05.31.2009 0

$100 Billion IMF Credit Line in Big Trouble

  • On: 06/05/2009 09:59:34
  • In: Economy
  • By Robert Romano

    Yesterday Democrats found themselves scrambling frantically to find enough votes to enact a controversial $100 billion credit line to the International Monetary Fund (IMF), and an $8 billion expansion of the United States’ IMF holdings. The trouble?

    They plan to attach it to a $90 billion war supplemental, as reported by Reuters—thus making it impossible to court Republican support for the legislation. Or, more accurately, they want to attach a $90 billion war supplemental to a $108 billion expansion of the IMF—making it impossible for the most radical representatives of the Democrat caucus to support the internationalist institution.

    The trouble has been intensified by the fact that 51 Democrats just voted against the war supplemental May 14th when it did not include the $108 billion IMF funding. Now the entire House Republican Conference is against the legislation if it includes the global bailout. The result is that House Democrats in principle start out with only 200 votes in favor of the conference legislation.

    For Congressional novices, that means they’re 18 votes short of a majority, and the votes they have to ask for are from the most ardent opponents of the wars in Iraq and Afghanistan.

    In other words, it’s in trouble. Big trouble.

    So much so that they have moved the vote that was previously scheduled for today. As reported by The Hill, “House Democratic leaders won’t bring up the supplemental spending bill Friday as they scramble to come up with enough votes to pass it amid a wall of opposition from Republicans to directing money to the International Monetary Fund (IMF)… Leadership aides said Thursday that the vote could be held next week.”

    Unfortunately for the Democrat Party’s Dear Leader, Barack Obama, he pledged at the April G-20 conference to get the money from Congress. A defeat now would undermine the Administration’s globalist agenda. And tarnish the Obama halo.

    Americans for Limited Government released a backgrounder this week elucidating upon the problem attendant to the $108 billion expansion of the IMF. It notes that the U.S. does not even have the cash to lend to the IMF, and will be forced to either borrow and/or print it. This spells more debt and inflation for the American people.

    And it occasions a corollary to the old adage, “When you’re in a hole, stop digging.” To wit, When you’re in debt, stop digging.

    The already excessive fiscal and monetary stimulus, which has resulted in the largest budget ($3.64 trillion) and deficit ($1.8 trillion) in the nation’s history makes further spending unpalatable, as Federal Reserve Chairman Ben Bernanke admonished Congress for earlier this week.

    To make matters worse, as the ALG backgrounder averred, bolstering the IMF reserve currency, Special Drawing Rights (SDR), would also have the double effect of weakening dollar assets and incentivizing purchase of non-dollar-denominated assets like the SDR. China, Russia, and other countries are already planning to stock up on IMF bonds denominated in SDR. And U.S. creditors are already slowing their purchases of dollar assets because of the nation’s spending tsunami.

    The Democrats’ original plan was to attach the unpopular IMF measure to what was viewed as “must-pass” legislation, in this case, a war supplemental that Republicans would have a hard time opposing. Unfortunately for them, Republicans called their bluff.

    All of which leaves the House Democrats with a potentially intractable dilemma: force the most liberal members of its conference to violate principle and support wars they have always hated—or remove the $108 billion IMF expansion from the legislation and accept defeat.

    And then, the Obama plan to expand the IMF would have to wait for a stand-alone bill—which could mean yet more trouble for the Administration as Congressional Democrats are forced to face roll call votes on an issue that has already been defeated and is likely to become even less popular as the public becomes aware of the offshore boondoggle.

    Robert Romano is the Senior Editor of ALG News Bureau.

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