The Europeans have the resources but lack the political will to save the collective. We have reached the stage where the Europeans might act too late and infect everyone. So, we set up an emergency arrangement (that's why pledges and not immediate contributions) just in case we need to contain that infection. We're also sending a signal to Europe that we'll act to stop contagion but not to bail out a bunch of idiots. Note that US Treasury Secretary Timothy Geithner has said that Europe has the resources to fix its own problems and the IMF loans should only be viewed as supplementary. That's the public view of the IMF's most influential member! That's the US govt communicating with those idiots in Europe!
The problem with the European union right at the outset is trying to create a monetary union without a fiscal union, and doing it whilst mired in deep differences politically and in terms of economic productivity. Not to mention the huge discrepancies in the level of government prudence and responsibility with regards to long term budgetary planning.
Do you know some months before this discussion took place, I had a similar debate with GMS about what was the key problem facing the EU, and he said EU was very united politically? I stamped my feet and didn't know what to say ....
I met a hedge fund analyst last week who is in tune with the mkts on daily basis, and he said the euro still remains a fantastic short despite having already declined so much. I tend to agree. The europeans simply lack the will to do the necessary and Germany is up to their necks trying to turn the whole EU politically in their favour. No one is actually solving the problem, everyone is just trying to kick the can down the road. As the saying goes, paying later means paying more.
Our pledge to the IMF is the right thing to do, in my opinion. Firstly it is not a fantastically large amount. It is a prudent amount given the size of our reserves. Those who say we should spend more helping the poor are right. But that money can already be found in the current budget and the issue in this case is political will rather than political accountability, which is the essence of this thread.
So please allow me to summarize:
(a) As Scroobal has emphasized, the issue is the mechanism/control and the way the govt can allocate capital without having to explain or justify itself before a formal forum like Parliament.
I think this should be taken further. Our real problem is the hundreds of billons OF DARK MATTER that is controlled by the PAP which is totally unaccounted for, entirely absent from the public record. It is extemely dangerous situation because you don't know what those rascals are currently doing with the money, how they got it, etc. If that DARK MATTER is what has been keeping our fragile SG economy afloat all these years, a sudden global crisis can unravel the very foundation of our country.
(b) We must play our part as global citizens to be sure, and there's always the international politics that we have to play to appease powers larger than us and keep our foot on the right side their boat.
(c) Real issue at the end of the day is political plurality and adequate representation in Parliament which is currently lacking. Because no matter whether you want to address the dirty politics with Indonesia or our local domestic economic decisions, you first need political representation to address them.
(d) IMF is not an investment vehicle, it is an institution dedicated to helping others and it will lose money from time to time doing so. Nothing new. What matters is that we understand what the IMF does, that it frequently rights off its debts, but still maintains a good track record of honouring its own payments to those from whom it borrows. This may of course entirely unravel in a global crisis big enough to wreck the whole world, but lets not jump too far ahead. The more immediate issue here is govt accountability in use of national assets and reserves.