IMF Again Discussing Plan to Replace the Dollar
It seems the IMF is once again discussing plans to replace the dollar as the world's reserve currency.
The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency. The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.
Oh, this must be the same way the Federal Reserve helps stabilize our economy here in the U.S....
SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs
"Potential claims?" Is anyone else confused at how this could help anyone?
While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.
Who are these "economists" anyway?
Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some "technical hurdles" involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.
Central planning by some mega-international-bank will not help anyone anymore than the central banks have helped Greece, Spain, Ireland, Iceland, and the U.S.
"Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," he said.
A more stable monetary system for Goldman Sachs, JPMorgan Chase, and their cronies. Ultimately the ordinary citizens of the world lose out.
The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.
Of course the dollar is "vulnerable" to swings, its fiat! Just like this reserve 'asset' would be.
Now, I want to be clear that I'm not saying that the US Dollar should remain the world's reserve currency (I don't think it should remain ANYONE'S currency...it's worthless), I'm simply pointing out that this IMF "alternative" is nothing better (it may even be worse). It is simply a way to push economic control further and further away from the people of the world. It's bad enough that today citizens have essentially no control over what their central bank does (and thus their respective economies). This scheme by the IMF would only lessen the influenc citizens have on their own currencies, countries, and economies. If the world needs a reserve currency, it should be a real asset like gold or silver, not an "asset" that is "not a tangible currency."
In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks' dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.
Does the world need more bonds (debt)? Who would the IMF be creating this debt on behalf of? What kind of control would ordinary citizens have over the IMF? (The answer to that last one is almost none)
Additionally, for those in the U.S., imagine the impact of a reduced dependence on U.S. Treasuries. If treasury yields rise in the U.S (and they will), the consequences on our budget and deficit will be astronomical.
Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.
SDRs, he said, "will further diversify the system."
I think such a scheme would 'diversify thy system' in the same way that Credit Default Swaps and Mortgage Backed Securities helped diversify investors portfolios from 2003-2008. Try not to think about how they also lead to the largest credit bubble, recession (arguably, depression), and financial disaster in at least a generation...they wouldn't screw up that bad again, would they? (Yes.)
I'll leave you with the best question of all, does the world need the IMF? (The answer is no.)