Filed under: General Editorial

Dear CIGAs,

This is going to be interesting as the IMF does not have the power to create money like central banks do.

I had the privilege of writing the speech many years ago when SDRs were first introduced. The same problem with SDRs then is the same problem now - they are backed by nothing. SDRs are nothing more than pure paper and are incapable of offsetting the fear of such paper

Special Drawing Rights:

An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.

Investopedia Says:

You can think of SDRs as an artificial currency used by the IMF and defined as a "basket of national currencies". The IMF uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries' governments

More…

Basically an SDR is an accounting transaction with an index mix of currencies originally devised to replace gold settlement of trade transactions with a faux currency unit.

Forget the media PR. Today it is in anticipation of large dollar and/or US treasury international sales hoping that rather than flooding the market with dollars in exchange for Euros, Swiss Francs, Cando's and so on that SDRs would be sought after.

The problem with this reasoning is the same as it was at its last big introduction over 35 years ago. It is paper, worse an index against swaps, that lacks the ability to attract confidence required as we move into a hyperinflationary world. This was the meat of the objecting speech on the Senate floor more than 35 years ago and is the weakness today.

Comment: How dumb do they think we are?? VERY
dumb!