Risky business

By Anne Williamson

This is the last of a four-part series on the International Monetary
Fund, World Bank and the international financial system.

    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

    –Alan Greenspan

Gracing the front page of yesterday’s edition of the Financial Times was a rare image sure to chill the heart of investors everywhere. For there was a seemingly discombobulated Alan Greenspan, his furrowed eyebrows rising above slightly askew glasses and a twisted mouth, whose photo, the accompanying article informed, had been captured in the midst of his remarking that in fifty years “he had never seen anything quite like the events unfolding in the financial markets.”

Should we not pity a frazzled Alan Greenspan, quite possibly the most-lauded central banker in history? After all, the dollars he’d printed to make a happy financial carnival for the benefit of both Bill Clinton’s election effort and globalism’s forward march in return for his third appointment as chairman of the Federal Reserve System are now threatening his reputation, his years of work in service to “price stability” and perhaps, by the look of him, even his mental well-being.

Alas, emerging markets had turned out to be nothing like what the Crazy Eddies at Treasury had advertised them to be. Instead of a sponge for the Fed’s gravy, they were proving themselves powerfully poisonous boomerangs. And now, during the just-concluded IMF’s annual meetings, the world’s other central bankers along with their finance ministers, commercial and investment bankers, hedge fund and portfolio managers were all looking to him to bind up their wounds and restore their confidence. And how is that to be done?

Simple. All that is needed is for Mr. Greenspan, Treasury Secretary Rubin and his ample deputy, Larry Summers, and IMF Chief M. Camdessus to frighten Congress enough over the costs of not playing ball with “the boys” that that august body will screw up its collective courage and agree to soak US taxpayers for the financial elite’s losses. Then their rigged game might begin again.

No less an authority than Bill Clinton — a man who has never had a job, made a mortgage payment, or even paid a babysitter, a single medical or legal bill — had spoken: What the world needs, Mr. Clinton said on Tuesday, is a world central bank, “a lender of last resort,” to tame the brutal business cycle. Therefore, Mr. Clinton proclaimed, he was proposing a new IMF lending facility to speed more money abroad sooner — rather than later — as one more stepping stone to the high altar of global corporate fascism.

The story of how the citizens of what had been the freest nation on earth, founded in liberty and justice for all, were to become under their own leaders’ direction the world’s unwitting bottomless purse can be summarized in two words: Risk avoidance.

The Federal Reserve System was implemented in order to fob off the restraints of honest banking by socializing the risks of reckless banking amongst the entire American population while allowing the profits to be retained by and then shared out amongst the political and economic elite. Similarly, the IMF was founded to fob off the risks inherent in speculative foreign investments and global financial markets on the hard-working populations of prosperous countries, whose practitioners pocket the gains, sharing only with their political patrons.

It is no surprise then that a man who is not much more than a provincial influence peddler, who made it to the bigtime, should propose to widen and deepen the Looting Class’ perpetual subsidy through a “new architecture for the international financial system.” But Mr. Clinton was, in fact, telegraphing his financial constituency that he was all for having everybody on earth pay part of the huge price of returning to him the tinsel crown of political celebrity he has made of the US presidency. It is, of course, Mr. Clinton’s special gift for shamelessness that he justifies this proposed, penultimate power-grab in the name of “free markets” and of “democracy.” Never has liberty stood at a more tricky moment.

When exchange rates fluctuate against one another as they do now, some countries will inflate more quickly than other countries. The G-7 are the only nations that try to coordinate their monetary policies and the effort usually ends up a failure over time. When one country inflates too quickly, the value of its currency will decline.

Some governments — especially those with an election on the horizon — actually want to devalue since national exporters, their goods now being cheaper, sell more goods. Global lenders like the IMF are also fond of devaluations because a rising national income from bargain exports leave plenty in the national kitty for principal and interest payments to them. (Global direct investors — the “good guys” — fear devaluations, because their profits calculated in a devalued domestic currency buy fewer dollars for repatriation.)

But when exchange rates depreciate rapidly the specter of capital flowing out of a country appears. Foreigners and residents put their savings elsewhere. The currency goes into free fall, its value plummets, more investors flee and at the end of the cycle, interest rates skyrocket. This is exactly what happened in Asia in 1997, in Russia in 1998 and will soon happen in both Brazil and China.

