Is the IMF Planning to Replace Dollars With SDRs?
by Nigel Bolton Shaw
The International Monetary Fund is moving ahead with plans to offer a true global currency.
Of course, the IMF has a global currency of sorts – the SDR, which is short for Special Drawing Right – a kind of nation-specific currency that has application for IMF lending activities currently but is not in general circulation. That could change.
According to The New American, the recently concluded G20 meeting in Moscow focused on a plan to “supersize” the International Monetary Fund. “The end goal is to transform the IMF into a global Federal Reserve, with the ability to flood the world with huge new volumes of loans and currency. It would also wield vast financial regulatory powers.”
Here’s more from the article:
The IMF’s unit of account, or “currency,” known as a Special Drawing Right (SDR), is being readied for eventual adoption as the replacement for the U.S. dollar in international transactions, to lead the way toward eventual adoption of the SDR or some other designated unit as the global currency, much in the same way that the euro was foisted upon the people of Europe as a replacement of their national currencies.
The mainstream media seem intent on keeping the public fixated on the latest Kardashian frolics, sportsmania, and Democrat-Republican political mudwrestling, while coverage of the G7, G20, and IMF confabs that are determining the economic fate of the world receive short shrift. And the little reporting of these events that does leak out usually amounts to little more than regurgitation of the pre-scripted talking points of the conference principals …
Virtually unreported was IMF Managing Director Christine Lagarde’s comments at the close of the G20 Moscow summit on February 16 that she expected the IMF members to come through soon with the remaining funds necessary to double the IMF’s funds. Unknown to most voters and taxpayers the world over is the fact that their governments’ finance ministers agreed at the G20’s Korea meeting in 2010 to increase the “quotas” (contributions) of each member to the IMF, effectively doubling the IMF’s SDR assets to about $US 750 billion.
The article points out that while IMF numbers regarding SDRs are in the millions and billions currently, this may not always be the case. “The IMF has much grander visions; the IMF’s Christine Lagrande in February 2012 called for a trillion dollar ‘firewall,’ including a European Stability Mechanism (ESM) for bailing out the collapsing economies of Europe’s socialist regimes.”
So the IMF has set its sights on soliciting not billions but trillions of dollars using the putative justification that an IMF administered fund of real size can put an end to the sovereign debt crisis in Europe once and for all. Does this sound sensible?
We’re skeptical. As for a global monetary system based on SDRS … well, what’s more likely from our point of view is some sort of global gold-based currency, or maybe just a variety of competitive currencies generally. There are many smart people who believe that this is a lot of fuss over nothing and that the world’s dollar reserve system will continue indefinitely with certain tweaks. Obviously, top honchos at the IMF don’t think so.
But the IMF simply doesn’t have a very good reputation when it comes administering its global loan power. The austerity it demands usually involves raising taxes and cutting government programs. The latter is done at the height of financial stress (thus exacerbating the situation) while the former only aggravates the problem.
Countries get into trouble when governments spend too much. Ironically, the World Bank often loans money to developing countries that then need IMF bailouts. On top of this, the IMF will often demand privatizations that put national resources in third-party hands with disastrous results.
The idea of the IMF controlling the world’s currency may appeal to IMF officials but not to many in the developing world and certainly not to those who believe in free-markets. The chances of it happening are slim to none, but the gambit indicates to us that the dollar’s position may be more fragile than supposed.
The IMF’s plans give us one more reason to watch the dollar’s reserve status closely and monitor not only indirect challenges to it like the Chinese yuan but precious metals as well.
Nigel Bolton Shaw specializes in international Austrian economic analysis and writes for numerous publications including Global Speculations where you can see more of his work on a regular basis. Click here. Articles provided to Q Wealth are original compositions not to be found elsewhere. He welcomes your comments at [email protected].