Register for Free
Post comments, receive updates via email, gain access to exclusive content, and more.
Spam Safe!
IMF To Print SDR Funny Money
It's B-A-C-C-C-C-K-K-K-K-K-K -- the SDR (Special Drawing Right), that is. The UK's Telegraph says the IMF is being encouraged to do its own 'quantitative easing' --
[UK Treasury Secretary] Alistair Darling and senior figures in the US Treasury have been encouraging the Fund to issue hundreds of billions of dollars worth of so-called Special Drawing Rights in the coming months as part of its campaign to prevent the recession from turning into a global depression.
Should the move, which is up for discussion by the summit of G20 finance ministers this weekend, be adopted, it will represent a global equivalent of the Bank of England's plan to pump extra cash into the UK economy.
However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.
Simon Johnson, former chief economist at the IMF, said: "The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them. The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary."
The best explanation of SDRs is found on the IMF's own website. The story is frankly unbelievable, in its fraud, deception and chicanery. But I am not making this up --
The Special Drawing Right (SDR) was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in world foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets— gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.
However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.
Today, the SDR has only limited use as a reserve asset, and its main function is to serve as the unit of account of the IMF and some other international organizations. The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members.
The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website. It is calculated as the sum of specific amounts of the four currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.
Don't you just love the fact that the SDR is 'not a claim on the IMF,' despite the fact that the IMF issues them? An SDR is a piece of paper giving the holder a claim on other, unredeemable pieces of paper -- that is, it's a derivative. And not a very liquid one, since it's accepted nowhere as a currency, and traded on no public market.
Nevertheless, in a world starved for liquidity, even bogus liquidity in form of dodgy IMF paper may do. It's worth reviewing what happened the last two times SDRs were handed out --
Decisions to allocate SDRs have been made only twice. The first allocation was for a total amount of SDR 9.3 billion, distributed in 1970-72. The second allocation was distributed in 1979-81 and brought the cumulative total of SDR allocations to SDR 21.4 billion.
Discerning readers may recall huge surges of inflation in the early 1970s and again in the late 1970s to early 1980s -- exactly when the IMF was dumping helicopter-loads of monetary kerosene (the most inflammable fuel known to man, as proved in the WTC disaster) onto the raging inflationary fires. Can the IMF -- the central banksters' bankster -- pull off this masterful feat of timing yet a third time? As the IMF's pampered tax-free bureaucrats say ... 'YES, WE CAN!'
BRING ON THE CLOWN POSSE
Print
Offline
All you need to know is that it's a derivative of already irredeemable paper currencies. In other words, it's more BS packaged in fancy terms and seemingly complicated schemes designed to hide the fact that it's BS. Is that layman enough? ;)
Gold production is going down and dollar production is going up... isn't there only one thing that can happen? Gold is money.
All you need to know is that it's a derivative of already irredeemable paper currencies. In other words, it's more BS packaged in fancy terms and seemingly complicated schemes designed to hide the fact that it's BS. Is that layman enough? ;)
Patrick,
I do so enjoy the way you cut quickly to the core!
Sam....
{No matter how cynical you get, it’s impossible to keep up. - Lily Tomlin}
{Owning a handgun doesn't make you armed any more than owning a guitar makes you a musician. - Colonel Jeff Cooper}
Here is one way to look at it, via a simple example. Let's say that you and I, while hanging out at the strip club, exchange million-dollar IOUs scribbled on cocktail napkins. If I can discount your IOU at my bank for a $1 million loan to me, and you can discount my IOU at your bank for a $1 million loan to yourself, then we have jointly created 2 million dollars, in what is essentially a chain-letter scheme.
The
vast expansion of international reserves during this decade also
resembled a chain-letter scheme. The U.S. trade deficit piled up
dollars in China, which became international reserves for China. China
then recirculated these dollars to the U.S., providing the expanding
volume of debt financing which is essential to keep a Ponzi scheme
expanding. There is no numerical limit, other than the economy's
ability to service the debt, to prevent this cycle from endlessly
repeating.
In recent months, the drastic shrinkage of the U.S.trade deficit has slowed this runaway transmission belt to a crawl. Reviving trade is going to take years. If one's objective is to restore the heady 20-percent annual growth of international reserves during the Bubble II years, then new reserves must arise from some source other than expanding trade.
Enter the IMF, with its SDRs. SDRs are acceptable as international reserves, because nearly all countries belong to the IMF club. SDRs can be created out of thin air as derivatives of existing national currencies and then handed out to central banks, in a process exactly like our exchange of cocktail-napkin IOUs. Central banks in turn can exchange SDRs among themselves to settle trade debts, meaning they can buy real goods with these thin-air paper derivatives. And that's the very definition of inflation -- purchasing power created from nothing, with no corresponding increase in investment or production. So all purchasing power gets diluted accordingly.
I wouldn't bet on it. It's like giving over control of your currency to the IMF (indirectly). In some sort of fantasy 'theoretical' way this may work but the reality is very different.
This is just a way to inject quick "cash" (printing $$) without having to print 'real' money.
It could work......c'maaaaaaaaaaaaaaaaan!
Incrementally, western nations are losing their financial sovereignty - which is the greatest power of a nation. We are becoming nothing but client states for the international bankers.
"Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," he continued.
"The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government – established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?"
This is a serious allegation that is getting absolutely no MSM attention. Private banks are negotiating our country's financial future behind closed doors. It should be readily apparent to all citizens that our government has been over-thrown by those who had previously worked behind the shadows.
Larry
END the FED before it ENDS US
Before World War I, most countries were on the gold standard: currency issue was tied to the gold held in their reserves. A country whose gold holdings fell, had to shrink its money supply too. Such stiff discipline meant inflation was close to zero: governments could not print notes at will. But governments needed huge spending in World War I and so gave up the gold standard for the printing press. Besides, the bulk of gold production came from Russia and South Africa, and others refused to be at the mercy of those two countries for future money supply.
One thing that a lot of people have missed in this recent economic down turn is the fact that in-game money for all of the massive mutliplayer online role playing games has not been effected. I guess it just shows how strong and stable the computer game industry really is. Virtual Currency