By Sean O'Grady
Ah, memories. Some of us are old enough to recall the IMF visit to Britain in 1976, and the range of "monetarist" solutions forced on an unwilling Labour government by the Fund. The medicine was probably a bit harsh, and in fact the IMF monies were repaid fairly early, when North Sea oil revenues came more strongly on flow. Then Denis Healey could declare "bugger off day" when he could get on, as Chancellor, with running the economy our way, though he retained many of their principles, such as keeping public spending under control and watching the growth in the money supply.
So we should know how Ukraine and Hungary feel now that they have got themselves into chronic balance of payments difficulties and have to submit to IMF remedies. There will be some reduction in living standards in nations that are not yet rich. There is also the danger that, as in the East Asian crisis of 1998, when nations such as Thailand and South Korea had to be rescued by the IMF, they may get the medicine a little wrong. Indeed many of the seeds of the current crisis were sown then - those vast East Asian trade surpluses and a flood of savings/funds coming into the west to push down interest rates and spur the "search for yield" that gave us sub prime and much else.
So much rides on the IMF's wisdom. Even if you don't like the idea of punishing nations for financial problems partly of the IMF's own making, you should still hope that the IMF get it right this time. Who knows, they may even be visiting Britain again before too long...
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