Giving Them Something To Cheer. Tax the 'Rich'

The strong sense of unreality about the budget is emphasized by the reports that world finance leaders will be in Washington on April 24 and 25 for meetings of the IMF and World Bank to discuss among other things IMF lending, and governance reforms at the 'global' institutions. In a letter sent days before these meetings to Democrat and Republican leaders in the U.S. Congress, President Obama has said that U.S. funding is required to combat the worst economic crisis since the Great Depression, and makes up part of pledges made by G20 member countries at their meeting in London at the beginning of the month.

It does not, the President argues, "represent a budgetary expenditure or any increase in the deficit since it effectively represents an exchange of assets...The United States transfers dollars to the IMF under the NAB, [New Arrangements to Borrow, an emergency facility established in 1998 that allows IMF member countries to provide credit to the Fund to deal with crises that may threaten the stability of the global financial system] in exchange the United States receives another monetary asset in the form of a liquid, interest-bearing claim on the IMF, which is backed by the IMF's strong financial position, including its significant holdings of gold".

President Obama urged Congress to pass legislation quickly to raise IMF resources, calling the NAB's pool of capital "woefully inadequate" as is its ability to respond to crises in countries hard hit in the current severe economic and financial crisis. "The deteriorating conditions threaten to worsen the recessions in these countries and could cause currencies to collapse," Obama wrote.
"Together, these factors, particularly if they become more acute, will further lower global growth and, as we saw during the Asian financial crisis, they will cause U.S. growth, jobs, and exports to fall even more sharply". (letter cited in the Herald Tribune)

Ostensibly the increase in funding is aimed at emerging market economies, but it is increasingly clear that the United Kingdom will need to be near, or at, the head of the queue for rescue. There is nothing the New Labour regime can do to resolve the contradiction between its grotesque levels of public indebtedness and its political raison d'etre - the maintenance of a client state and itself in permanent power. Nor can it raise anything like the taxes it needs to meet its clients' demands. There are simply not enough 'rich' to attack.

When Obama says there is to be an enlargement of the NAB facility by an overall $500 billion, quite where he gets that figure from is hard to discern. Chinese officials have said Beijing plans to contribute $40 billion to the IMF through a bond issued to its central bank by the Fund, and IMF officials have said Brazil and Saudi Arabia could also contribute. And he hopes if the United States takes a lead other governments might follow.

But this is all being asked for, proposed, expected, hoped for.When they all meet up (again) at the end of the week, the countries that can offer funds are going to require a lot more say first, in who runs the IMF, and the terms on which it acts, before they hand over.

No wonder tomorrow's performance feels like a charade. Waving red boxes, drinking watered whisky, the Chancellor will waggle his silly eyebrows, tell lies about the awfulness of the situation, swipe at Labour's pet shibboleths, and behind him will be the serried ranks of fat, troughing, corrupt, bawling, Labour lobby fodder who have let us all down so badly.

The New Labour regime has no idea what terms and conditions might be attached to their 'de-stigmatised' application for assistance, but they have given the control of our country's budget into the hands of others.