From: "jurriaan bendien" <Jbendien-AT-globalxs.nl>
Subject: Re: M-TH: Credit
Date: Tue, 13 Jan 1998 12:01:39 +0100


Another clip that is perhaps of interest to Thaxists.

Regards

Jurriaan.

________________________________________________________________

                  DESTROYING NATIONAL CURRENCIES
_________________________________________________________________

                      By Michel Chossudovsky

     Professor of Economics, University of Ottawa, author of "The
     Globalisation of Poverty, Impacts of IMF and World Bank
     Reforms, Third World Network, Penang and Zed Books, London,
     1997. He is also the author of "Dismantling Yugoslavia,
     Colonizing Bosnia," Covert Action Quarterly (CAQ),
     Washington, D.C., Number 56, Spring 1996 and "The Business
     of Crimes and the Crimes of Business: Globalization and the
     Criminalization of Economic Activity," CAQ, Number 58, Fall
     1996. The author can be contacted at chosso-AT-travel-net.com

                                *

     Since the onslaught of the debt crisis in the early 1980s,
the IMF has played a central role in exchange rate policy often
requiring indebted Third World countries to devalue their
currency by 50 percent as a "pre-condition" for the subsequent
negotiation of a loan agreement. IMF-sponsored currency
devaluations have invariably resulted in abrupt price hikes and a
dramatic compression of real earnings.

     What is distinct in the cases of Korea, Indonesia and
Thailand is that the devaluation (which preceded the bail-out
agreement and the imposition of sweeping macro-economic reforms)
had not been explicitly demanded by the Washington-based
bureaucracy. Rather it was the result of speculative pressures on
currency markets exerted by the large merchant banks and
financial institutions (through the use of a variety of
speculative instruments).

     In the context of the Asian financial crisis, "institutional
speculators" (rather than the IMF) have come to play an indirect
role in the process of macro-economic reform. In other words,
international banking and financial institutions have (in a de
facto sense) dictated country-level foreign exchange policy, --
ie. through the deliberate manipulation of currency markets. In
this context, "institutional speculators" are involved in
"setting the stage" for the subsequent IMF bail-out operation.
They are also involved in routine consultations with the Bretton
Woods institutions pertaining to the various components of the
macro-economic reform package included in the bail-out agreements
(eg. the deregulation of Korea's financial sector and the opening
up of Seoul's bond market to foreign capital).

     In turn, the same Western and Japanese financial and banking
institutions (routinely involved in currency and stock market
speculation) are the creditors of Asia's central banks. They also
hold large amounts of short term debt and have, therefore, a
vested interest in averting loan default by Asian financial
institutions. Not surprisingly, these same Western and Japanese
financial institutions have pressured G7 governments to implement
the bail-out operations of which they are the ultimate
beneficiaries, -- ie. the 57 billion dollars under the IMF-
sponsored agreement with the Seoul government will be used to
reimburse Korea's creditors.

     How will these multi-billion dollars operations be financed?
The contribution of the Bretton Woods institutions and the Asian
Development Bank (ADB) constitutes but a fraction of the total.
The largest contributions to the bail-outs are from G7
governments, requiring the issuing of vast amounts of public
debt.

     In other words, G7 governments have come to the rescue of
the merchant and commercial banks by accepting to finance the
bail-out, yet to undertake this objective, G7 national treasuries
are obliged to issue large amounts of public debt which is
invariably underwritten by the large merchant banks. In other
words, the "beneficiaries" of the bail-out are also the
underwriters of the public debt operation required to finance the
bail-out. An absurd situation: G7 governments are "financing
their own indebtedness"...

     While the bail-outs are conducive to the building up of
public debts (in both the Asian and G7 countries) -- thereby
reinforcing the stranglehold of the creditors over the conduct of
economic policy -- tens of billions of dollars of public money
are transferred into the hands of private financial institutions
leading to an unprecedented accumulation of private wealth. In
turn, the macro-economic reforms imposed in the context of the
IMF-sponsored bail-outs are conducive to a dramatic collapse of
the real economy leading to the impoverishment of millions of
people.

     Copyright by Michel Chossudovsky, Ottawa 1997. All rights
     reserved.



     --- from list marxism-thaxis-AT-lists.village.virginia.edu ---