Geopolitical chaos procreating a chaotic leaderless world is sucking the literal life out of human hope. The tentacles of austerity measures and quantitative easing are the primary catalyst of all the madness. One way or another every government financier around the world is determined to cultivate the appearance that the good times are still rolling. The only problem is that the natural rate of failure refuses to participate in the economic facade. Fiat currencies’ purchasing power dwindles, the pounding drum beat of war beckons, and an open ended hegemonic polarity struggle for commodities ensues.

While serving as a member of the Board of Governors of the Federal Reserve System in 2002, current U.S. Federal Reserve Chairman Ben Bernanke gave the world a glimpse into the past, present, and future all at once. In his speech, entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” Ben Bernanke stated:

“Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation.”

Today the infamous 40 percent strikes again, as Cyprus agreed to the terms of a European Union bailout in which banks will seize 40 percent of uninsured bank depositors’ wealth.

Moody’s Investors Service was quoted in Bloomberg as saying, “The seizure of larger deposits may spark tensions with Russia, the source of an estimated $31 billion in holdings in Cypriot banks.”

Proxy wars have gone beyond the spectrum of arming rogue militants and allied nations in dispersed pockets of the globe, graduating to the realm of state sponsored economic terrorism. As “Gerald Celente” consistently and aptly states, “Currency wars + Trade Wars = Real Wars.”

All of the economic wheeling and dealing continues on as the “Arab Spring” explodes into a caballing year round inferno engulfing the entire Middle East. Daily at the United Nations, permanent Security Council members China, Russia, France, United Kingdom, and the United States spar over regional influence with each passing veto and resolution.

This is most apparent in Syria where Russia opposes any intervention as it struggles to prop up the government of its last remaining ally in the Mediterranean region. Russian naval forces stationed at Tartus, Syria may be the last line of repellent preventing NATO intervention.

The lines of frienemy engagement get blurrier with every passing engagement.

Simultaneously as the United States prepares to implement its own austerity measure policy that has carefully been repackaged and marketed to the public under the label sequestration, it is arming rebels in Syria. All claims of being in financial dire straits gets immediately lost within the noise of controlling key choke points around the globe.

One cannot forget less than two years after watching the Al Qaeda flag being proudly raised in the Libyan city of Benghazi, that America’s new found ally the Free Syrian Army are the protégés of Al Qaeda.

The life cycle of keyboards do not possess the durability to correctly and fully analyze threats posed by the uncontrollable Kim Jong Un ruled North Korea. The isolated peninsula nation even managed to startle its longtime ally China into voting in favor of U.N. Security Council resolution 2094. Chinese Foreign Ministry spokesman Qin Gang was quoted as saying;

“China supports the UN Security Council’s necessary and moderate response to the nuclear test of the Democratic People’s Republic of Korea (DPRK).”

Barely beyond two weeks later newly appointed Chinese President Xi Jinping, warned the West not to meddle in Syria’s civil war while on his first visit to Russia.

Not even the mythical country of Chimerica can rescue the too big to fail world from the natural rate of failure. Governments around the world are taking sides now under the cloak of every global economic and geopolitical conflict, because nations know that a hegemonic storm is coming with no evacuation routes or shelter in sight. Once more, honesty of time is proving that which cannot last forever won’t.

Image courtesy: European Parliament

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Imagine a group of people being stranded amidst deep amazon forests with nothing to eat except insects and lizards, with nothing to cover their heads, being tugged out into the wilderness of discomfort and agitation. After days of extensive and tireless operations, rescue officers ultimately landed with loads of food and all the amenities they can offer. But there was a tragic turnaround: rescue officers decided not to take the stranded people out of the claws of death; on the contrary, they agreed to continue their operations as long as they can.

This is what Greece is going through. Over the year of crisis, it has been observed that whatever the assistance mechanism (in terms of bailouts and loans) designed and amended so far contributed more towards fiscal chaos and debasement of the economy, affecting the lives of millions of people and its image as a whole.

Assistance extended so far allowed Greek government to spend,  since the engine of the economy has bottomed-out and domestic resources dried away.

