By Bill Wilson
Sometimes, government officials tell the truth, and when they do, watch out. It might be a good idea to hold on to your wallet.
A recent example is International Monetary Fund Managing Director Chrstine Lagarde commenting on the European debt crisis in Berlin on Jan. 23.
Even though the European Financial Stability Facility (EFSF) has
already committed €440 billion, the European Central Bank (ECB) €220
billion, and the IMF €78.5 billion to propping up troubled sovereigns
Portugal, Italy, Ireland, Greece, and Spain (PIIGS) — some €738.5
billion, or almost $1 trillion in total — Lagarde said, “these moves
form pieces, but pieces only, of a comprehensive solution.”
If Spain and Italy enter the equation, said Lagarde, all bets are
off, saying a “larger firewall” was needed. Without it, Italy and Spain
“could potentially be forced into a solvency crisis by abnormal
“I am convinced that we must step up the Fund’s lending capacity,”
Lagarde declared, adding, “The goal here is to supplement the resources
Europe will be putting on the table, but also to meet the needs of
‘innocent bystanders’ infected by contagion, anywhere in the world. A
global world needs global firewalls.”
Saying the world’s financing shortfall “[i]n the coming years” could
be as much as $1 trillion, the IMF chief proposed a dramatic expansion
of her agency. “To play its part, the IMF would aim to raise up to
$500 billion in additional lending resources,” she said, alluding to a
proposal already on the table to double the Fund’s $364 billion of
quotas. That includes doubling the United States’ quota in the fund to
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