Doug Casey on DSK, the IMF, and the World Bank

(Interviewed by Louis James, Editor, International Speculator)  

L: Howdy Doug; had a good week? We can talk, but I should warn you that my Internet connection has been very flaky today.

Doug: Are you still in Bamako?

L: No, I’m back from Mali. It’s my good old all-American high-speed Internet that keeps disappearing. Anyway, what’s on your mind today?

Doug: Well, one thing is my upcoming trip to Tel Aviv, Cairo, Beirut, and Dubai from June 9-22. If we have any readers in those cities who’d like to get together, it would be great to hear from them. I’m sorry I couldn’t join you in West Africa.

We both travel almost as much as officials from the IMF. In light of that, I guess we should follow up on the Dominique Strauss-Kahn (DSK) scandal. It’s still vaguely on people’s minds – not quite yet flushed down the memory hole and replaced with something else torn from the pages of the National Enquirer. Maybe the Greek central banker who’s just been arrested for the same thing will serve…

L: You don’t sound very enthusiastic.

Doug: Well, following the depredations of IMF bureaucrats, whether in the bedroom or the boardroom, is depressing. Only a sociopath could become head of the IMF anyway, so why should anyone be surprised by such a man’s sociopathic behavior?

L: [Laughs] I should have known.

Doug: We could talk about the IMF, though, and its ugly stepsister, the World Bank. There’s a pair of lofty institutions that need a little deflating. Abolition, actually, but let’s start with lancing the boils. Do you know much about the IMF?

L: Not really. I’ve never paid much attention to it. It’s just another of these transnational bureaucracies stuck in the quicksand of money thrown at problems money can’t solve. On the fringes of my awareness, I’ve noticed that it positions itself as being a benevolent group of bright economists who can help benighted “developing” nations solve their economic problems. But it’s not really sound economics they teach, it’s First-World bureaucracy – rules and regulations – they spread to Third-World countries already tied up in red tape, enticing them with cash bribes.

Doug: [Chuckles] Well said. That’s pretty much the way I see it. It was set up in the waning days of WWII, to impose order on currencies, trade policies, debt structures, and the general financial and economic affairs of poor and troubled countries. That’s its official mission. In reality, it’s a vehicle made necessary only by the fact that all of its members have fiat currencies.

L: Okay, we can debunk the IMF. It certainly deserves it. But is there really nothing instructive about the demise of DSK? He hasn’t been found guilty of anything yet, but it looks like he’s toast, regardless of the outcome of his trial.

Doug: I don’t know about instructive, but I certainly found the arrest of DSK gratifying. I don’t want to say that I experience schadenfreude every time I see a high government official ensnared in his own wrongdoings… Let’s just say that my sense of justice triumphant gives me a good laugh at such times.

L: Is it justice we’re seeing carried out?

Doug: You can rarely be sure about these things. If he did violate that poor woman, then it might be. But the IMF is such a powerful and corrupt organization, it’s just as plausible to me that the whole thing is a setup, perhaps a coup d’état within the IMF, hidden right out in the open. Perhaps some group wanted to get rid of him and set it all up for that purpose. One conspiracy theory being floated – apparently by the Russian Federal Security Service – is that DSK had evidence that most of the gold in Ft. Knox was gone and was about to spill the beans. If that were the case, I would think that an unfortunate fatal accident would have been a much better guarantee of silence.

Regardless of whether he violated that chambermaid or not, he impresses me as being the type of criminal personality who’s capable of absolutely anything. But, that said, people should be presumed innocent until proven guilty – even people like DSK, or, for that matter, bin Laden. Whether or not he’s guilty of this crime, he’s absolutely responsible for an immense amount of damage to the world economy. So, good riddance.

L: I’ve long thought things might be better if the presumption of innocence were reversed for public officials. Anyone who presumes to rule, anyone who takes up the power of legalized theft and homicide – taxation and war – should be purer than the driven snow. They should be held to the highest possible ethical standards. And if there’s ever any reason to believe they might be abusing their power, they should be stripped of it immediately until they can show they can be trusted.

