Given the chaos of the financial markets this week, and (sullenly) conceding that my personal descriptions of BIS, the IMF and WB were overly simple, I thought I’d provide you with some choice links. These aren’t comprehensive, but do provide references and a degree of insight for readers who wouldn’t be inclined to brush up on this kind of obscure financial wonkery a week ago ago (prior to the current crises).

Here’s a link to Basel and the BIS, and their research on global financial stability: the use of BIS international financial statistics.

Here are links to a couple of articles over at Cato:

“Audit the World Bank’s Performance”

“New Mandates for the IMF and World Bank”

“Global Imbalances, Tanking Dollar, and the IMF’s Surveillance Over Exchange Rate Policies” by Sitikantha Pattanaik

Links to (some) related GAO reports (when possible, I’ve used executive summary links for ease of use by non-specialists):

“Financial Regulation: Industry Trends Continue to Challenge the Federal Regulatory Structure“, GAO-08-32 (October 12, 2007)

“Financial Market Preparedness: Significant Progress Has Been Made, but Pandemic Planning and Other Challenges Remain“, GAO-07-399 (March 29, 2007)

“Financial Market Regulation: Agencies Engaged in Consolidated Supervision Can Strengthen Performance Measurement and Collaboration“, GAO-07-154 (March 15, 2007)

It’d probably only take me a couple of days to cut and paste these into a full subject post, but again, given the irony of the crises occurring within the timeline of our thread, I’d rather err by providing a couple of very general and very pointed references relating to the immediate issue, as these can be of use independent of their relation to my prior posts.

Best, A. Scott Crawford
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Fabius Maximus replies: Thanks. Much useful material here!

One is healthcare. Now I do a lot of analytic work in this area and the incontovertable, gold plated fact is that the ‘market’ does not work. The US spends more money per person and a higher % of GDP than any other country in the world, and its health statistics are shameful. Cuba does better (google it and find out). In every country where there is ’socialised’ medical care (and there are a multitude of technical ways to do this) the health statistics are better .. for a far lower cost .. and for a greater % of the population.

Bit like its military, spend a lot for not a lot.

Take Australia (longest lived Anglo Saxon based country in the world). My wife is going in next week for an incredibly advanced treatment for a very difficult brain aneurism. She has a Professor doing it. She is getting the best care in just about the whole world .. direct cost to us .. zero.

Poll after poll shows that Australians are happy to pay higher taxes to have better health care overall .. even if you, as an individual person never needs it .. but your wife or relative or friend may need it so you are happy to pay. Society working together it is called. Plus we have the benefit of paying a fraction of what the US does per person, so we are actually, overall financially better off.

QED.

If you guys would like, I can post a letter from Buffet’s man at Lazard to the NYS insurance board regarding the municipal bond guarantors (insurance firms). It’s kind of a banker version of legalese, but I’m confident I can translate and/or clarify obscure references. Let me know.

The bottom line is that the IMF relies on the BIS as it’s primary settlement arm, and like the World Bank, is mostly a front institution. The UK, by the way, doesn’t conform to IMF transparency guidelines (nor does Austria or Switzerland), which is why so much off-shore banking and dubious cross-border transactions use those financial centers. “Hypothetically”, under the terms of the NAFTA Treaty related to financial transactions, one could introduce an ENTIRE currency, like the Euro for example, backed by nothing more than leveraged U.S. municipal and corporate Bonds held in Mexico City and Hong Kong representative offices of a Swiss Bank, and then use tertiary currencies, like Sterling, Swiss Francs, or etc. to exponentially over-leverage those SAME U.S. Bonds to the point where a global short term liquidity crises occurred… And the entire ‘hypothetical’ structured financial house of cards would rely on ONE SINGLE U.S. States insurance regulator allowing successive (and quite illegal) bailouts of firms with less than 1% of the liquidity required by law. If the Countries regulators and accountants responsible for the tertiary currencies weren’t very responsible, ‘hypothetically’, the irony of this situation would be that THEIR National currencies, rather than the secondary currency (in our example, the Euro) or that of the over-leveraged Bonds (the dollar), would be the currencies that’d collapse… a scenario that’d likely lead their fellow citizens to howl for their blood upon realizing that “Nationalization” of private banking debt created by over speculating on OTHER Countries municipal bonds is a very very very bad idea if that ‘other’ Country is the United States (as Americans outside of New York are quite touchy about their own muni bonds being illegally leveraged by foreigners in order to buy assets in their own back yards). Hypothetically, of course.

