On April 1st, a vice-governor of the Czech National Bank, Dr Mojmír Hampl, gave an interview to the Der Standard daily in Austria:
Ausgerechnet der IWF beschleunigte die Krise (German)Although he may soon be forced to apologize and recant his opinions by an international gang, I would subscribe to every word he said in that interview. In fact, I have written similar things on my blog.
Ironically, the IMF accelerated the crisis (autom. English)
Reactions via Google News (English)
During the crisis, there's been lots of efforts in the Western media to present the New Europe as the key source of credit and financial problems - the epicenter in the next stage of the "great depression". This misleading publicity was not invented by random journalists only: it was often promoted by people from the International Monetary Fund and similar groups.
For example, the International Monetary Fund published some tables about the exposure of the Central and Eastern European banks. These documents happened to ignore a "detail", namely the fact that the loans to the Western banks branches were covered by the local deposits. ;-) So the whole value of the foreign-owned banks was claimed to be the "exposure"! I remember this episode quite well. The Czech National Bank finally managed to convince the IMF to publish a correction.
These things may look distorted from a Czech perspective because the Czech Republic has never had any significant credit problems - and the Czech citizens have virtually no debt denominated in foreign currencies. Relatively to the foreign owners, the Czech banks are creditors, not debtors. And the internal loans are more-than-covered by deposits. These spreading credit problems were mainly a problem of the Western financial systems - with their excessively leveraged financial instruments etc. But even outside the Czech Republic, in the remaining countries of Central and Eastern Europe, the problems were vastly exaggerated.
Hampl also offered an obvious explanation why the IMF was doing so: it didn't have any clients before the crisis and it looked kind of unimportant during the crisis, too. They wanted some new work to do so the new leaders of the IMF - Dominique Strauss-Kahn et al. - were trying to bring the whole region into the sort of crisis that would require a regional bailout led by the IMF. That would allow the IMF to spend the increased collected resources, redistribute much more of them, and collect even more of them in the future. Despite lots of badmouthing in the media, this didn't happen and couldn't happen because the real situation was vastly different from the presented one. So just four countries or so got some non-essential loans.
Also, some powerful groups try to expand the eurozone. However, no one is too eager to join these days - certainly Czechia is not. First, we don't want to join too much - because the separate currency works, especially because the inflation is low. Second, we don't quite obey the criteria. Third, they don't want us to join too much, either.
Moreover, the eurozone membership was often claimed to accelerate the structural reforms in countries such as Greece. Needless to say, the correct answer turned out to be just the opposite one: as expected, the eurozone provided the irresponsible Greek politicians with yet another "umbrella" that allowed them to be more irresponsible than before.
This bias of institutions that try to "get work" and "be important" is quite universal. After all, that's also the reason why politicians love to exaggerate external threats - whether they're financial, climatic, or terrorist threats. It unifies their nations under the politicians. It makes the politicians more important and more well-paid. We see it all the time and it's logical that this mechanism or bias is at play, at least statistically. It's crazy if someone tries to deny it.
But as you may expect, the truth hurts.
The IMF got angry once they read the interview. They immediately called the governor of the Czech National Bank and forced him to denounce Hampl's words as his private opinions. Mr Tůma quickly did it.
A Willy Kiekens of Belgium did the dirty telephone work on behalf of the IMF. It seems that they also tried to hurt Mr Hampl behind the scenes by calling prime minister Jan Fischer and finance minister Eduard Janota. They moderately distanced themselves from Hampl's findings, too. Clearly, many of the other Czech officials know where Hampl is coming from - but the courage and clear thinking are the first things in which they can't compete with Hampl.
At any rate, the actual dynamics of the crisis has shown that Hampl is right and the IMF scenarios were wrong. And by its sudden anger, the IMF has shown that they don't follow sources such as The New York Times where Hampl expressed very similar opinions in November 2009. See also his related op-ed about politicians in The Wall Street Journal from December 2009.
It's very unfortunate for such international institutions to behave as mafias that are equally likely to help as they are to hurt - but they're always eager to get powerful and to attack the sovereignty of the nations, their national banks, and particular people who work in these banks. It is conceivable that in the long run, the existence of the IMF and similar institutions may have a positive impact but there should clearly exist some counter-mechanisms that will protect the nations and individuals from the obviously possible negative impact of such large structures.
And that's the memo.