IMF creates SDR to Redistribute the Wealth

If you have been following the financial press of late you will have read the IMF may be making a comeback to center stage. It seems the G20 may well agree to make them a world bank of sorts with their own currency called the SDR – Special Drawing Rights.

The US can stop this but it seems the G20-1 may want to move to a different reserve currency other than the US Dollar.

Many of our countries have print money to maintain market liquidity they say, but more to protect themselves politically in the short term I think.

Now it seems the IMF is getting into the “printing money” business is a big way too with a thing called an SDR. It’s not new but the IMF wants to be the world bank. It’s all about power not economics. Rich countries will be the losers.

They are getting into the derivatives business with a thing they call “Special Drawing Rights” It is very difficult to understand.  As far as I can tell it is just monopoly money but by definition….

The SDR is based on a basket of currencies which include the US Dollar, British Pound, Japanese Yen and the Euro. They put these four currencies in a basket add some financial wizardry and make like it is real money, so poor countries can use it to buy real goods.

As if we have not had enough of derivatives and printed money.

See the article, “Special Drawing Rights – What are they?”

“The IMF has the authority under its Articles of Agreement to create unconditional liquidity through “general allocations” of SDRs to participants in its SDR Department (currently, all members of the IMF) in proportion to their quotas in the IMF.”

“What this means is that the IMF has no limit on the amount of money that it is able to create, and that is the creation of money in addition to the central banks of the basket currencies. The IMF is able to create money at will.”

The article goes further and this is my major concern,

“However, SDRs are unusual in that they can only be held and traded by governments and ‘prescribed holders’ such as the BIS. What we seem to have here is a currency which can be issued at will, with no restraints, and which can then be used by governments to pay their debts to each other. It is therefore interesting to note that the IMF has just completed a record allocation of SDRs to the tune of $US 250 billion:”

This report, “Opening a Back Door to Foreign Aid: The SDR Department at the IMF“, written in 2004 does a great job of explaining what’s wrong with SDR’s and why they are dangerous and will make the US poorer and thus the world. Baby Boomers take note.

“Rich countries agree to exchange their freely usable currencies for SDRs on demand. This is what gives SDRs their value. Poor countries therefore receive their SDR allocations and exchange their SDR credit balances for US dollars, EUROs or Japanese yen. This creates an effective perpetual loan from the rich countries to the poor at the SDR interest rate. Contrary to standard IMF loans, there is no obligation or even expectation of repayment of the loan and there are no conditions of economic reform or policy adjustment.”

The conclusions are frightening,

“Every lesson the world has learned from 50 years and $500 billion of failure to stamp out poverty in developing nations is violated by a move to more SDR allocations.
Unconditional giving stands in the way of constructive reform. It destroys the incentives to create the solid ethical and economic environment that is the prerequisite to growth.
There will be no means to measure results and no desire to do so.
Ratification by Congress of the SDR expansion would mark the beginning of a new series of demands on US generosity. Already 63 governments or more than half of IMF developing country members with SDR allocations have consumed their existing shares. (See Table II.) This appetite for “free money” without restraints can only grow.”

Wake up America and stop this madness. The IMF is becoming the de facto world bank. The major Central banks around the world including the FED don’t even blink when they transfer huge sums of their currency into the IMF coffers to be exchanged for SDRs (monopoly money) and with little possibility of the money being paid back.

It’s just unbelievable to me that sane highly educated people can actually think that doing things like this makes sense.  What’s worse is that no one steps up to opposes it or maybe they can’t gets enough power to stop it.

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