The International Monetary Fund, despite being a global organization, has pittance for a budget. It was designed to help save dick, third world dictators from the fallout of their poor leadership, by pumping low quality loans into their banking systems.

As you can imagine, it doesn’t take much money to completely wash a place like Zimbabwe in currency worth more than the cumulative of 10 years of their gross GDP.

My point is this; the latest EU salvation announcement – that the IMF is going to bail out the world’s largest combined economy – is dumb.

But first things first; where have we heard this storyline before? Wasn’t leveraging a meager reserve balance into a miracle homerun supposed to be the faculty of the EFSF? So this announcement, foremost, is an indirect acknowledgement that the EFSF plan is effectively dead. Why else repackage literally the exact same idea and try to feed it to the public like it’s shiny and new?

Second, where is the IMF going to get that kind of money? Last I checked, their budget sucks. If they were to have any hope of actually raising the kind of money they’re talking about, they definitely need a bigger set of deposits. Who’s giving them those? Germany isn’t giving money directly to Greece; they’re not giving money to an institution that’s going to give money directly to Greece either. The U.S. sure as hell isn’t going to associate with this; you want to see conservatives start setting Executive Branch Office buildings on fire? Try to force the U.S. to accept that kind of liability for Europe’s little welfare mess.

And then they need to actually get anyone to loan to them. Who’s going to do it? The entire EU together couldn’t garner enough interest to raise 600 billion euros. The IMF only expands liable counterparties to include the U.S. (great budget to absorb shock there…) and some emerging economies – the same emerging economies that have heretofore refrained from loaning money to Europe!

Get over it, guys. Nobody is going to invest money into saving Europe just so Europe can live comfortably for 2-4 more years before this issue rears back up again. There is too great an expectation (totally justified) that Europe will screw over anyone who puts their faith in them, in order to buy some more time. Look at the labor movements that are welling up in places like France and Greece, and you will understand why no sane man or women will be investing in any of these hairbrained schemes to “magically leverage away” all of Europe’s problems.

The rest of the planet would love to have the same things happen to their debt. Everybody can come up with much better uses for their own resources than to throw it into that bottomless pit.

The next three months are crucial to the survival of the EU. If they are to make it out alive and into the future, the require support and cooperation of the markets.

Remember that the ECB and EFSF, along with the potential cooperation of the IMF, have hundreds of billions of euros on the sidelines. That’s not enough money to fix the crisis. It is potentially enough money to spark a rally in euro bonds just in time to absorb their auctions.

That’s what I would gather they have been doing throughout the past three days.

It started with CDS contracts being sold in size a few nights ago (the Fly posted the numbers in the news section). Then it spread to euro bonds the next day.

Today, Italy had a twelve month auction at yields near half of what they were going for at the time.

Who buys bonds like that, other than a government body? Why purchase that many one year bonds down to that yield level, when any investor could get them for the higher yield on secondary markets?

Now the Europeans are entering the end game, buying their own debt in size, determined to try and bring back the private money to the table with visions of huge payoffs. Will they succeed? Or is their bluff even now being called by Soros’ type investors shorting their debt as fast as they can get their trades cleared?

I guess the answer is: we’ll see, won’t we.