Confidence Quote by Michael Hudson
““To enable lending to proceed when the IMF’s sustainability criteria were not met, its bureaucrats designed the “systemic risk waiver.” It was a model of circular reasoning that might well be taught to philosophy students. “Severe debt crises all carry the risks of systemic spillovers,” notes Schadler. The global financial system was deemed to be endangered if a debt payment was missed or a haircut imposed on bondholders, because “confidence” was threatened. Any haircut for bondholders might cause panic and “contagion.” So it doesn’t matter what IMF economists say regarding debt sustainability. The IMF is committed to preserving “confidence” at all costs – confidence that the troika will lend governments enough to pay their bondholders and speculators in full (but not pension funds). The systemic risk waiver means that no bondholder should lose. Labor and taxpayers must pay for the losses from risky loans, or else there will be “contagion.””
About This Quote
Source Speech: Interview on IMF policies, 2020
The IMF creates a loophole allowing risky lending by prioritizing market confidence over debt sustainability, shifting losses to taxpayers.
In simple terms: IMF protects confidence by letting risky loans continue, burdening taxpayers.
Key Takeaway
Question the cost of protecting confidence over fiscal reality.
Themes
financial policy
systemic risk
public debt
ethics
governance
Mood
critical
analytical
Type
policy
economic
When to use this quote
- policy debates
- budget planning
- public finance
- risk assessment
Key Concepts
circular reasoning
moral hazard
confidence effect
Questions to Reflect On
- How can confidence be maintained without compromising fiscal health?
- What safeguards could prevent taxpayer burden?
A Different Perspective
Assumes confidence alone prevents contagion, ignoring underlying debt issues.