Bailouts and loans just sway a nation back and forth in ravines of debt and despair. Bailouts may help a worn-out engine run, but it can’t help reduce deficits. It is very uncommon to witness that after years of crisis, authorities failed to restructure deficits, failed to frame rules concerning public expenditure, failed to eradicate to fiscal illness, and failed to bridge the fiscal gap and move on.

For example, how far have measures taken to stabilize Argentina debt crisis been successful? Ten years after the Argentinean sovereign debt default, the world seems to have ignored or fizzle out lessens learned in South America. Even today, after a decade of financial fall-out, litigation are continuing; debtors are still hopeful that one day they might get their money back.

On the other hand, austerity measures help curtail expenditure. They assist in lowering the possibility of the further accumulation of debt, but in no sense do austerity measures help reduce previously accumulated debt. This is where action by the International Monetary Fund and European Central Bank turns folly.

A system has to be put in place that brings public expenditure under an axis of regulation, under the barricades of the financial capability of a nation to spend, rather than printing stacks of money to purchase government bonds. Institutions aiding financially are just acting like a cushion, instigating or backing-up nations to carry on reckless spending patterns no what matter whether they can withstand the debt burden or not!

Institutions that promote spending cuts followed by hybrid doses of bailouts partly shift responsibility back to themselves from a debt-laden nation, and continue the legacy of fiscal fallacy.

Legal framework on a systematic platform has to be implemented at a global level, so that in the future we live in a debt free world, a world where fiscal discipline matters and budget surpluses are a reality for all. At least in the case of Europe, a fiscal institution has to overlook the fiscal affairs of all the member nations, capping public spending based on the country’s own financial health and current debt.

The situation where Greece is currently dwelling is very close to people stranded in Amazon forest. What is needed is effective fiscal management. International institutions can play a much bigger role with technical guidance on budget management and by discounting policies that hardly bring any substantial change.

The need of the hour is to lift people away from the woods, not to let them survive being the weakest!

Image Courtesy of   Ververidis Vasilis / Shutterstock.com

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The problems in Spain cannot be denied any longer. In fact, the crisis that hit the Eurozone is something that cannot be hidden.

Since the credit crisis that began in the U.S. a few years ago, countries and their banks have fallen like trees, showing black holes that had been hiding for years, as well as very bad practices that did nothing but make what was already a big problem worse.

Now that the complete rescue is about to come to Spain– the first one was only for the banks, although it counts as government debt– many authors and writers of Spanish newspapers question the competence of the European Central Bank (ECB), and wonder what prevents the ECB from saving us from total disaster by buying public debt of states that are worse off. In these writers’ speeches they explain that the ECB should act as the International Monetary Fund (IMF), and provide financial resources to those who need it.

Are they wrong asking for this? Absolutely. The answer to the question of why the ECB does not act as the IMF is this one: because they are not the same. Despite the fact that, apparently, both agencies have similarities, the truth is the objectives for which they were created are completely different in each one, and the way they respond is not the same. That is why it is advisable to make a couple of clarifications on the differences between the two entities, in order to understand why the ECB is not a “European IMF.” It was not intended to be one.

The IMF was created in a completely different context, when the consequences of the Great Depression could be still felt. Its creation reflected the attempt of several countries to avoid repeating the disastrous measures that weakened economic activity during those years.

Meanwhile, the ECB, successor to the European Monetary Institute, was created in 1998, but it did not make full use of its powers until the entry of the euro in 1999. The creation, established in the Maastricht Treaty, responded first to the oversight of the transition of member countries from their national currencies to the euro and, second,  the need for the existence of a bank for this currency.

With these completely different contexts it is logical that the objectives of both entities are not the same. Thus, the main function of the IMF is to oversee the smooth running of international economic policy, and to encourage it, acting as a fund where countries can ask for help when they need temporary financing.

However, the main objective of the ECB is to maintain the price stability in the euro area by maintaining the inflation at low levels, leaving other objectives subordinates to this first and foremost. Broadly speaking, it seems that we can define the IMF as a fund that lends money to countries who need it, and the ECB as that one who ensures the proper functioning of the Eurozone. So, the role of the first one is active, while the second one’s role is rather passive.

Now the big question is: if the euro is not working properly and there is a risk of its disappearance, can the ECB not protect it through the purchase of public debt? The answer is, again, no. Why? Because of the statutes which regulate it.