Yet to curse the speculators is useless; since the 1972 collapse of Bretton Woods that broke the international link between the dollar and gold, the fear of the syndrome described above is the only remaining bit of discipline in the international system. How much better, the globalists reason, if there were to be one central bank and one fiat currency for everyone so that then national leaderships (and the financial oligarchies they sustain) could inflate and rob their own populations in unison, thereby perpetually enserfing all the world’s people.

And besides, a bailout fund sure sounds good to a U.S. federal government constantly on the hunt for justification of its outrageous size and reach. If the U.S. Leviathan can convince citizens that it alone is protecting their savings from a bogeyman called Currency Contagion, instead of exposing those very savings to what is essentially a street mugging, then it can successfully waltz them into an internationally binding arrangement for one global money monopoly that will be a final claim on their national sovereignty and their wallets. And if the IMF can count on U.S. presidents like Clinton continuing to get themselves into such expensive jams to insure re-election, well, there lies the high road to serious, potentially independent power capable of usurping an American president unconstrained by the U.S. Constitution.

But before we pass judgment on Mr. Greenspan, it is worth recalling one curious and mostly unremarked detail from 1994, that sticks out in the story of the current global meltdown like a boy’s unruly cowlick. In mid-July 1994 — at the very moment dollar-based Mexican tesobonos were being oversold to prosperous clients of Goldman Sachs and other U.S. investment banks, which, in turn, would lead to the 1995 Mexican bailout and the introduction of moral hazard into the world’s financial system — Michel Camdessus told a press conference that he intended to press for the creation of a new IMF facility to give members resources with which to defend themselves against speculative attacks in financial markets.

In other words, long before bailouts of entire countries became routine Camdessus wanted a new loan program to feed the last disciplinarians in the world’s financial system — currency speculators — so that national governments might become even more unaccountable to their citizens. At the time, The Economist slammed the proposal, saying it was “absurd and almost certainly unworkable,” since Camdessus “bizarrely” was assuming the IMF would know more about economic fundamentals than the markets. And that assumption, The Economist noted, was the very assumption which had been the undoing of the USSR’s centrally planned empire. But Camdessus’ 1994 plan is the very one the U.S. President proposed just this week!

So who wags the tail of the money dog? A French socialist and lifetime bureaucrat, who is quite possibly the most incompetent person on the planet, or the most-lauded central banker in history?

It doesn’t take a conspiracy theory to observe that the downward arc of citizens’ liberties, independence and civic competence and of American culture generally parallels the declining value of the U.S. dollar, which has lost 99% of its value since the founding of the Fed, and 75 percent of that debasement has occurred since the last link with gold established by Bretton Woods collapsed. From that perspective, it’s really not very surprising that at the end of the century, not quite nine decades after America instituted the Federal Reserve, and began the process that would deliver the power of creating unlimited debt to the political class, the White House is occupied by a couple who share not so much a marriage as they do a collection of felonies.

Throughout the 1990s, the Decade of Deceit, finance capitalism’s shills have been heralding a “new paradigm” so glorious one might have thought Beatrice awaited us each and every one at the very lip of Heaven itself. Their brassy tune celebrated the defeat of the business cycle by globalization, productivity gains and computer technology. Inflation was tamed, the golden horns sounded, and we were to dwell eternally in lush fields of full employment, low interest rates and a booming stock market. And, insiders winked, foreign money once mugged by speculators would have nowhere else to go but directly into Wall Street’s money machine.

But by the expression on Mr. Greenspan’s face in the Financial Times, it’s clear things have turned out rather differently; as if — instead of Beatrice — what waits over our collective shoulder down Purgatory way is a repeat of the European currency instabilities of the 1930s, which culminated in the most vicious and widely-fought war in world history.

So which is it Mr. Greenspan? Will you continue to argue for public subsidy of private risk? Will you continue to promise a slow squeeze on interest rates to grease the wheels of commerce and industry? Or will you do the right thing and argue for massive tax cuts instead so that resources might remain in the hands that created the wealth in the first place?

Do you stand for liberty and the sovereign individual, Mr. Greenspan? Or is the culmination of your life’s work to be remembered as nothing more than the wilted shill of what is perhaps history’s most talented and luckiest con man?

Anne Williamson has written for the Wall Street Journal, The New
York Times, Spy magazine, Film Comment and Premiere. An expert on
Soviet-Russian affairs, she is currently working on a book, “Contagion:
How America Betrayed Russia,” a chapter of which can be read at


The Goldilocks Economy Unmasked
October 6, 1998

An Imperial President’s Moneybags
October 7, 1998

Russian fundamentals
October 8, 1998