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Show Hinckley Journal of Politics Spring 2000 countries that, although solvent, face temporary liquidity problems. The third would be called the Global Restructuring Agency. It would be in charge of cleaning up and would deal with those countries that in spite of every effort, run into a crisis. Conclusions In the United States, if a business has been overly risky or has not been managed well, it is usually allowed to fail. That is free market competition, Darwin's survival of the fittest, a weeding out of the bad. Whatever one will call it, it is this system that allows for the healthiest economy. This system needs to be practiced in the global economy as well. Instead of hanging on to national banks that have created a moral hazard, let them fail and start over again with new management, new capital, and a new risk averse, conservative approach to business. If companies know that because of bad policies they will go bankrupt, they certainly will be less likely to take the same risks. As the IMF continues to hand out more and more money to member countries, the moral hazard will continue to grow. Instead of investing in order to strengthen the economy as a responsible government should, they will use this money to invest in non-performing loans that their top banks have created by taking unnecessary risks. A great example of this policy occurred in Chile. Chile was not loaned money from the IMF because it was not abiding by certain rules. Chile's economy collapsed and there was no additional capital coming from the outside. Through various steps the Chilean economy has been reformed without IMF help, and is now one of the strongest economies in South America. This is the most significant reform that the IMF needs to make. It needs new policy that will once again make it a true lender of last resort. Transparency is needed so that we can see what type of policy recommendations the IMF is making and why. This is so other governmental agencies can better ensure that the IMF is performing according to everyone's best interest. The IMF need not be abolished. However, definite reforms need to be made so that we do not continue experiencing the type of financial crises that we experienced during 1997 and 1998. References Bandow, Doug. 1998. "Kill the IMF." Fortune, 25 May, 40. Calomiris, Charles W. 1998. "The IMF as Imprudent Lender of Last Resort" Cato Journal, May. Eatwell, John, and Lance Taylor. 1998. "The Performance of Liberalized Capital Markets." Notes from speech given at the Hotel Washington, Washington, DC, September. Edwards, Sebastian. 1998. "Abolish the IMF." Financial Times, 13 November. Fidler, Stephen, and Robert Peston. 1998. "Blair to Urge Full Overhaul of IMF and World Bank." Financial Times, 21 September. Fuelner, Edwin J. Jr. 1998. "The IMF Needs Real Reforms, Not More Money." Heritage Foundation: Backgrounder, 5 May. Heifer, Ricki Tigert. 1998. "Rethinking IMF Rescues." Broofongs Conference Report No. 1, August. Hornbeck.J.F 1998a. "Ability of the IMF to Manage Financial Crisis." Memorandum to Robert Lockwood, 27 October. Hornbeck, J.F 1998b. "The International Monetary Fund: a Short Overview." Congressional Research Service Report for Congress, 12 February. Illaronov, Andrei. 1998. "How the IMF Contributed to the Russian Economic Collapse." Speech given to Trade and Foreign Policy Legislative Assistants, Washington, DC, 9 September. International Monetary Fund. 1995. Financial Organization and Operations of the IMF. Pamphlet Series No. 45, 4th ed. September. International Monetary Fund. 1996. "Financial Statements." 31 October. International Monetary Fund. 1998. "The IMF at a Glance." April. Johnson, Bryan T, and Brett D. Schaefer. 1998. "A Checklist for IMF Reform." Heritage Foundation: Backgrounder, 16 July. Kemp, Jack. 1998. Letter to Rep. Richard K. Armey, U.S. House Majority Leader, April. Lindgren, Carl-Johan. 1996. Bank Soundness and Macroeconomic Policy, Washington, DC: International Monetary Fund. Makin, John H. 1998. "Interference with Free Markets Causes Global Crisis." American Enterprise Institute: Economic Outlook, October. Melvin, Michael. 1985. International Mone^ and Finance, New York Harper & Row. Nanto, DickK. 1998. "The Asian (Global?) Financial Crisis, the IMF, and Japan: Economic Issues." Congressional Research Service Report for Congress, 3 September. Platt, Gordon. 1998. "Call for a New Financial Regime Strikes Chord." Journal of Commerce, 22 September. Root, Franklin R, 1990. International Trade and Investment, Cincinnati: South-Western Publishing Co. Sachs, David, and Peter Thiel. 1998. "The IMF's Big Wealth Transfer." Wall Street Journal, 13 March. Saxton, Jim. U.S. Representative. 1998a. "Congressional Pressure Reduces IMF Secrecy-IMF Transparency Reforms Taking Effect." Joint Economic Committee, press release, 6 November. Saxton, Jim. 1998b. "IMF Financing: a Review of the Issues." Joint Economic Committee, 105th Congress, 1st session, March. Saxton, Jim. 1998c. "IMF Reform Progress Noted by Saxton-End to IMF Loan Subsidies Possible." Joint Economic Committee, press release, 8 October. Saxton, Jim. 1998d. "IMF Reforms Urgently Needed-Near Term Reforms Lay Groundwork for Long Term Reform," Joint Economic Committee, press release, 9 October. Saxton, Jim. 1998e. "New IMF Reform Proposal Welcome by Saxton-IMF Reforms Needed for International Stabilization." Joint Economic Committee, press release, 23 September. Saxton, Jim. 1998f. "New IMF Reform Rooted in Transparency and Efficiency Act-Progress Achieved toward Long Term Reform." Joint Economic Committee, press release, 20 October. 23 |