Posts Tagged ‘Dominique Strauss-Kahn’

Dominique Strauss-Kahn, the IMF and a Bizarre Case

July 2nd, 2011 Comments off

Just when things appeared they could not be more strange with the Dominique Strauss-Kahn case, they in fact get a lot stranger. First the managing director of the International Monetary Fund, one of the most powerful men in the world, is arrested for allegedly sexually assaulting a hotel maid. He is in fact indicted by a grand jury. But now, after the Manhattan district attorney previously boasted about his “solid” case against the recently disgraced and resigned head of the IMF, he is forced to inform the presiding judge and defense  counsel that the supposed victim and only witness against Dominique Strauss-Kahn  has, in fact, repeatedly told lies to the prosecution.

The tough bail conditions imposed on Strauss-Kahn have already been lifted. While the charges have not been withdrawn, the consensus of legal opinion is that the case against the former head of the IMF has been fatally tarred by the revelation  of lying by the hotel maid, and in all probability the charges will either be withdrawn or dismissed.

The rumors are already rife as to the possibility that the whole affair was a set-up to  destroy Strauss-Kahn. If this in fact was what occurred, was it to remove a potent opponent to French president Sarkozy in the upcoming national elections in France? Or, was the goal to bring about a change at the top of the IMF? And, was it only a coincidence that while this affair was raging, an unnamed nation-state hacked into the confidential data bases of the International Monetary Fund?


IMF in Turmoil; Who Will Replace Dominique Strauss-Kahn?

May 24th, 2011 Comments off

The International Monetary Fund, as predicted in a recent post, will need to find a new managing director, following the arrest and indictment of Dominique Strauss-Kahn over allegations of sexual assault involving a maid at a Manhattan hotel. With Europe engulfed in a full-blown sovereign debt crisis, and the IMF viewed increasingly as the lender of last resort for the insolvent PIGGS nations on the periphery of the European monetary union, a vacancy at the top of the International Monetary Fund adds further to already elevated levels of market uncertainty.

Among the names being floated for new head of the IMF is the finance minister of France, Christine Lagarde. Her name has been surfaced by a strong faction within the IMF which  believes its head must remain a European, just as the leader of the World Bank is traditionally an American. In any event, whoever is the new leader of the IMF, he or she will head a pivotal backstop to the unraveling of the global financial system and economy that has been severely weakened and tarnished by a scandal that is an allegory for all the ills of the current global economic system.



Head of the International Monetary Fund, Dominique Strauss-Kahn, Arrested In New York City!

May 15th, 2011 Comments off


In  a bizarre twist in the still-evolving global economic crisis, Dominique Strauss-Kahn, the iconic Director General of the IMF, has been arrested in New York in connection with allegations involving the sexual assault on a maid at a Manhattan hotel. According to news reports, the IMF head was removed from a Paris-bound flight just prior to take-off from JFK airport.

Normally, an allegation of sexual assault would not be a relevant factor in the global financial and economic crisis. However, the 62 year-old Strauss-Kahn and the International Monetary Fund he runs is so pivotal a player in the global economic crisis, any hint of scandal or illegality that may force him to resign is bound to have a profound impact on global markets. It was under the leadership of Strauss-Kahn that the IMF was center-stage in constructing the bailouts of insolvent nations in the Eurozone, specifically Greece, Ireland and now Portugal. Should he be formally charged, it is a certainty that the IMF will need to find a new leader. This will add a huge dose of uncertainty just as the European sovereign debt crisis is growing to levels that may have surpassed the possibility of containment.



Is IMF Chief Dominique Strauss-Kahn Insane? His Claim That Greek Debt Crisis Won’t Spread is Astounding

March 9th, 2010 Comments off

Economic and financial history seems to be repeating itself, in an utterly surreal example of hubris and mockery. When residential real estate prices in the U.S. began collapsing and the sub-prime mortgage market imploded, Federal Reserve Chairman Ben Bernanke and his then sidekick, Treasury Secretary Hank Paulson, boasted that their brilliant intervention had “contained” the crisis, preventing it from spreading into the broader American economy. Well, in hindsight, they were partially right. The sub-prime debacle did quite spread, or rather only spread, to the wider U.S. economy. It merely metastasized across the world, bringing about the global economic crisis. It now appears that the head of the International Monetary Fund is doing the same thing.

