Let Russia Default!

By Patrick J. Buchanan – June 9, 1998

Why would Republicans even think of throwing half of 1999′s surplus down an IMF rat hole, into a Russian regime even its chief financial officer says is shot through with larceny and corruption?…

The last six months have exposed the Global Economy as a vast poker game that can never end. When one player, because of bad cards, bad luck or badly played hands, loses all his chips, the “house” hands him another stack. So the game goes on. For if the players ever call it a night, they will discover there are 10 times as many chips on the table as there is cash to back them up.

Last fall, the International Monetary Fund rushed $117 billion in fresh chips to South Korea, Indonesia and Thailand. Wise men know we will never see that money again. With their currencies collapsed, these Asian economies are probably only half as large, in dollar value, as they were months ago. And now, they are billions of dollars deeper in debt.

Yet the game must go on. Why? Because if we admitted that Indonesia was bust, that it can never pay back its loans and that these debts must be written down or written off — then U.S., European and especially Japanese banks would have to declare huge losses.

Though swamped with debt, these regimes cannot be allowed to do what normal bankrupts do, i.e., default, for that would expose the bankruptcy of their Western creditors. As Treasury Secretary Robert Rubin can tell you, too much truth can be a bad thing for markets built on myths.

But Russia’s crisis may be our day of reckoning. Moscow is sunk in debt. Tens of billions of dollars of it comes due in 1998. The money is not there to pay it. Another bailout of Russia is needed, or Moscow goes belly up and defaults.

Last week, however, Russia’s chief financial officer, Venianin Sokolov, said that all the previous IMF billions pumped into Russia have been lost, wasted or stolen “at the highest levels” of Boris Yeltsin’s government, which he calls an “entirely corrupt regime.” It “consciously and deliberately blocks efforts to get at the truth,” says Sokolov of the thievery. Foreign loans are nothing but a “fix” for a “dope addict.” For the good of Russia, they must stop.

Brave man, Sokolov. Cut to the GOP Congress. Does it have the same courage to expose this fraud? Does it have the courage to say no more tax dollars to the IMF to bail out corrupt regimes, so they can continue trickling payments to Western creditors, and the creditors can maintain the falsehood that their loans are good?

Clinton’s men are desperate to keep the poker game going. They do not want a global collapse on their watch.

So, the White House last week issued this remarkable statement: “The president wanted to underscore the fact that the United States has no doubts about the underlying strength of the fundamentals of the Russian economy.” Did Mike McCurry say that with a straight face?

Why would Republicans even think of throwing half of 1999′s surplus down an IMF rat hole, into a Russian regime even its chief financial officer says is shot through with larceny and corruption?

Answer: Fear — fear of what will happen in Russia if we stop paying extortion money, fear of what comes after Yeltsin if we don’t bail him out, fear of Western banks going under if the truth is known that Russia’s debt is never going to be paid back.

The big stick Clinton and Rubin hold over Republicans is this threat: If you don’t hand over the IMF money and Russia or the Global Economy collapses, we’re going to blame you for the crash!

But if Congress forks over the $18 billion, and the IMF bails out Russia again, we but postpone the moment of truth and deepen the eventual crash and cleanup. Consider how our ensnarement in this fraudulent Global Economy now ties America’s hands.

We cannot sanction Pakistan for firing nuclear weapons, else Pakistan will default on its $32 billion in foreign debt, and American taxpayers will have to pay off Pakistan’s World Bank loans.

We cannot sanction China for shipping nuclear and missile technology to Iran and Pakistan because that would force China to devalue its currency. Hong Kong would follow, triggering another round of Asian devaluations, forcing even larger IMF-World Bank bailouts, subsidized by the American taxpayer.

If Vladimir Zhirinovsky comes to power in Russia and decides to discipline Latvia, what do we do? Can we threaten U.S.-NATO military action against a nation the White House is terrified may default on its debts and ignite a global depression?

The Global Economy is America’s straitjacket.

The debtor-nations have discovered that we are more terrified of their defaults than they are. The Global Economy is a honey trap. We are ensnared and going down with it unless the GOP has the guts to defund the IMF and expose how worthless these foreign debts really are. It is a time for courage and a time for truth.