Thursday, March 31, 2011

Global Elitist Pushing for World Currency Wants $390 Billion SDRs Issued Every Year

Former-World Bank chief economist Joseph Stiglitz is out with a commentary at FT. He's calling for more use of SDRs, which elitists have been trying to push on the world since 1969.

Writes Stiglitz:

The international monetary system needs fundamental reform. It is not the cause of the recent imbalances and current instability in the global economy, but it certainly has been ineffective in addressing them. So a broad set of reforms is required, beginning with an immediate expansion of the current system of special drawing rights or money that can be issued by the International Monetary Fund. And here the Group of 20 leading nations must take the lead...

In the late 1960s a more limited global currency was created: the SDRs, issued by the IMF when enough member countries agree. The largest such issue – equivalent to $250bn, and suggested by the G20 in April 2009 – was an enlightened response to the dramatic collapse in international private lending after the global financial crisis. It helped soften the negative impact of the crisis on growth.

Now, in the same way, the global role of SDRs should be increased, both through new issues and a bigger role for SDRs in IMF lending. New SDR issues could be introduced in times of declines in private capital flows or large falls of global commodity prices. These would increase the ability of current account deficit countries, such as Pakistan or Egypt, if they were hit by an external shock.
Despite what Stiglitz says, this is a push towards a new world currency and unlike his claim that it is not inflationary, it has the potential to be very inflationary. Here are Stiglitz claims:
Given its relatively small scale, more SDRs would also help to sustain and accelerate recovery of the world economy, without leading to inflationary pressures.New measures to increase the effectiveness of SDRs themselves are also needed. One way would be for the IMF to use these SDRS to finance lending to countries that need short-term financing, due to balance of payments constraints, as happened recently in Greece and Ireland. Eventually SDRs could become the main, or even the only, mechanism for IMF financing.

Further, when crises occur in many countries simultaneously, as happened, for instance, during the 1998 east Asian crisis, IMF lending could be totally financed by new SDR issues in unlimited amounts. If and when the world economy recovered or boomed, SDR issues could then cease, or even be reabsorbed. Thus the IMF would have a greater role in creating official liquidity, in a way that curbed both recessionary and inflationary trends at different times.

All of this would make a contribution to enhancing global stability, without altering in any fundamental way existing monetary arrangements. And the dollar would continue as the main currency for private transactions, making this change more acceptable to the US.

In practical terms the G20 should encourage the IMF to issue a significant amount of new SDRs during the next three years, up to a value of $390bn a year
Here's what the SDR is really all about. According to the IMF, which issues them:
...[the SDR] is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations
In other words, any party receiving SDRs can convert them for currencies of other IMF designated countries. This means those designated countries that buy the SDRs are in fact financing whatever funding is being conducted by the IMF. Whether this becomes inflationary or not depends on how the governments of the designated countries finance the SDR purchases. They can squeeze their own taxpayers or they can print more of their own currency to buy the SDRs.

It's a means by which countries like the PIIGS could be bailed out by financially strong countries with the sleepy public not knowing what hit them. Step one is this proposed new enhanced financing role for the IMF will be conducted at the government central bank level, but can one really believe that it will stop there? How long before some pink paper is designed to represent a physical SDR, and in the same fashion the euro absorbed currencies like the German mark and the French franc, the SDR will absorb the dollar and the euro?    
But aside from the SDR eventually being forced upon us all, Stiglitz clearly wants to make the SDR the money of  central bankers, now. Stiglitz, Geithner, Bernanke and  the rest of crew know the days are limited for the dollar as the reserve currency. They are deathly afraid that either gold or the Chinese yuan will emerge as the new global reserve currency. At such point, they will lose total control.

The new push to increase the role of the SDR is an attempt to prempt a move towards gold or  yuan options. It is also designed as a method to coordinate global inflation. Should some country actually run a fiscally conservative government, bang, that country will be designated by the IMF as a buyer of SDRs. The country will more than likely pay for the SDRs it buys by printing up more of its own currency. Viola, global coordinated inflation, the dream of every economic technocrat that is afraid somewhere, for some reason, a central banker may not buy into the call for Keynesian government spending, and may actually attempt to run a responsible, non-inflationary policy. Well, global coordinated inflation, i.e. an expanded role for the SDR, will take care of that!


  1. Actually, Robert, the dollar looks as if it will strengthen this summer.

    Andrzej Tadeusz

  2. Wasn't stiglitz senior vp and chief economist of the world bank, as opposed to president?

  3. Yeah, you're right, he was just chief economist. After awhile, all these guys sound the same to me.


  4. It's funny, I see this "one way we could finagle this" language in the articles of calculating socialists over and over again. If what they're doing is really scientific, objective and in accordance with mechanical laws or truths about economics, shouldn't there only be one way, or a few, specific ways, to accomplish a given task?

    All of this "one way we could do this" language really makes it sound like it's all ad hoc, arbitrary and by the seat of their pants. That is, they're making it up as they go along, always have been, always will. Confidence game.

  5. Sure, I can see no unintended consequences or moral hazard in this. What can go wrong with a risk-less financial system where mistakes, mismanagement and poor judgment are rewarded with loans and freshly printed money? Its funny how mainstream economics has become the science of economic deferral mechanisms. I guess if your science isn't good at predicting economic events at least it might be half good at deferring them.

    In the end this is just another economically ignorant idea from a dishonest socialist (aka Progressive) trying to bring about centrally planned capitalism where all the benefits of capitalism are realized with none of the pain. In other words, a fairy tale.

  6. What's an SDR? :)

  7. This is nothing other than the World Bankster elite trying to figure a way to keep their looting ponzi scheme going. You want to fix the world monetary system? You can't do it with varaitions and a continuation of what has been the problem all along.

    You want to fix the mess the world is in?

    First of all there must be a global philosophical awakening. Then eveery government in the world must be replaced with a different type. A government which does not see it role as solving every problem. A government which really embraces individual freedom. A government which see it role as to serve rather than to control.

    Turning to the governments' partners in crime, the Bankster, they must be eliminated along with their fractional reserve system. The fractional reserve system, started out as a crime of counterfiting committed by the goldsmiths who evoled into the present day banksters.

    No continuation of this system will everr do anything but allows these same criminals to continue their scheme of control, looting and enslavement.

    Do you wish to live as slaves? Just keep listening to these criminal masters and you will get your wish.