Dominique Strauss-Kahn, the scandal-prone managing director of the IMF (he had previously been involved in a highly publicized intimate tryst with a female employee at the IMF, triggering a legal investigation into his conduct) has just offered his pontification on the potential systemic risks connected with the ongoing Greek public debt and deficit crisis. He told the news agency Reuters that “there was no reason to expect that Spain and Portugal will need external financial support to get to grips with their public debt.” The IMF boss, in essence, claims that the Greek debt crisis will not spread to other regions of the Eurozone experiencing high levels of public debt to GDP.

His calming words will probably fool few investors. Obviously, Dominique Strauss-Kahn has engaged in PR spin, as his attempts at downplaying the growing public debt to GDP ratios throughout the Eurozone and in the UK, not to mention the United States, are absurd beyond all measure. More importantly, he has illustrated  in his own uniquely obtuse fashion that the IMF is an increasingly irrelevant institution as the mounting public debt levels ensure that a massive sovereign debt crisis is ahead of us all.

International Monetary Fund Chief: Global Economic Crisis Still Raging

September 14th, 2009 Comments off

The G20 will be convening this month to no doubt boast about their cooperative efforts to reign in the global financial and economic crisis. The reality is that, at the price of saddling future generations with an immense debt burden, they have temporarily stabilized the financial system. But at what price?

While government deficits are artificially showing quarterly GDP growth or stability after the free fall in Q1 of 2009, consumer spending is contracting due to massive unemployment and stagnation or reduction in real wages.

The head of the IMF, Dominique Strauss-Kahn, recently told the French newspaper LeMonde, “Who will replace the U.S. consumer to power global growth? We have left the financial crisis, but we are still in the economic crisis. ”

The IMF head is correct about the economic crisis. As for the financial crisis, it will be back, with vengeance.

Paul Krugman Angers Austria’s Bankers, Politicians By Stating The Obvious

April 18th, 2009 Comments off
Nobel laureate Paul Krugman stirred the ire and indignation of Austria’s political and financial establishment by merely stating the obvious. While speaking at the Foreign Press Club, Krugman responded to a query regarding Austria’s exposure to flimsy debt in over-leveraged Eastern Europe. The Princeton University economics professor and New York Times columnist had the audacity to provide a factual response. As Paul Krugman restated in his blog, ” I responded by saying what everyone knows: Austrian lending to Eastern Europe is off the charts compared with anyone else’s, and that means some serious risk given that emerging Europe is experiencing the mother of all currency crises.” Hell knows no fury than an economist stating the obvious.
Austria’s irate Vice-Chancellor and Economy Minister, Josef Proell, denounced Krugman’s comments as “totally wrong.” To make sure everyone understood his point, he added, “absolutely absurd.” Adding to the amen chorus of aggrieved Austrian politicos was the International Monetary Fund. The head of the IMF, Dominique Strauss-Kahn, informed the Austrian media, “I do believe that the Austrian situation is fairly good, so I have no particular concern about the Austrian economy these days.”
No concern? The Austrian banking situation vis a vis East European loans is “fairly good?” What planet is Dominique Strauss-Kahn living on? It’s perhaps time for a little financial history, which the Austrian and European political establishment seems to have forgotten. Does anyone still remember the collapse of the Credit-Anstalt?
Created in 1855, with links to the Austro-Hungarian nobility and Rothschild banking family, Credit-Anstalt was the world’s first investment bank. It was the catalyst of many of the most important infrastructure projects in the last decades of existence of the Habsburg Empire. In the years after World War I, this Austrian bank engaged in major speculation throughout Europe, giving all the appearances of being a highly profitable financial institution. Even after the stock market crash on Wall Street in 1929, Credit-Anstalt sought to conduct business as usual, though the economic contraction that followed the 1929 crash transformed a growing proportion of its balance sheet into non-performing assets. When the bubble burst on May 11, 1931, it sent shock waves throughout the world’s financial system.
Contrary to public perception, the Wall Street Crash of 1929 was not the major catastrophe of the Great Depression; it was merely the precipitating event. In fact it was the bankruptcy of Credit-Anstalt in 1931 that made the Depression truly global, and crippled banks throughout Europe and North America. The resulting run on banks throughout the world, with numerous banking failures, was the catalyst that accelerated the rise in global unemployment. When Franklin Roosevelt assumed the U.S. presidency in 1933, his first major task was to attend to the deplorable state of U.S. banking. That reality was at least in part attributable to a chain reaction of financial failures that stemmed from the insolvency of Credit-Anstalt.

