Fountain of Youth?

Technotranscendence (
Wed, 20 Jan 1999 07:45:51 -0500 (EST)

From: "Mises Institute News" <> Subject: Deadlines and Deadbeats
Date: Tue, 19 Jan 1999 10:39:58 -0600

Reminder to graduate students and young faculty: The deadline to apply for the Rothbard Graduate Seminar is February 15, 1999, less than a month away. We are only accepting 25 outstanding participants, so the deadline must be strictly enforced.

For more information, see

The Schlarbaum Prize for Lifetime Achievement for Liberty will be presented February 5-6, 1999, Auburn, Alabama, in conjunction with a conference on Human Action: The Scholar's Edition. This year's recipient is Mises's friend and colleague, His Royal and Imperial Highness Otto von Habsburg, who will be with us for the occasion.

There is still time to register.

For more information, see

For the results of Jeffrey Herbener's work in the archives to unearth the hidden history of Human Action, see today.

Today's Wall Street Journal (January 19, 1998) carries a solid analysis by George Melloan of the IMF's role in "fixing," actually precipitating, the events leading Brazilian currency devaluation. He writes, in part:

"Congress succumbed in October and a grateful IMF handed Brazil a $41
billion IMF package. But Brazil went the way of the Asian tigers anyhow.... Brazil still had some $45 billion in October when the IMF proffered its new credit line and dispatched a $9 billion first tranche. This was supposed to show the markets that Brazil could easily defend its admirable Real Plan, which pegged the real to the U.S. dollar but allowed a very gradual devaluation.

"The markets were not impressed. What's a lousy $54 billion in a global
foreign exchange market that turns over at least $1.5 trillion every day? The only people who were impressed were Brazilian politicians, for whom $41 billion looked like a lot of money, quite enough for them to go on merrily spending as if there would be no tomorrow, funding welfare programs and pork-barrel projects. The markets, instead of looking at the IMF bailout, were looking at the behavior of the politicians, the swollen Brazilian budget, its vast and heavily featherbedded public sector and its $300 billion in debt that was compounding rapidly because of the high interest rates the central bank was using in a vain effort to defend the Real Plan.

"The silence at the Treasury and the IMF last week was surely because those
institutions knew that they had sold Congress a bill of goods. This was not a time to bluster, but rather a time for damage control. Francisco Lopes, Brazil's new central banker hired to do the dirty work, had ill-advisedly declared that the devaluation was consistent with the IMF deal last October. That must have embarrassed Camdessus and company, who have taken a lot of flak for promoting those disastrous devaluations in Asia. Mr. Lopes and Brazilian Finance Minister Pedro Malan were summoned to Washington, perhaps to try to help Mr. Camdessus, Mr. Rubin and Mr. Summers work out a better-sounding story.

"But finding a better-sounding story isn't easy. The string of disasters
midwifed by the global money managers since 1997 is reflective not only of misjudgments but of a fatal flaw in the existing "architecture." ...[A] president who spends most of his working hours figuring out how to buy votes with public money is not likely to be very critical of a multilateral agency that does pretty much the same thing. It subsidizes two very influential constituencies, international bankers and the profligate politicians who preside over such places as Russia, Indonesia and Brazil.

"These bankers and politicians got the IMF's number a long time ago. They
knew that institutions, like natural organisms, fight for self-preservation. The IMF keeps itself in business by winkling money out of rich nations such as the U.S. and handing it out to the poorer brethren, who usually are poor because of gross economic mismanagement. In this age in which income transfers are deeply imbedded in politics, the IMF doesn't lack for clients.

"What is absent is any convincing evidence that this has made the world a
better place. Africa appears to be regressing, despite the billions poured into it by the IMF, U.S. aid agencies and the World Bank. Asia, acting partly on IMF and Treasury advice, took a big step backward, in terms of living standards, with the 1997 devaluations, as did Mexico in 1994. The Brazilian and Russian governments, living well beyond their means, were shielded from reality for far too long. The people in such places now must pay a price and their politicians will blame everyone but themselves, including Bill Clinton and Michel Camdessus.

"The IMF has proved that it is impossible to get good conduct from
politicians by subsidizing their bad conduct. President Fernando Henrique Cardoso made himself very popular when he killed hyperinflation and gave his country a solid currency with the Real Plan. But he didn't follow through by reforming government itself. Had there been no international safety net supplied by an act of Congress, he might have seen fit to work harder. There should have been plenty of evidence around that a monetary policy alone cannot compensate for governmental indiscipline.

"So it's back to the drawing board for the U.S. Treasury and the IMF. Will
they really come up with some new "architecture" this time, something like going out of the global management business? Don't count on it."