US Bailout of Foriegn Countries

Discussion in 'Economy' started by Reidlr, May 13, 2010.

  1. Reidlr
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    Reidlr Constitutionalist

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    Due to the recent financial crash in Greece, the question has come up on whether or not the US should provide a "bailout" for a foriegn country. The question is a mute point.

    The US contributes a larger percentage of funds to the International Monetary Fund (IMF) than any of the other 186 countries (see below link). Therefore, the US is going to provide a "bailout" to Greece anyway.

    IMF Members' Quotas and Voting Power, and IMF Board of Governors

    I propose a more pertinent question. Should the US, during our own economic crisis, contribute such a large percentage of funds to the IMF? IMO, our country should not contribute any funds to the IMF, but that is not realistic. The US is in this for the long haul whether the US public likes it or not. With that said, the IMF has developed a quota system that is determined by a formula. That formula has determined our current required quota.

    Problem number one, a country's deficit is not considered in the quota formula. Also, 50% of the formula is GDP. Currently in the US, just over 40% of our GDP covers government run programs and therefore is not a true measure of our GDP. Our country is not in the position to be provided funds to any country, much less a country like Greece that has turned itself into a nanny state that essentially broke itself. The recent proposal by the European Union (EU) and IMF, is to hand Greece $145 billion in assistance funds. The IMF would contribute a total of $40 billion. Remember that the US is currently on tap to provide 17% of total funds to the IMF, thats $6.8 billion in US dollars to bailout a country of the EU. :cuckoo: It gets worse, earlier this week the European Union (EU) proposed a $1 trillion "bailout" for Greece. Which would put the US on the hook for more tax payer money to assist Greece.

    Yesterday, Sen. John Cornyn (R-Texas) introduced an amendment to the financial regulatory reform bill, currently being debated in the Senate, that would bar American taxpayers from bailing out “irresponsible” foreign governments. This amendment should get support from bothsides of the eisle, but I doubt that will happen.

    There are two reasons why Amercia should not be providing funds to support Greece.
    1) Greece is a member of the EU! The EU is an economic competitor to the US. Would Microsoft bailout Apple? I know much smaller scale, but still basic economics. 2) We can't afford it!

    Your thoughts!
     
  2. william the wie
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    william the wie Gold Member

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    You left out the fact that saving Greece will reduce world GDP as Portugal, Ireland, possibly Spain, Italy and the UK also demand bailouts. All told figure on a 3T hit as countries demand to be bailees instead of bailers. Expelling Greece from the EU is the least loss policy. So current policy is stupid in ways you have not mentioned.
     
  3. 52ndStreet
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    52ndStreet VIP Member

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    If Europe collaspes, that will hurt American exports to Europe, thus hurting our economy. We would be in a position of reduced export revenue, as Europe buys a lot of American technology, ie ,computers,
    and many spare parts for computers, machines , aircraft, ect,ect.

    So it is in the best interests of America to help their economies, although they are a competitor.
    They are also consumers of American products and services.
     
  4. william the wie
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    william the wie Gold Member

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    Actually not on a net basis the EU gone would help the US economy.
     
  5. Eccgmike
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    Eccgmike Semper Fi

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    First of all I disagree with the premise that we must help our neighbors out or it will cause us financial strife, we are ALREADY in dire straits as we have no money! You don't loan your neighbor money after he spends money like a drunken sailor for years especially when u don't have any money because you yourself have been spending money like an entire aircraft carrier fleet of drunken sailors. Regardless of all the technical goblygook that everyone throws at this situation to try to justify the bailout, we need to bring our own house into fiscal sanity before we help ANYBODY else out. But we're not even doing that! We're spending money WE DONT HAVE at breakneck, unprecidented speed! To make it even worse, the EU had originally put together a bailout package of $600 billion, which would have made our share about $28 billion, but our fearless leader, fiscal genius that he is, called Menkel, Prime Minister of Germany (basically the bank of the EU) and insisted that it needed to be AT LEAST $1 trillion!!! Now why do you think he did that?? Even the left wing media ie: Brian Williams in this instance, told David Letterman that "the dirty little secret is that NOBODY has any money, and the Emporer has no clothes"!! We need to wake up and start throwing these 60's radicals out of office, and quick, fast, and in a hurry because we are circleling the drain and when the shit hits the fan everyone that's not paying attention is going to be saying "how did thus happen", "I never saw it coming" well there ARE people that have seen this coming, and have been sounding the alarm bell for at least two years or better!! But the left wing media has labeled them as "conspiracy theorists" and "crazy right wing nut-jobs"!! But if you go to the New York Times, even THEY are finally starting to get it!! If we trully love this country, we need to pull our collective head out of our ass and throw these idiots out on their ass'es before it IS too late!!
     
  6. industry7
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    industry7 Member

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    I agree with Eccgmike. Too many Americans are focused on fixing the problems of other countries when we already have more problems here at home then we can handle.
     
  7. peter
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    peter Member

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    One note here: euro is already lower (1 euro = $1.24), so it hurts us even now. I don't expect euro to strenghten any time soon.
     
  8. Reidlr
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    Reidlr Constitutionalist

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    Greece's only hope is to attempt to voluntarily withdraw from the eurozone and create their own currency. As Greece continues on a downward spiral the euro will only continue to lesson in value. As the euro drops so does the local economies of all the other EU countries in the eurozone. Greece is only the first domino! Which is another reason why we shouldn't give the EU or the IMF anymore funds, but our federal government will not do that and we will continue to go further into the red!
     
  9. Reidlr
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    Reidlr Constitutionalist

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    By no means am I advocating supporting the EU or the IMF! I hope you don't think that just because we vote out the Democrats this funding will stop! Our government as a whole has sent us into this financial crisis and it isn't going to matter which party is in control!
     
  10. william the wie
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    william the wie Gold Member

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    A major problem is that elections in Britain and Germany have probably killed the bailout but Trichet over at the ECB will not simply admit that this is the case. So the band will play on to the tune of "rinse and repeat".
     

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