I only dared to suppose that the rule of thumb of sociology that every burocratic organization tends to accumulate more and more competencies with the time applies for the IMF as well and Strauss Kahn’s – who anyway is a French socialist, therefore not really a fun of the invisble hand-free market ideas – earlier remarks on a new role of the Fund fit very well into this pattern. It is not necessary to know where they are heading to suppose that they are eager to become more and more important in administrative terms as well.

Otherwise I don’t see real contradiction between your opinion on the long term problems (and I basically agree with your anaylsis, not that it is really matters) and the resulting need of writedowns instead of securing capital flows, but
a, if the guys at the IMF view it otherwise they will act accordingly (well, it is a banality, I know)
b, in an environment where every minor news can bring a currency to the brink of disaster it can be advantageous in the short term not to make news of IMF visits in countries with running agreements or of new countries applying for a loan.

As I recall even you wrote something on the deathly spiral of the raising costs of debt after downgrading leading to another downgrading and raising costs. (The Hungarian sepcialist media seriously diccussed the possibility that the IMF deleagtion visting Budapest in February will announce the suspension of the agreement and you can easily imagine the mood of the market following those sepcualtions and the reults, even though shirt term ones.) I don’t know whether these measures are effective or not (I tend to think that not as effective as the IMF would like to believe) but at the moment I can’t hope for more action from international actors.

“I suspect, that the whole package, besides being a stpe forward to the new role of the Fund envisioned by Strauss Kahn”

Well I suspect no one really knows where the IMF is headed at the moment. The problem is that these countries are getting a lot of lending at the moment, but while this is a temporary respite, they don’t need loans, they need WRITEDOWNS or “debt restructuring” (if you prefer). In any event, they can’t pay the loans they already have, so how does anyone expect they will be able to pay more.

They are not having a liquididty flow problem (balance of payments crisis), but a long term structural declining and ageing population one, which means, with all the liabilities they have outsanding to the older age groups they are effectively insolvent.

So this is not like previous lending to Argentina, Ecuador, Pakistan or even Turkey.

As I am arguing, those countries who are in the EU will need to have the “erstructuring” under the fiscal umbrella of the EU, but those who are outside – Ukraine, Belarus, Serbia etc, they have nowhere to go, so my feeling is that the IMF are now – de facto – going to have to create a new category of “fiancial protectorates” of countrieds who become and permanently depend on them for life support.

This situation isn’t going to end when this “crisis” is over (whenever that will be), since for them the problem is just begininng.