The Coming U.S. Debt Swap for IMF Notes

EPJ reader No Axe posted a comment to my post, Gordon Brown in Town for Talks on More War, More Inflation and New International Reserve Currency(?). It's worth bringing to the top:

On the IMF currency, Michael Hudson laid out his theory on how this would develop in an interview with Eric Janszen of iTulip on April 7, 2008:

"H: I think so. US strategists have been talking now for about thirty years regarding how to counter if and when foreign countries push back against our free ride. The answer is there is no way we can forecast when they will do so, until it actually happens. So we’re just going to keep on doing what we’re doing until there is counter-pressure. So far, there isn’t any counter pressure. The Americans have all sorts of contingency plans, but other countries have shown no apparent plans of their own. They merely respond, not initiate.

J: So what do you think US contingency plans are?

H: Essentially it will be the old paper-gold proposed via the IMF. It will tell foreign central banks, “Okay you have $3.5 trillion of dollar claims on the US Treasury. All we can do is pay you with new notes. But we have a way to solve your problem. (Note that we frame the issue as their problem, not ours.) You’ll turn over these US
Treasury bonds to the IMF, and they will give you paper-gold certificates worth $3.5 trillion. These no longer will be liabilities of the US Treasury but they’ll be your assets with the IMF. So we can continue with a ‘clean slate.’ We won’t owe anything, but you’ll still have your $3.5 trillion in assets.” That’s the plan that the US is going to propose as a rescue for itself. A debt repudiation masked as IMF credit creation. They will call this “progress,” “innovation,” “reform” – all the usual euphemisms that are trotted out for such bailouts."

Of course, Hudson is no free market fan, but I often agree
with his diagnoses and forecasts, just not his cures.