Obviously such a scenario couldn’t possibly occur without a large number of American bankers, institutional fund managers, accountants, and politicians being involved up to their eyebrows as well, which is crazy enough for me to use ‘hypothetical’ to describe such a case.

I would disagree with you on one point, Fabius, regarding my “tribure or war” bit. The nuclear option is a 3GW extension into 4GW strategic conflict. As the 4GW understanding of warfare includes ALL aspects of ones opponents ability to pursue traditional Nation State goals previously restricted to OPEN and declared engagement of hostilities, we must not forget that in a 3GW world our allies had to choose between the conventional physical protection of ECONOMIC rivals (’communism’ versus ‘capitalism’), but that in a post cold war 4GW world, this is no longer the case. Thus if a minor Nation State perceives that it’s political goals can best be pursued by manipulating or betraying a 3GW allied Nation using some 4GW tactic, and needn’t fear any 3GW consequences should it’s duplicity be exposed, the “game theory” logic recommends that minor Nation State players assume exactly this strategy. In a 4GW strategic view of geo-politics post cold war, the primary reorientation every individual Nation State must undertake is to define and distinguish IT’S OWN interests INDEPENDENT of it’s 3GW allies interests! Otherwise a Country like the U.S. might mistakenly include circumstantial allies in it’s OODA loop as if said allies were perfectly disinterested contributors, even after their Nation States had made it perfectly clear that their National goals were fundamentally different that our own.

This is a point evoked in a counterintelligence paper on the NCIX site: There might be such a thing as allied Nations, but there is no such thing as allied National Intelligence Services. I would suggest that Military Intelligence entities that fail to grasp that they are necessarily National as a first principle cannot possibly perform their duties/functions in a 4GW environment, and that an observable consequence of this failure would be that disinformation and misinformation fed via military intelligence into it’s National strategic OODA process would reflect OTHER Nations interests as indistinguishable from its own.
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Fabius Maximus replies: I disagree with your description of the BIS, IMF, and WB. Nor are State insurance regulators necessary for leveraging up assets into bubbles. Banks can do it with the approval of their regulators (e.g., thru SIV’s). Private investors (e.g., hedge funds) can do so without any official approval, so long as can find lenders.

The role of nukes in preventing state-to-state conflict is described in several of van Creveld’s works and, and more recently in Chet Richard’s “If We Can Keep It.”

In the 1990’s the “Bretton Woods II” system developed, in which emerging nations had undervalued currencies, high domestic rates of savings and investment, rapidly growing exports — and increasing prosperity. The IMF’s ex-clients are getting rich, and no longer need the IMF.

Under this system the US ran large and increasing trade and current account deficits — rising debt. It’s a bizarre system, probably disasterous for the US over the long-term. But fun while it lasts.

The IMF is an US institution pushing a political agenda (which was the first neo-con victory), far removed from its original purpose (John Maynard Keynes is turning in his grave over this).

It is also irrelvent now. After its tender ‘mercies’ South America is building its own ‘IMF’. Asia wants nothing to do with it (after the treatment it got after the Asian 1990’s crash) and have built up their own resources and reserves.

Plus the US has no money.

Ironically, this means that the American white lower class might look for help from Hugo Chavez, or at least from his model of populism.

Oh yes, no doubt our creditors will have many interesting “suggestions” to offer in exchange for their help.

Fabius Maximus replies: Agreed!