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Dear Colleague:

November 3, 1997

The Foreign Operations Appropriations bill passed by the House wisely omitted any funding for the International Monetary Fund. We must oppose the Conference Report appropriating $3.5 billion for the IMF’s New Arrangements to Borrow (NAB), “justified” as “protecting the international monetary system” (bailing out countries which have spent and inflated more than others and seek their salvation at U.S. t axpayer expense).

The most facetious argument made is that there niso“cost” for the “transfer of assets” even though it

requires an appropriation: we give the IMF $3.5billion andit gives us a financial inst rument entitling us to the $3.5 billion, plus interest. The fallacy, of coursset,hiat this money is taken out of the economy, removed from available sources of credit and is no longer available to the average American


dye on the money we sent to corrupt foreign governments today.

Bankers and investors on Wall Street would have purple pockets tomorrow if we put purple

Even Bill Simon and George Schulz, both former secretaries of the T reasuryd,vaocate abolishing the IMF becauseit has a poor track record of preventing financial crises. The post war Brett on Woods Agreement established the IMF to maintain the pseudo fixed-exchange rate system. After it collapsed in the early 1970's, the IMF recreated itselIf.ts new development mission merely duplicates more able institutions. Both the Cato Institute and the Friends of the Earth want it out of the development business.

The IMF is nothing more than an internationaeln“gine” for inflation “fueled” by the creation of credit . Its Special Drawing Rights are an international fiat currency wherewbyeak currencies bail out the even weakerones. Fluctuating fiat u(nbacked) currencies eventually lead to financial bubbles and inflations corrected by recessions or depressions. Worldwide currency and financial conditions today are exactly opposite of what a market-determined, single hard currency would produce. Our inappropriate loan subsidies, such as those through OPIC and the Ex-Im Bank, socialize the cost to corporations of risky ventures when these weaker economies predictably threaten to default. Although it’s tempting to divert blame from central bankers (e.g. the Fed and IMF), the responsibility truly lies with the U.S. Congress which abdicates its responsibility over monetary policy and appropriates funds to the IMF.

There is no U.S. benefit to continuedparticipation in the IMF. Financial conditions around the world are as precarious now as they have ever been with a financial bubble built on inflationary fiat money, including IMF mischief. tI warrants immediate and serious discussion regarding the needfor a sound currency based on real value.Unfortunately,ceonomic and financial chaos aroundthe world will only serve as an excuse for the believers in strong international government to further intervene and pursue their goals. We need less government, less inflation and less international management of our

currencies and our economy and more emphasis on a sound currencfrye,e markets, andindividual liberty.


Ron Paul, M.C.