Since it was created, the ECB defined itself as completely independent from the member countries of the Eurozone– which has been questioned in recent years, especially by the suspect origin of the last directors of the ECB– and the measures should not respond to the national interests of any country. In the same way, the European institutions and national governments are required to respect this independence, and this means that there is no mechanism by which a member state may compel the ECB to act in one way or another.

This is the main reason why the ECB cannot rescue any Eurozone country. Besides this, there is another powerful reason that we forget sometimes: the conditions for being a member of the Eurozone are strict. It is not enough to wish to adopt the currency, there are steps to follow before completing the transition.

The ECB is responsible for safeguarding the proper functioning of the euro because it assumes that other institutions– created for that purpose– have been responsible for verifying that the candidates have the specific requirements for entry. If someone has not, whose fault is it then?

Image Courtesy of  eisenrah

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For years, women world-wide have been fighting for their rights and to have equality with their male counterparts. While some nations have progressed much more rapidly for the equality of women, other nations are still struggling to give women the rights and freedom that men have.

According to the dailybeast.com, “in the last year, Denmark elected a female prime minister, Brazil elected a female president and a female took the helm of the International Monetary Fund. In the last decade, Ethiopia passed the most progressive abortion laws in Africa to combat unsafe abortion rates and Mali passed a law that says women are not required to obey their husbands.

It seems the state of women’s rights and freedoms worldwide are perhaps better than ever before. But, large and sobering discrepancies remain. Women aren’t allowed to drive in Saudi Arabia, are subject to genital mutilation in Mali and are killed for honor in Pakistan.”

Another country, which is considered one of the worst to live in for women, is Turkey. Their rights are extremely limited. But for Turkish women, things might start looking up for those who have succumbed to inequality for decades. According to the United Press International (UPI), “the European Parliament (EP) recently adopted a report urging Turkey to follow up on its recent work toward securing gender equality and women’s rights.”

The report, written by Socialists & Democrats Member of European Parliament Emine Bozkurt, lays out a series of goals for Ankara, Turkey’s capitol, to accomplish by 2020 in raising the status of women to fully equal members of Turkish society as Brussels and Ankara seek to breathe life into the country’s stalled European Union (EU) accession bid.

Bozkurt, the EP’s rapporteur on women’s rights in Turkey, discussed the passage of the report and named it, “A 2020 Perspective for Women in Turkey” which is meant to ensure that the European Commission keeps the issue of women’s rights and domestic violence in the forefront of its efforts to promote a “positive agenda.” Also, the report “stresses that there can be no democracy without women and that women should be treated as individuals rather than just as family members or as mothers.”

While ministries are working toward gender equality in Turkey, many problems remain.

According to the report, Turkey’s new law against domestic violence “lacks a mechanism which immediately removes [alleged perpetrators] from the vicinity of the woman who has been subjected to violence.” Stefan Fule, the European Commissioner for Enlargement, believes Turkey still has a long way to go and that several inequalities still need to be addressed.

Fule says, “On women’s rights, every step needs to be taken to implement the recent law on violence against women, also, to improve the situation on the ground of women in Turkey as regards education, employment and political representation.”

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The Executive Board of the International Monetary Fund (IMF) approved a new arrangement for Niger under the Extended Credit Facility (ECF) in an amount equivalent to SDR 78.96 million (about about US$120.97 million). The Board’s decision will enable an immediate disbursement equivalent to SDR 11.28 million (about US$17.28 million).

The authorities’ program is aimed at maintaining macroeconomic stability while increasing resilience to shocks; strengthening public finance and debt management; putting in place a transparent legal and supervisory framework for the mining and petroleum sectors; and supporting private and financial sector development.

“The 2012 budget is well aligned with the authorities’ growth and poverty reduction program. Medium-term fiscal policy is rightly geared towards creating the fiscal space for increased development spending, while maintaining debt sustainability.

“Rising receipts from oil production and strengthened domestic revenue should primarily finance the planned investment. It will also be important to step up efforts to seek grants and concessional financing for large infrastructure investment and other projects. Non-concessional loans should only be contracted for well-assessed, high-yield projects,” observes Naoyuki Shinohara, Deputy Managing Director and Acting Chair.