Now we are in 2009, with the subprime mortgage securities debacle having been the underlying cause of the state of insolvency afflicting America’s largest banks. The U.S. government, including Congress, Treasury and the Fed, have injected or issued backstop guarantees to the tune of $13 trillion, in a frantic effort aimed at keeping these zombie financial institutions artificially alive. Yet, in this truly global economic and financial crisis, events in other parts of the world may render mute and futile all the trillions of dollars the U.S. is borrowing to save the American and global financial system. As in 1931, it may well be the Austrian banking sector that is the final nail in the coffin of the current globalized financial order.

With the fall of communism, former East Bloc European states were encouraged to borrow heavily by their Western brethren, with Austrian banks leading the way. Governments in Eastern Europe borrowed massively to finance the modernization of their industries, with the goal of providing lower-cost industrial goods and commodities to consumers throughout Western Europe. In addition, consumers in Eastern Europe were encouraged to borrow money in Euro currency at low interest rates for homes and consumer durables. When the Global Economic Crisis hit Europe, demand destruction afflicted the highly leveraged new industrial plants in Eastern Europe. In addition, the consumers who unwisely borrowed money from Western banks in Euros were devastated by the collapse of their home currencies. A new housing crisis has arisen in lands as diverse as Hungary, Bulgaria and Romania.

The non-performing assets on the balance sheets of European banks are enormous, and have affected many countries throughout the Eurozone. However, in terms of percentage of toxic assets to GDP, no European state is in as precarious a state as Austria. More than $250 billion in bad assets are poisoning the balance sheets of Austrian banks, a sum equal to more than 62% of the nation’s GDP. By way of comparison, if the admittedly shaky U.S. banks held toxic assets in the same ratio to GDP, this would equal $8.7 trillion dollars in bad assets. If America’s banking disaster was on the same scale as Austria’s, it would require a dozen TARP programs to cover the holes on the balance sheets.

Is another Credit-Anstalt catastrophe in the works? The macroeconomic data emerging from Europe looks increasingly gloomy. In addition, the European Union is proving to be both disunited and uncoordinated in facing up to mounting evidence of a financial avalanche that may bury the Union and everything else with it, including the common currency. Policymakers throughout Europe are arguing over Eastern European stabilization funds, protectionism versus “free trade,” and other issues, both real and distractions, while the financial underpinning of the entire European economic system is ablaze.

Just as Iceland was the first nation to become nationally insolvent due to bank failures stemming from the Global Economic Crisis, Austria may be fated to endure a similar disastrous outcome. Should Austria’s banks fail as spectacularly as did the Credit-Anstalt back in 1931, the impact on the world’s financial and economic order will be at least as catastrophic and likely much worse. It is indeed timely for Paul Krugman to state the obvious regarding the looming Austrian banking crisis, irrespective of the indignation pouring out of Vienna.

Will 2009 prove to be 1931 redux? The indicators favor the pessimists far more than the optimists. Nobel Prize winning economist Paul Krugman has issued a sober warning, which hopefully will not be drowned out by the hyperbole of reality-denying European politicians.


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