Created in 1945 (after World War II) to create "stability in international monetary affairs and promote world trade"

• Create an orderly world that would be free of violent fluctuation and economic collapse.
  
  
• Led by the U.S., the U.K., Japan, Germany, France, Canada, and Italy -- the "Group of 7," which holds over 40% of the votes on their boards

In the early 1970's many nations who had taken loans found themselves in a financial bind. Oil prices needed to keep the economy going were skyrocketing. It became more expensive to try and "develop" economically.

Private Banks had an access of cash and encouraged nations to take out huge loans to continue to finance "development." Private banks argued that commodity prices (farm products and natural resources) were high and that the extra debt could be paid off quickly.

• Also applies to U.S. farmers

In 1980's the rules of the game changed.

• U.S. changes the basic foundation of its economy. This had a major global impact.
  
  
• Full employment policy exchanged for low inflation policy
  
  
• Interest rates were raised to keep inflation low
  
  o Those who had borrowed money, now owed even more
  
  
• Also impacted commodity prices, which fell.
  
  
• But value of dollar (in which the loans had to be repaid), went up.

This collection of events stretching from the 1970's to 1980's is what is referred to as the debt crisis of the 1980's and into the present.

How to Deal with the Debt Crisis

Private banks in the U.S. and other "western countries" now were having difficulty collected their debt payments on the loans they had made.

IMF/World Bank steps in, not to help "developing" economies, but to bail out western bankers who had made risky loans.

• welfare for bankers
  
  
• IMF/World Bank refinanced loans, but with new conditions

  o Structural Adjustment Policies

  • To ensure capital continues to flow North
    
    
    • If you don't accept...
      
      
    • Cut off from world's cash flow
      
      
    • TINA (There Is No Alternative)
      
      o [to the neo-liberal economic model]
      
      
      
      
• Gave more power to the worlds bankers than national governments over local, national, and global economies
  
  
• National governments were stripped of power over the economy, too dangerous to allow countries to choose alternative models.

  o Might not choose "the right" one

• Based on a belief in "free" markets
  
  
  • "free" from interference by people (i.e. governments) who might choose to regulate capital.
    
    

The Credit Card Connection