“A significant build-up of government reserves at the central bank will provide flexibility in budget execution and bolster Niger’s resilience to exogenous shocks.

“Important structural reforms are underway. Measures to strengthen budget execution, reduce the number of tax exemptions, and modernize tax and customs administration will help maintain fiscal stability. At the same time, steps to strengthen and develop the financial system and improve the business climate will promote private sector development and diversify the economy,” Shinohara added.

Niger is emerging from a prolonged period of social unrest and from military rule. A democratically-elected government came into power in April 2011. Building on the poverty reduction strategy, the government has adopted an ambitious development program.

Economic activity in recent years has been affected by large swings in agricultural production. Following a year of serious food shortages, economic growth recovered quickly in late 2010, driven by an excellent harvest and the expansion of services related to agriculture.

The authorities’ medium-term policy framework is based on a favorable growth outlook driven mainly by the oil and mining sectors. With the startup of a new petroleum project, GDP is projected to expand by13.4% in real terms in 2012. Investments in a large new uranium mine and the development of the petroleum sector should sustain economic activity in the years after 2012

Niger’s medium-term prospects are nevertheless subject to various risks. The country is vulnerable to exogenous shocks, including recurrent, weather-related food crises and fluctuations in commodity prices. The deteriorating security situation in the region is another factor adding to Niger’s vulnerabilities.

Medium-term fiscal policy will aim at maintaining debt sustainability while creating room for increased development spending. At the same time, the objective to strengthen government cash balances to increase the resilience of the budget to unexpected shocks. In light of these objectives and the current projections for external donor aid, the authorities intend to keep the basic fiscal deficit below 1.5 percent of GDP during the program period.

The government is committed to further strengthening public oversight of the natural resources sector in 2012 through the Inter-ministerial Committee for natural resources assessment, which will ensure appropriate information flows and coordination between government representatives in each natural resource company. In addition, the government intends to undertake a study on its overall strategy and policy in the petroleum and mining sector, including the policy to maximize the government’s petroleum resources and the structure of government oversight in that sector. This study is to be completed by end-December 2012.

A key objective for the medium term will be to bring the Investment Code into line with best practices. In collaboration with the World Bank, the authorities are planning to undertake a comprehensive review of the Code in 2012.

Image Courtesy of   http://www.flickr.com/photos/imfphoto/

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A credit program will be reinstated for Afghanistan, its government stated on Tuesday, by the International Monetary Fund. This should restore the stream of international aid that had been suspended due to the Kabul Bank crisis. The Kabul Bank was the largest financial institution in the country and had sustained major losses of around $300 million USD. It almost collapsed from mismanagement and bad loans.

The IMF has not backed up Afghanistan for more than a year, while some nations who had previously been donors decided to stop authorizing payments to Afghanistan. Now that credit has been reestablished, the country’s international partners can now enlist once again in its development plans. The IMF approved a three -year loan for $129 million, said the Afghan Finance Ministry.

This will permit the government to take on crucial reforms in the financial and banking sector, it will further fiscal amendments in customs and revenue departments, and public financial management will be improved.

No mention of the Kabul Bank was made by the ministry, though it is now a symbol of the corruption in Afghanistan. The matter is being scrutinized by the Afghan people and Afghanistan’s international donors because it is an indicator of the government officials’ promise to eradicate patronage and show accountability to the financial institutions of the world, like the IMF.

Last October, Afghan lawmakers said they would reimburse the central bank of Afghanistan since they bailed out the Kabul Bank. A bill was passed to grant up to $825 million, which will be dispersed for the next eight years. The money will help recapitalize the central bank.

The Kabul Bank has been divided into a “good bank” and a “bad bank”. The Afghan Finance Ministry is running the “good bank,” while the “bad bank” is riddled with bad loans worth hundreds of millions of dollars. The division and the refinancing of the Kabul Bank partly satisfied the IMF conditions to provide more credit to the country.

However, the IMF has asked the Afghan government to fortify the regulation and supervision of the bank sector and to prosecute the people blamed for the downfall of what used to be the country’s largest bank. Seventy million dollars has been recovered out of over $800 million in falsified loans given out by the Kabul Bank, says the finance ministry.

