Who decides?

In the 1930's the world suffered the biggest economic depression there is record of. Unemployment was at some point 25% in the USA (one in four workers was unemployed) and poverty spread from there to the rest of the world.

That was the state of the world when a group of economists leaded by John Maynard Keynes thought what some think is common sense. When a country is in financial trouble someone should lend it money to be used to solve those problems. It's the same with a person. If a person is in financial trouble because it's unemployed for instance, this person is going to need a loan to get food and dress and pay for transportation to where the jobs are. If a person is in financial trouble because her business is in trouble she is going to need a loan to fix whatever is wrong with her business or to wait for the bad times to go away. If that's true for people of course it's true for countries.

That's why the International Monetary Fund was created. The name is self explanatory. The IMF is a fund of money that was created to help nations with loans to take actions to ease the effects of a crisis. This was the original idea but the people in Washington (where the IMF headquarters are located) decided that besides giving loans they'll supervise how the money was spent “for the sake of the country receiving the loan ”.

So, the IMF started imposing conditions to the receiving countries. This is the origin of the latest protests in Greece and the protesters are right. Even though the IMF is the one providing the funds for the loan, no international institution has the right to tell a sovereign country how to spend its money. Do the banks tell the credit card holders how to spend the credit? Again, what makes no sense for people makes no sense for countries.

The scary part is that this IMF intervention is not the worst part. The worst part is that they often only care about the money that foreign investors have in the receiving country. When a country receives a loan from the IMF, the IMF usually asks for more taxes and less public services so that the government has enough money to pay foreign investors. Do you remember that the H1N1 flu started in Mexico? Did you know that at the same time an IMF loan got to the country but everybody was busy thinking about the virus and nobody paid any attention to the loan? Did you know that early this year the Mexican authorities raised sale taxes from 15 to 16% and increased federal income taxes to almost 30%? And everybody asks why we are poor.