When your nation is in economic trouble -- and I mean really big economic trouble -- you call in the cavalry, in the form of the International Monetary Fund. The IMF comes in and loans your nation great heaps of money. Its officials climb around in the national financial records and make lots of recommendations for belt-tightening. The process never sounds like much fun, but if you need help from the IMF, you're not in any position to argue.

Lately, the IMF has been making plans for Iceland, Ukraine and Hungary. Economist Brad Setser, a frequent guest on our podcast, makes the argument today that the IMF isn't big enough to do what's being asked of it. The IMF needs to be lending hundreds of billions, Setser writes:

The Wall Street Journal (Slater and Hilsenrath) reports that Brown Brothers Harriman estimates that Russia, Mexico, Brazil and India have spent $75 billion in the foreign exchange market defending their respective currencies so far this month.
The most the IMF ever lent in a year to the world's emerging economies? About $30 billion.
. . .
[It] lacks the resources to be at the center of the international financial system.

categories: Understanding The Crisis

1:03 - October 27, 2008

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