Three hundred and fifty million of the amount has been restructured for repayment, while $110 million in the assets related to the loans were held and transferred to the government. Some of the fraudulent loans were used to buy mansions and invest in malls and other risky projects. Criminal investigations have begun for many bank officials and the top two executives of the Kabul Bank, Sherkhan Farnood and Khalilullah Ferozi.

The two executives each used to own 28 percent of the bank’s shares, while President Hamid Karzai’s brother owned 7 percent of the bank’s shares and was the third largest shareholder. Afghan officials claim that Karzai’s brother and Haseen Fahim, a shareholder and brother to one of Afghanistan’s vice presidents, have repaid most of what they borrowed from the bank.

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The sex assault accusations of attacking  a housekeeper in a hotel room in Manhattan were too harsh for Mr. Dominique Strauss-Kahn to handle. Therefore, on Wednesday he proceeded to resign his position as  head of the International Monetary Fund.

While leaving his position, Mr. Strauss-Kahn said, “I want to say that I deny with the greatest possible firmness all of the allegations that have been made against me.”

Early this morning, a statement released by the I.M.F, exposed some words from Mr. Strauss-Kahn, “It is with infinite sadness that I feel compelled today to present to the Executive Board my resignation from my post of managing director of the I.M.F.  I think at this time first of my wife — whom I love more than anything — of my children, of my family, of my friends.”

After Mr. Strauss Kahn’s resignation was announced, Ms. Le Pen claimed: that France needed to learn a lesson from his arrest, and guarantee “rich and poor are treated with an equal footing.”

He is being legally charged with severe accusations such as rape, forced oral sex and to force another person against her will. His arrest was conducted on Saturday, while he was in an Air France airplance. The action was taken, 10 minutes before his plane was due to depart, when two detectives of the Port Authority boarded the Air France Flight 23.

These accusations intervene with many plans ahead for MR. Straus Kahn. Not only he had a great position as a former French finance minister, but also he was a political figure that if enrolled in the presidential candidatures, he could have a great percentage to defeat President Nicolas Sarkozy.

On the other hand, the International Monetary Fund stated on Wednesday night that John Lipsky would stay as acting managing director

It is interesting to notice the reaction in France. On Wednesday, a poll conducted by CSA showed that 57 percent of people surveyed think he was “the victim of a plot.”

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The news that Dominique Strauss-Kahn had been taken into custody by the police at John F. Kennedy International Airport, New York, on Saturday, shocked not only his supporters but his opponents alike.

The chief of the International Monetary Fund is facing charges of attempted rape, criminal sexual act and unlawful imprisonment of a 32-year-old hotel maid. The maid, who went inside his penthouse suite at a hotel near Times Square to clean it, was able to identify the 62-year-old married father of four out of a line-up. She was then taken to a hospital for a “forensic examination” requested by prosecutors to obtain more evidence in the case, defense lawyer William Taylor said in the report by The Independent.

According to the maid’s account, she entered the suite in the belief that it was unoccupied. The New York Police Department spokesman Paul J. Browne relayed that not only did Mr. Strauss-Kahn emerge from the bathroom naked, but he chased her down a hallway and sexually assaulted her. After breaking free a second time, she escaped and informed hotel staff of what had happened.

When detectives arrived moments later, he had already gone. “It looked like he got out of there in a hurry,” Browne said.

Hugh Schofield of BBC News in Paris explained that the first reaction of many ordinary French people is that ‘this had got to be a put-up job.’ The former French finance minister has recently come to be seen as a realistic potential challenger of Nicolas Sarkozy in the upcoming French presidential elections in 2012. His popularity and reputation as an excellent politician has garnered him a lot of admiration and credibility on the political scene but the arrest is threatening to dissolve his hopes for candidacy. The long-divided Socialists are now thrown into revived turmoil over who they can turn to for credible representation in the election, The Independent reported. According to the paper, even some of Mr Strauss-Kahn’s adversaries were stunned.

“It’s totally hallucinating. If it is true, this would be a historic moment, but in the negative sense, for French political life,” said Dominique Paille, a political rival to Strauss-Kahn on the center right, on BFM television. Still, he urged, “I hope that everyone respects the presumption of innocence. I cannot manage to believe this affair.”

