Officials of the International Monetary Fund (IMF) have stated that the national bankruptcy plan proposed by Anne Kruger, the No. 2 person and First Vice President, has received preliminary approval from the IMF Executive Board. The IMF will be fully preparing to introduce a formal plan in the near future. It is expected to hold a special high-end financial meeting in the spring of 2008 to focus on solutions to the country's credit problems. Public opinion here believes that the recent political and financial turmoil in Argentina has strongly promoted the IMF's plan to take a big step onto the agenda.
Economist Ms. Anne Kruger proposed that countries facing severe financial crises can declare bankruptcy like individuals and companies and receive corresponding legal protection. The international financial system should establish formal bankruptcy procedures for this purpose. , through negotiations with banks and creditors, these countries can stop repaying debts.
According to foreign media reports, the proposal has received support from the Bush administration, the British Chancellor of the Exchequer, and the Canadian Finance Minister, but it still needs approval from the U.S. Congress and the consent of the other 183 members of the IMF.
When the government seriously considered the national bankruptcy plan, Wall Street and other international financial markets strongly opposed it. They warned: "Investors will withdraw funds invested in developing countries. Because they will not take the risk of having their money confiscated," said Cha Dalari, executive director of an international finance institute in New York. Based on his investment experience in emerging markets, it is tantamount to a country entering bankruptcy proceedings. "Put a nuclear bomb in those broken emerging capital markets that will once again inflame you."
Some developing countries also show nervousness because they are worried that they will be "forced" into bankruptcy procedures under "IMF standards" and their initiative will be greatly restricted in the financial crisis.
In the past few years, many people in the industry have criticized the IMF for lacking a strategy and appearing indecisive in providing financial assistance to emerging markets. Stiggets, winner of the 2002 Nobel Prize in Economics, serves as chief economist and senior vice president of the World Bank. In a recent interview with Business Week, he pointed out mercilessly that iMF is always eager to put out fires. The psychology of investing money into the scene of financial fires, but sheltering capital speculators who are arbitraging in emerging markets, is better to let the debts and exchange rates of those countries run on their own and let investors bear the capital risks themselves.
Only through coordination at the legal level among countries can the national debt crisis be effectively solved, and the IMF's legal provisions must first be reformed, if there is no effective solution to the crisis. I'm afraid there will be more "bankrupt" countries in the world. We believe that starting from the spring of 2010, the global systemic crisis may enter a new stage, that is, the public finances of major Western countries will become unmanageable. The sheer size of the huge budget deficit inhibits any major future government spending.
The public deficit is like a shackle that the government was willing to put around its neck in 2009, but if it cannot make the financial system compensate for their mistakes, and the government still believes what the banks say "Saving the banks means saving the entire economy", then the public government deficit will seriously affect all public government expenditures, especially the entire social security system in rich countries, making the middle class and retired people poor, and making the bottom class of society poor. The poorest people are displaced.
At the same time, in the context of the fact that more and more countries and other institutions (districts, provinces, states) are facing bankruptcy, there will be an urgent need to increase interest rates, as well as to use currency to buy gold (1211.90,0.00, 0.00%) (raising interest rates is withdrawing currency, buying gold is selling currency). With no other options to replace the weak dollar, and to replace the loss of value in Treasury bonds, especially those in the United States, all central banks will quietly convert some of their reserves into gold without making any formal announcement. announcement.
From Dubai to Greece - national bankruptcy will be one of the trends that will emerge in 2010. And more and more ratings agency reports are worried about the debts of the United States and the United Kingdom, warning about Ireland's serious deficit, and also recommending that the euro zone work hard to solve the public deficit problem. Countries are increasingly unable to manage their debt. newspaper headlines.
However, not all information has the same value. There is a Chinese saying: When the wise man points his finger to the moon, the fool points to the wise man's hand. Some of the information is just complicated work on the "finger", but others really speak to the essence of the matter. The problem of the Greek debt crisis is a complicated job on the "finger".
Taken together, the Greek debt crisis is only a small problem for Frankfurt (Editor’s note: representing Europe), but it is a serious problem for Washington (representing the United States) and London (representing the United Kingdom) warn.
Greece’s debt problem reminds us of what we mentioned in our March 2009 report. At that time, the public believed that Eastern Europe would lead the European banking system and the euro into a huge crisis.
At that time, we explained that the basis for this news in Eastern Europe was not reliable, but was just an attempt by Wall Street to create a view that the European Union was about to break up, and then slowly instilled in society the idea that "the risks in the Eurozone are increasing." They It has been publishing some exaggerated news that the Eastern European banking system is in danger, and highlighting the image of the euro zone as a "coward" by comparing it with the "wanton" various rescue measures implemented by the United States and the United Kingdom. One purpose is to shift the focus of international attention away from the growing fiscal problems of the United States and the United Kingdom, thereby reducing the EU's role at G20 meetings.
Judging from this trend, as the future economic crisis becomes more serious, more countries will fall into national bankruptcy. At the beginning of the new decade of this century, the worst news is that sovereign credit is on the verge of crisis. Since Dubai World announced a moratorium on debt repayments in November 2009, the crisis has begun. But Dubai is not alone in the sovereign credit crisis. Countries such as Portugal, Italy, Greece, Spain and Mexico also followed. The "downgrade" of sovereign credit has become an obvious weather vane.
The reason is simple: these countries have weak economic growth and high debt levels. Taking Greece as an example, its fiscal budget deficit accounted for 12.7% of GDP in 2010, and government debt accounted for 123% of GDP, which is much higher than the 3% and 60% upper limits set by the Eurozone's Stability and Growth Pact, making it a The "double champion" of the euro zone's debt ratio, all data shows that the institution is on the verge of collapse.
The latest version of the sovereign credit crisis emerged in Iceland. On January 5, nearly 25% of Icelanders petitioned the president because Icelanders were unwilling to pay for the bank's mess. President Grimsson announced that a referendum will be held on the bill passed by Congress at the end of last year to decide whether to compensate the British and Dutch governments of US$5.5 billion.
The frequent occurrence of sovereign credit crises reveals an unobjectionable fact: financial shocks will continue and the economic crisis has not ended as hoped. Sovereign credit crises may also be colloquially referred to as "national bankruptcies." It has become a time bomb on the road to global economic recovery. Just like personal and institutional bankruptcies, state bankruptcy is simply defined as the declaration of insolvency by a sovereign state. According to IMF statistics: In the past 200 years, about 90 countries have experienced "default on debt". Different from the background of Argentina's refusal to pay its international debt in 2002, most of today's intensive sovereign credit crises stem from the large-scale economic stimulus policies and record bond issuance after the outbreak of the economic crisis. Data show that in 2000, global net issuance of government debt was only US$250 billion. This year alone, the UK will issue a third more than that, and the euro zone will issue almost six times as much. Economists Rogoff and Reinhart pointed out in their research report the year before last: As long as the ratio of total government debt to GDP remains below 90%, there is no correlation between debt and economic growth. Once the debt burden exceeds the above level, the average economic growth will drop by up to 2%. According to the IMF's latest forecast, the U.S. debt ratio will exceed 90% in just one year, and the United Kingdom will also break through this warning line in two years. China should be wary of falling into national bankruptcy
Due to the continuous issuance of loans in recent years, the total liabilities of the people have become higher than the total assets of the people. In addition, China has always been the largest holder of U.S. Treasury bonds. If one day the dollar depreciates indefinitely, China's assets will shrink significantly. If things go on like this, if China's fiscal policy cannot be effectively controlled, China will also face the threat of national bankruptcy.