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Another Bailout of Lenders, This Time in Ukraine

March 31, 2014 in Economics

By Mises Updates

National Bank of Ukraine

National Bank of Ukraine

By Michael S. Rozeff 

The IMF is lending $18 billion to Ukraine’s government, so that it can pay one small part of its huge debts. The money will go to the lenders, which include banks, mainly in Europe, and other investors in Ukraine’s bonds. This will not stem Ukraine’s economic decline. The IMF’s price includes higher taxes, which will make it worse.

There are several possible recipes for reviving Ukraine’s economy. One of them is to mimic the German miracle. Ludwig Erhard understood how to do it. See here and here and here.

Another avenue is to repudiate the debt and start over again with sound policies that basically disallow the government from borrowing anything except perhaps seasonal borrowing against that year’s tax receipts, to be cleaned up for at least one month each year so that there’d be a no-debt period.

As a general rule, no government should ever borrow anything on a permanent basis. Allowing that is to allow a government to spend now and tax future generations. Clearly it has a huge incentive to do exactly that if it can borrow in anything but seasonal debt. One state after another then gets into the situation of either excessive debt or a depreciating currency or both.

One of the more amazing things about the world at present is that the major robberies accomplished by its states are done right out in the open and celebrated. Furthermore, institutions like the IMF that fail time and again, even report their failures in great detail before repeating them anew. For example, the IMF has a 51-page report explaining its failures in its Greek loan program.

Another amazing thing is that people like Erhard are ignored. Here is a government official who has succeeded in creating an economic miracle in Germany and who has explained how he succeeded in lucid prose. Any country’s government can imitate what he did, but they do not. And the IMF is an added inducement to ignore appropriate policies that encourage economic growth.

More: LewRockwell.com, March 27, 2014

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