IMF to Audit U.S. Financial System


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IMF to Audit U.S. Financial System

By Patrick A. Heller, Market Update
July 08, 2008

Other News & Articles

During the latest meeting of the board of directors of the International Monetary Fund, the members voted to conduct a Financial Sector Assessment Program of the U.S. financial system.

The IMF is an international organization charged with monitoring the global financial community, identifying nations with troubled finances, and promoting policies and financial assistance to resolve the problems.

An FSAP is performed in countries that are undergoing significant financial problems. Normally this means underdeveloped nations with non-existent or poor financial policies.

For the IMF to conduct an audit of the U.S. financial system means that it is concerned about potential major crises in America that could wreak havoc around the world.

Among the reasons for the IMF to take this extraordinary measure are:

1. High rate of expansion of the U.S. money supply. Private calculations of the growth in the M3 definition of the money supply show that it is now expanding by 16 percent annually.

2. Soaring Consumer Price Inflation. Calculated by the methods formerly used by the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) is now almost 12 percent.

3. High unemployment levels. Although the U.S government last Thursday reported a June unemployment rate of 5.5 percent, this figure excludes unemployed people who have been out of work so long that their unemployment benefits have run out. These long-term unemployed workers used to be counted in the U.S. government's unemployment statistics. If they were still included today, the reported unemployment rate would be almost 14 percent.

4. The collapses in debt markets, which are expanding from one sector to the next like falling dominoes.

That the IMF will be conducting an FSAP of the U.S. financial system is a significant sign that the U.S. dollar and paper assets measured in U.S. dollars are at a high risk of falling sharply in value from today's levels. For self-protection, more American investors are buying gold. If you haven't already established your position in precious metals, you might want to do so soon - like right now.

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Comments

On July 8, 2008 Alan Walsh said

Talk about the Fox guarding the Henhouse!

On July 8, 2008 Thomas Schellberg PhD said

the unemployment rate counts those who have been actively seeking work in the last four weeks. The long-term unemplyed may be missed by the count because they become discouraged and stop seeking work. But to say 14% is unsubstantiated and seeems too high. The BLS website should have estimates on discouraged workers, for those who are interested.

On July 8, 2008 Pat Heller said

Even the Bureau of Labor Statistics reports an alternate unemployment figure, which is now about the 10% level. It is their U-6 definition of unemployment which tries to include some of the people who have stopped trying to find a job and also people looking for a full-time job but who have a part-time job. More information on the 14% unemployment is available at John Williams' www.shadowstats.com. Click on the Primer menu choice to avoid having to subscribe to his detailed data.

On July 9, 2008 Shawn Willett said

I find that 14% number somewhat dubious. Where I work, we can't get people in there! I live in one of the worst job markets in the state of Michigan. The CPI under the old methods is more likely correct. 9 months ago, lightweight inflation I could suck up. Now, I cringe at the slightest increase in price in anything. We need to hike interest rates. The free flow of cash to the black holes that were unscrupulous lenders, home buyers that bought too much house, and trading houses that loaded up on the subprime assets can no longer be supported by the Fed. Ditto for the uncontrolled spending that is happening in Washington.

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