Doug: But that would take most of the fun and profit out of being a high government official. Therefore it will never happen.

L: Of course. And a person of the highest ethical standards would never participate in the inherently coercive mechanisms of the nation-state as we know it today. Anyway, I guess it’s a good thing this goon seems likely to be locked up for a long time.

Doug: I sympathize with the emotion, although his incarceration won’t change anything. Congressmen, mayors, and all sorts of government officials are often prosecuted and jailed. But it’s just window dressing, there just to give the state an appearance of propriety. The organization itself is corrupt and destructive, and inevitably draws corrupt and destructive people to itself. It has to be pulled out by its roots.

DSK himself is just another typical, arrogant, power-brokering scumbag. He’ll be replaced by another scumbag who’s just as bad or maybe even worse. They’re like sharks' teeth; they’ll keep growing, and being replaced, until you kill the shark. So, again, we should talk about the IMF and the World Bank themselves, not whatever clowns happen to inhabit their penthouse offices at any given time.

L: Okay, lay the case out for us.

Doug: Have you noticed that while everyone’s heard about these organizations, no one really seems to know what they do? Even you, generally a pretty well-informed person, don’t have a precise idea of what they do on a day-to-day basis.

L: You’ve got me there. What do they do?

Doug: They are basically creatures of the United Nations. They’re part of the UN and are the equivalent, in the financial and economics world, of the WHO (World Health Organization), the ILO (International Labor Organization), or the WTO (World Trade Organization), and about a dozen other UN agencies, each in its own bailiwick. But they’re much more powerful, because they have large endowments. Member countries contribute money – from the U.S. having contributed the most on down to little nothing-nowhere countries that barely have two cents to rub together. The countries have voting rights in proportion to their contributions, so these organizations are pretty much extensions of U.S. foreign policy, and that of other developed countries. Of course, that’s going to change as the Big Boys declare bankruptcy in the years to come.

The UN itself is nothing but a posh club for lucky and well-connected government bureaucrats who get to hang out, palaver, and play big shot all day on their expense accounts. If anything productive gets done, it’s at 10, or 100, times the cost it would be in the free market.

The IMF’s web site says it’s “an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” In practice, that means the money pooled by the IMF is used to assist member countries to manage their economies and their currencies. It’s a sort of cross between an investment bank and a consulting firm.

L: That doesn’t sound too evil, on its face.

Doug: No, but it’s an economic consulting firm run by a bunch of communists, socialists, and fascists. Only an idiot would ever welcome their advice. The advice they give seems to be useful at times, but only by accident, such as when they tell governments to cut deficit spending. Their economists are all very conventional political hacks, anxious to try out their nostrums on desperate little backwaters. In the ‘50s, ‘60s, and ‘70s that amounted to having them set up huge bureaucracies to “manage” their economies.

Since the ‘80s, the privatization of state enterprises has been fashionable – and that’s a good thing. But the reason the IMF liked it had little to do with sound economic thinking, so much as the realization it would result in more tax revenue for the state. Plus, the enterprises were always given to well-connected friends, which made it easy for kleptocrats to steal not just millions, but billions.

They also spend a lot of time telling governments how to “manage” their intrinsically worthless paper currencies – raise interest rates, or cut interest rates, or implement other monetarist interventions…

L: Such as have worked so well for Ben Bernanke?

Doug: As well as Gideon Gono, Chairman of the Zimbabwe central bank. Again, to be clear, sometimes their advice makes business sense. It almost has to from time to time, just because of the law of large numbers. But improving the economy isn’t the goal, so much as propping up and strengthening the existing government and the general status quo.

It’s as if they never looked at what happened with Hong Kong since WWII. The place was a barren rock, with no capital assets except a good harbor, and was populated by poor, ignorant Chinese refugees. Hong Kong now has a per-capita wealth about that of the U.S. – and it achieved that with zero advice or help from the IMF. It did it exclusively through having an almost unregulated free market and very low taxes.