FT Jumps The Shark (The IMF)


I’m amused…..

The use of the swap lines has subsided, but the speed and scale of their use at the time seems to have inspired some creative thinking at the IMF. Thus was born the MSL, or Multicountry Swap Lines, which would be intermediated by the Fund. Since no legislature has said you can’t have such an open-ended facility with no limits on size, it would seem that you can.

So when the next crisis comes, the IMF’s contingency plans will almost certainly have been pre-approved, and quickly put into effect. When you are making a one-way bet against risk assets, consider the avalanche of official money that will crush you at the moment you expect to cash in.

This, of course, implies that the IMF can actually fund such things.

Yes, I know, Bernanke loves swap lines.  But anyone who thinks that such didn’t attract attention (e.g. Mr. Grayson, for one) is simply nuts.  It did, and further, the premise of a swap line is that it is a short-term liquidity facility with no credit risk.

Well, that goes out the window and fast if it’s used as a funding mechanism.

Not that the IMF might not try such a trick.  But wars have started over less, and the IMF should be well-aware of both that and that being “headquartered” here in the United States it has some rather unique risks in this regard, since the US is the vast majority of its funding (just as is true for the UN.)

Yeah, the “get us out of the UN!” folks have for years sounded like a bunch of shrill crooners.  But are they really wrong, in point of fact?  That all depends on what the UN – or IMF – is doing at any given point in time.

At the point the IMF decides that it would like to write its own appropriation bills without Congressional approval there might be some push-back in a form and fashion they don’t quite expect.

All lawful, incidentally. 

At least I think it would be.

For examples one can look to Germany, where the challenge to the EU bailout fund has hardly gone away.  Indeed, there’s a prima-facie case there that the alleged “fund” violates the German Constitution and was so declared in public by those who negotiated it.

Now this doesn’t necessarily guarantee that the court will uphold the law, but as MERS has discovered out in California and a number of other states, that which the “powers that be” construct in violation of said law can be, and sometimes is, struck down by the judiciary – much to the chagrin of those who thought they were “in control.”

The Market-Ticker