Why do we need the IMF?

July 15, 2004 7:25 AM

Choose your own adventure! "The following imaginary scenario attempts to picture what would happen if the IMF did not exist. It tells the story of a businessperson in a fictional developing country that is suffering from a shortage of foreign exchange. In the scenario, there is no IMF to turn to in order to resolve the currency crisis. You will soon come to realize the difficulties of carrying on international trade in that imaginary world without the IMF."
posted by livii (21 comments total)

IANAE but the choices seem false and unnecessarily limiting, to put it mildly. Not all international trade has to be done in $ or €, but the world's bankers would have us see it that way.
posted by cbrody at 7:36 AM on July 15, 2004

cbrody, maybe the World Bankers would have us see it this way, but the world's bankers would rather have more currencies than fewer. More currencies means more markets to make, more spreads to charge, and more volume to do.
posted by trharlan at 7:44 AM on July 15, 2004

I'm leading a protest against the government. Think I'll get executed?
posted by DrJohnEvans at 7:48 AM on July 15, 2004

Damn, I was made Minister of Economics instead.
posted by DrJohnEvans at 7:49 AM on July 15, 2004

This is simply absurd. For instance, when I try and exchange my "native" money for foriegn currency:

At the bank, the teller says that you can't buy any shillings. She tells you that shillings are scarce in Yak right now.

No. When I go to the bank, the teller explains that I can buy shillings, but they will be at a worse exchange rate than normal, because shillings are scarce right now. This is one of the many ways in which banks make a profit off of currency exchange. If my bank doesn't have enough shillings, I will simply go to a bank that is willing to take my business. Isn't the free market great?

In this imaginary scenario, my options are to either "go back to my shop" or "go on a waiting list" -- in essence, the bottleneck is that nobody wants my currency. Fine, how's about I buy some gold or platinum in my country? Think anyone will accept that?

This entire exercise makes me... so... argh.
posted by Civil_Disobedient at 8:00 AM on July 15, 2004

I think Bruce Cockburn said it best:

"IMF dirty MF
Takes away everything it can get
Always making certain that there's one thing left
Keep them on the hook with insupportable debt"

- Call It Democracy
posted by eustacescrubb at 8:10 AM on July 15, 2004

With or without the IMF, the *real* scenario is like this:

When I go to the bank, the teller explains that I can buy shillings, if I will give him a small "baksheesh", but they will be at a worse exchange rate than normal, because the government has raised taxes again, unless I am a friend with the bank manager, or offer him "mordida" because shillings are scarce right now, and the local police have been demanding more "insurance" then normal. Then, once I have the shillings, I will have to give a percentage of them to the local crime gang.

Life is HELL in New Jersey.
posted by kablam at 8:28 AM on July 15, 2004

There's a couple more games here.

Why is it people are so down on the IMF, anyway?
posted by Jart at 8:44 AM on July 15, 2004

kablam, and then to make political contributions to the party in power, after hearing the governor use the appropriate code word of course.
posted by caddis at 8:48 AM on July 15, 2004

Jart - Because they haven't studied the way economics actually work; they've only studied theory and the way a bunch of snooty liberal professors say it should...
posted by SpecialK at 9:06 AM on July 15, 2004

"Thank goodness I still live in a world of telephones, car batteries, handguns, and many things made of zinc."
posted by Johnny Assay at 9:07 AM on July 15, 2004

Argentina has its own version of the IMF game. As you might guess, it doesn't paint such a rosy picture.

jart: Here's a more specific "why the IMF is evil" page.
posted by O9scar at 9:23 AM on July 15, 2004

jart-- the IMF is one of those rare institutions that is disliked by significant portions of the right and the left. Really a nice trick.
posted by trharlan at 9:29 AM on July 15, 2004

it worries me that most people will see the link and leave mefi thinking 'thank god for that IMF'
posted by Tryptophan-5ht at 9:50 AM on July 15, 2004

If Yak and its trading partners had an organization like the IMF, this story would have been quite short. You, as the cell phone dealer, would have gone to the bank, exchanged some of your money for foreign currency, which would be available through the assistance of the IMF, and purchased the imported cell phones that your customers wanted.

Instead, I became Prime Minister and single-handedly created a trade surplus for the glorious nation of Yak. And the IMF wants me to stay a lowly celphone salesman. The Man wants to keep me down, man.
posted by ook at 9:59 AM on July 15, 2004

the world's bankers would rather have more currencies than fewer.

I seem to have completely missed the point of the Euro.

On a serious note, the whole "shortage of one currency" issue ignores several basic facts of economics. First, companies that do a lot of international business often protect themselves from fluctuations in exchange rates with various instruments including "banker's acceptances" (a letter from the bank saying "Yeah, he's good for it" in the language/currency of choice), futures (a contract to buy or sell money in the future at a given exchange rate), and options (a contract giving you the "option" of buying/selling something at a given rate, but you don't have to).

Furthermore, the bank should be able to buy any currency they want or need through the International Monetary Market of the Chicago Mercantile Exchange. They don't need to wait for someone to come in with cold, hard shillings. And as if that weren't enough to completely torpedo this bit of thinly veiled propaganda, this must really be the third world if the bank has to have physical foriegn currency on hand (begging the question, why does your supplier need cash? Did these phones just fall off a truck?). I mean, if you go to your local bank, what are the odds you can get a big wad of pesos, yen, and euros? But you can sure get a cashiers check cut in those currencies.
posted by ilsa at 10:36 AM on July 15, 2004

they've only studied theory and the way a bunch of snooty liberal professors say it should...

Surely neo-liberal?
posted by biffa at 10:51 AM on July 15, 2004

So, the world bank is eeeevil, and the citizens of Yak don't want to accept foreign debt and the structural changes it may bring. What should they do?

1. Post "See the world! Study abroad!" posters in universities around the english speaking world. Draw students to Yak, encouraging them to teach the local Yakians some rudiments of English in exchange for room, board and tours around Yak's countryside.

2. Go to ebay and get an older-model phone switch - the kind that lets you plug hundreds of phones into a the phone backbone.

3. Open up a call center where the moderately english-literate Yakians attempt to solve the customer service issues of US cell phone customers.
posted by Kwantsar at 10:55 AM on July 15, 2004

Something about this page makes me think it's a whole Yes-Men-style-fake-WTO scam anyway. Is it real?
posted by fungible at 12:21 PM on July 15, 2004

Its worth watching another viewpoint on the way the IMF and World Bank affect countries.

Because of the way the IMF/WB demands their money to be spent, it is now cheaper to import Idaho spuds and sell them in Jamaica than it is to buy potatos grown in Jamaica. Which is great, sure, cheaper potatos, but what about all the local farmers that the policies drove out of business who now have no money to buy them with.

Just an example.
posted by blackfly at 1:21 PM on July 15, 2004

SpecialK, do you like eating children when they cross your bridge?
posted by Civil_Disobedient at 2:19 PM on July 15, 2004