Back in 1983 debate was raging in the US about giving more money to the IMF to bail out more "failing countries". Or were the funds to be used to bail out banks that had lent money to these "failing countries"?
Whatever the case it wasn't a good idea and none other than free marketer Dr. Milton Friedman was leading the charge against the funding.
Here's a couple quotes from his 1983 article “’No’ to More Money for the IMF”:
"Banks made loans to the debtor countries at terms they considered profitable, taking full account of the risks involved. Had all gone well, they would have reaped the profits. If any loans go sour, the banks (i.e., their stockholders) should bear the loss, not the taxpayers. If government socializes the losses, it will inevitably end up socializing the profits. Neither the banks nor the rest of us can have our cake and eat it."
"... In the highly unlikely case that defaults caused some banks, perhaps including large ones, to fail, their depositors would be protected from loss by federal deposit insurance. The Federal Reserve would and should step in only to prevent bank failures from reducing the quantity of money. That would limit and isolate the losses. They would be borne by the banks that took the risk. The rest of the economy would not suffer."
As to what he would do with the IMF?
"The IMF was established in 1945 as part of the Bretton Woods monetary reform. It was assigned a clear role: to provide temporary financing to alleviate temporary balance-of-payment problems of member countries committed to maintaining fixed exchange rates for their currencies. That function disappeared when the Bretton Woods system collapsed in the early 1970s. However, the IMF did not disappear and ever since it has been seeking a new function. The debt crisis is a heaven-sent opportunity, creating the possibility that the IMF can become a world central bank. National central banks are bad enough; we do not need an international one. The IMF should be abolished, not expanded."
