Inflation, the IMF and Immigration

[Recently by Dr. Dombey: Multiculturalism And Medicine: A Deadly Combination]

“But my first question has to do with Mexico. It is bragged that we had this wonderful bailout of Mexico three years ago, and yet Mexico still has some of its same problems. They have tremendous bank loans occurring right now. The peso has weakened. Last month it went down 5 percent. Since the conditions are essentially the same, my question to you is when do you anticipate the next currency crisis in the Mexican peso?“—Rep Ron Paul (R) of Texas to Chairman of the Federal Reserve, Alan Greenspan 2/24/98

In the 1990s polls showed that 80% of the American people did not want to bail out the failing Mexican economy. But ultimately 50 billion dollars was sent to Mexico as the Republicans and Democrats agreed to allocate resources to a foreign country without even a vote from Congress.

Likewise, today polls indicate that a majority of people wants to stop illegal immigration. Yet our government refuses to enforce our immigration laws.

So why does the US government ignore our citizens?

I think Alan Caruba may be on to something:

“There are a lot of reasons advanced to explain why the Bush administration will do nothing to stop the flow of illegals across our southern border, the vast bulk of whom are Mexicans, but the one I had not heard until I received the email was that Mexico would collapse without the money sent back by the Mexicans, legal and illegal, among us. When you look at the economic data, it is the one explanation that begins to make sense.” [Mexico`s coming collapse, May 30, 2005]

Think about it. How bad would it look if a country we bailed out just over a decade ago failed again?

Which begs the bigger question: why does our ruling class support the IMF bailing out countries all across the world with US taxpayer dollars?

If the Austrian economists at the Ludwig von Mises Institute are correct, the answer goes beyond naked wealth transfer and also presents a more complicated scenario for immigration reformers.

According to economist Jeffrey Herbener:

“American supremacy in the wake of the collapse of communism allowed the Fed to fully exploit the international dollar reserve system. The new system opened up a vast new vista for overseas dollar holdings. From Russia and Eastern Europe to China and East Asia, the governments of former communist countries began to soak up dollars to hold as official reserves as they became part of the American, `global` system.”

So what role does the IMF play in this system? Herbener goes on:

“Any significant disgorging of dollars would threaten to ignite price inflation in America if the dollars were repatriated. Significant domestic price inflation would, at best, bring a repeat of the 1970s, and, at worst, a hyperinflation.

“This danger explains the U.S. interest in promoting IMF austerity policies and bailouts. The bailouts are intended to soften the blow of devaluation and price inflation. In exchange for taxpayers subsidizing banks and large corporations, and other key beneficiaries of the system, the IMF can use the bailout money as leverage to impose conditions favorable for the future of the dollar-reserve system.” Perils of the Dollar Standard, May 1998

Very interesting. If this theory is correct, the fiat dollar reserve system benefits special interests (as well as grand schemes for American politicians). If taxpayers don`t play along by footing the bill for the IMF, then we risk hyper-inflation sooner rather than later.

Massive illegal immigration predominately from Mexico obviously threatens to destroy America. But do politicians risk our homeland to keep Mexico afloat in a broader attempt to maintain our corrupt international monetary system?

Could the immigration disaster have been avoided had America stayed on the gold standard?

Dr. Ken Dombey [email him] is a practicing internist.