New IMF rules could have bad consequences

AU students, particularly Kogod enrollees, should consider the ramifications of future European debt speculation. The rules may change, provided the global banking community fails its mission to thwart proposed International Monetary Fund rules regarding Euro debt, according to the New York Times.

The IMF, in an attempt to regain traction in restructuring European debt markets, has apparently gone too far. Investors of European bonds, under new IMF recommendations, may be responsible for upfront losses. Currently, any individual carrying European bonds has the option of dumping them while minimizing loss, the New York Times said.

America is crying foul, as is the rest of Europe, over the IMF’s mission to create an image of catering to responsible investing. Kogod students must be reminded that, while the decision to invest in Europe is entirely at one’s own risk, it is illogical to think that the Europe – as well as the global monetary platform – will be any safer after these new rules are implemented.

Specifically, the rules give countries a “standstill,” according to the New York Times. This “standstill” allows countries such as Greece, Spain and Portugal, having already accessed credit to offset debt, extra time to “resolve its problems.”

This is strange, given that a country will need more than just a few weeks (or months) to get its ducks in a row. There is a reason for this madness, and in the opinion of frustrated investors: the IMF, now declining in prominence in Europe, needs somehow to regain it. So, why not form vague, and unfair, regulations that leave bondholders on the hook for their choice to invest? The reason is power.

This is not to say that the IMF is not a phenomenal organization, one that has arguably saved counties from the perils of their own poor fiscal and monetary choices (self-medicating, if you will). Unfortunately, these new regulations do more harm than good: instead of just the host country being burned, the speculator contributing to the country’s competitiveness also gets burned.

The fat is all in the upfront costs. Kogod students should voice their opinion, given that some graduate will no doubt enter a field like investment banking, or will simply invest in bonds as a side chore.

Marshall Bornemann is a junior in the School of International Service.

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