Stiglitz' loose talk again

Jordan Hayes jmhayes at
Thu Jul 2 09:16:35 PDT 1998

Doug Henwood wrote:

> He's right, of course, but what about the flipside? Would the
> Asian bubble have expanded to the proportions it did without the
> Mexican "bailout" of a few years earlier?

To hear Stanley Fischer tell it in the Jul/Aug Foreign Affairs, the IMF was watching closely since about 1/96 in Thailand and could have pulled the trigger at any time, but allowed it to unwind in the way it did because of fears of the problems with a pre-emptive strike. Bart Simpson says you're damned if you do and you're damned if you don't.

> Would foreigners be buying Russian bonds if it weren't
> for their implicit IMF guarantee (which would probably be rated
> F- on their own credit merits)?

It's that guarantee that is the reason the bonds are worth anything at all; it's a commitment to see it through, right? Aren't all adjustments to credit ratings due to underwriters in some way legitimate? The truth is, no one knows whether Russia can pull itself out of this. My long-term guess is that it won't. But in the medium term?

Do you think it's somehow wrong for the IMF to stand behind at least the idea of Russia trying to fix its problems? Do you think that it is somehow outside of its charter? Or I forget: do you think the very notion of having an IMF at all is somehow distasteful? I mean, of course, other that the normal objection to the whole ball of wax.

Finally: it's clear (to me at least :-) that Russia is doomed without some kind of external support. They may well be doomed anyway, but what is to be done? I think I've heard two things from you on this point: it's too easy to get IMF support, so countries have no incentive to avoid the kind of 'crisis' that leads to a 'bailout' and can go on being sloppy; and the IMF is like a Macarthur beach landing and the internal medling that comes along with the wing-tipped thugs is like an invasion. Should it be harder to get help or easier?


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