The IMF chief’s wife, Anne Sinclair, has expressed staunch support. “I do not believe for one second the accusations brought against my husband. I have no doubt his innocence will be established.” However, the BBC could reveal that Mr Strauss-Kahn goes under the nicknamed ‘Chaud Lapin’ (literally Hot Rabbit) due to his reputation as a ladies’ man. An affair with a Hungarian economist have before threatened to derail his career.

Speaking outside the court in Manhattan on Monday, Mr Taylor told reporters that Mr Strauss-Kahn had “willingly consented to a scientific and forensic examination.” A second lawyer informed that his client “intends to vigorously defend these charges and he denies any wrongdoing.”

Given the former French minister’s expected intentions of running for president, and his predicted favorable odds, Paris’ regional councillor Michelle Sabban told AFP, “I am convinced it is an international conspiracy [...] This is a new form of political assassination.”

Strauss-Kahn was supposed to attend a meeting in Berlin on Sunday in connection with the financial bailout of Portugal and Greece. Especially the later was of grave importance as the IMF is responsible for one-third of Greece’s existing loan package, according to the Independent. His presence was going to underline the gravity of the crisis. When Asian markets opened on Monday, the Euro fell half a cent to $1.4063 which reflects the concern that the arrest could affect the bailout plans.

Photo provided by International Monetary Fund

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At the start of 2011, India found itself the subject of concern among economists when the country’s food prices reached another troubling high. At the same time, the Reserve Bank of India signaled an interest rate rise after having increased the rates six times in 2010 – one of the most aggressive tightenings of any central bank. Calls for further moves were intensified by a report by the International Monetary Fund, saying that rates needed to be higher to curb inflation.

Looking back, India was one of the world’s best-performing economies in 2010 and has, alongside China, been considered the ‘engine of recovery’ for the global economy during the crisis. But rising inflation is becoming an increasing threat to this position and the Wall Street Journal warns that the central bank has to be careful in the coming year, since liquidity within the banking system is tight and further rate increases could exacerbate this problem.

According to numbers from the Ministry of Commerce and Industry, the last five weeks of 2010 showed a continuous rise in food prices which was mainly attributed to higher vegetable prices, particularly onions, after unseasonal rains in some parts of the country damaged crops. The Wall Street Journal reported that the squeeze in supplies – as well as higher demands from consumers and policy failure on behalf of the government – have exacerbated the situation.

In an attempt to control the problem, the Indian government banned exports of onions, which is seen as a politically sensitive staple given its enormous presence in Indian cuisine. Import duty has also been removed and state-run cooperatives selling the vegetable at subsidized prices in local markets have been set up. But still, the price of an onion was predicted to continue its rise – by January up 82% from the year before.

By the start of February, the inflation of the food prices eased to around 13% and by mid-February, the deputy head of the Planning Commission predicted a further ease in the market, claiming that the food inflation would settle itself in a “much more comfortable position” by the end of the fiscal year in March, according to Reuters.

However, the Indian people are beginning to feel the pinch and on February 23, thousands of people gathered in the Indian capital of Delhi to protest against the food prices and unemployment. Carrying red flags, the protesters marched through the streets of central Delhi since early morning and caused massive traffic jams. The rally was set up by trade unions who called nearly 40.000 people to attend a meeting at the Ramlila grounds.

The Indian National Trade Union Congress (Intuc) – which is backed by the governing Congress party – also supported the strike saying it wants to remind the government about its commitments to the poor, according to the BBC.

Previously, the government had shown interest in adopting an Afghani policy that bans lavish wedding celebrations – an extravagant tradition in the region – to tackle the domestic food crisis. As the Indian economy has grown, millions of people have been elevated into what is termed ‘the great Indian middle class’, but as the high inflation rate is hitting India’s poorest hard, the government scramble to come up with policy to promote a sustainable market. India’s Food and Consumer Affairs Minister K. V. Thomas was quoted by Reuter for saying that “We believe we can preserve food grains for the poor and needy of this country by restricting its use at such extravagant and luxurious social functions”.

He continued to explain that nearly 15% of India’s food grains were wasted at these events and to counter these numbers, the government was looking at introducing a bill before parliament to limit the consumption.

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