Thread: Uncle Sam To The Rescue: IMF Creates New European Bail Out

Uncle Sam To The Rescue: IMF Creates New European Bail Out Facility, The "Precautionary And Flexible Credit Lines"

Submitted by Tyler Durden on 11/22/2011 12:01 -0500
Comments: 233 / Reads: 12,889

And here comes Uncle Sam:

~ IMF APPROVES CREDIT LINE PROGRAM CHANGES TO PROVIDE LIQUIDITY
~ IMF CREDIT LINE CREATES NEW SOURCE OF FUNDS FOR MEMBER NATIONS
~ IMF ADDS EMERGENCY FUNDING TOOL TO ASSIST COUNTRIES IN CRISIS
~ IMF NEW CREDIT LINE AVAILABLE FOR SIX MONTHS TO TWO YEARS
~ IMF CREATES PRECAUTIONARY AND LIQUIDITY LINE
~ IMF SAYS ACCESS UNDER 6-MONTH LIQUIDITY LINE COULD BE UP TO 500% OF MEMBERS QUOTA

And here is the math: Italy's quota is 7,882.3SDR; Spain is 4,023.4 SDR. Multiply by 5 and you get 40 Billion and 20 billion SDRs respectively, which translates to $61 billion and $31 billion. A total of $91 billion in additional capacity? And that's it: enough to fund Italy and Spain for... two months. This is the best the regime can come up with?

Good thing America can get its own house in order so it can go out and fix the world next, not with one, but two credit lines. Incidentally, absent the US ratifying these two credit lines they are as good as useless because with 17.7% of the total allocation, the US is the defacto lender of only resort (since this is used to bail out Europe, which effectively means Europe will not be lending into these credit lines). And good luck passing a global bail out vehicle through the Frankenstein monster that is the US legislative body.

And the final nail why this move is completely irrelevant:

The IMF board of governors agreed December to roughly double quotas from around $375 billion to around $750 billion. But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, need to hand over their promised dues.

Q.E.Dead

The precautionary Credit Line:

Precautionary Credit Line The Precautionary Credit Line (PCL) has been established to provide effective crisis prevention to members with sound fundamentals, policies, and institutional policy frameworks that have no actual balance of payments need at the time of approval of the PCL, but moderate vulnerabilities that would not meet the FCL’s qualification standard. Members may request an arrangement with duration of between one and two years. Access under an arrangement with one-year duration shall not exceed 500 percent of quota, with the entire amount being made available upon approval of such arrangement and remaining available throughout the arrangement period subject to an interim six-monthly review. Access under an arrangement with a duration of more than one year shall not exceed 1000 percent of quota, with an initial amount not in excess of 500 percent being made available upon approval of the arrangement and the remaining amount being made available at the beginning of the second year of the arrangement subject to completion of the relevant six-monthly review. Purchases under PCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.

And the Flexible Credit Line:

Flexible Credit Line The Flexible Credit Line (FCL) has been established to allow members with very strong track records to access IMF resources based on pre-set qualification criteria to deal with all types of balance of payments problems. The FCL could be used both on a precautionary (crisis prevention) and nonprecautionary (crisis resolution) basis. Members may request either a one-year arrangement with no interim reviews, or a two-year arrangement with an interim review of qualification required after twelve months. Upon expiration, the Fund may approve additional FCL arrangements for the member. Access is determined based on individual country financing needs and is not subject to a pre-set cap. Purchases under FCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.

Source: IMF http://www.imf.org/external/np/tre/acti ... .htm#tab2a

http://www.zerohedge.com/news/uncle-sam ... t-facility

Originally Posted by Tyler Durden

A total of $91 billion in additional capacity? And that's it: enough to fund Italy and Spain for... two months. This is the best the regime can come up with?

Good thing America can get its own house in order so it can go out and fix the world next, not with one, but two credit lines. Incidentally, absent the US ratifying these two credit lines they are as good as useless because with 17.7% of the total allocation, the US is the de facto lender of only resort (since this is used to bail out Europe, which effectively means Europe will not be lending into these credit lines).

But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, [and] need to hand over their promised dues.

No, it means that the U.S. bears one sixth of the burden of postponing or softening the collapse of countries whose immigrants made great contributions to the rise of America. Other financially stable creditor nations include Germany, France, the U.K., Russia, India, China, Taiwan, Japan, South Korea, Brazil, and perhaps South Africa and Australia.

Refinancing only postpones the inevitable end. Besides abandoning broke governments and nations operating on deficits (like the U.S.): to the wolves; to the oil-rich countries of the Nation of Is|am and Venezuela; to slave labor economies like that of China and Vietnam; to flush criminal cartels looking for "investment opportunities" to control; to communism or chaos . . . some alternatives are:

• 1) to hang on to the financially hemorrhaging economies, and we all hold hands while we go under together, denying our self-preservation instincts . . . a mutual covenant of the fiscally responsible with the irresponsible, a binding agreement to which not everyone is so altruistic as to contract;
  2) to pick winners and selectively forgive their national debts, thereby limiting the number of nations abandoned to perish, and sustaining some humane element in humanity;
  3) to lock the door and leave the beggars in the night to either learn some personal responsibility and pull themselves up by their bootstraps, or to starve or freeze; or
  4) some combination of the above.

It is more blessed to give to the poor than to be the recipient of charity.