Business & Investment

One step closer to the newly printed “World Money” of US $ 1 trillion

Hopefully you are already familiar with SDR. I have written about them many times. SDR stands for Special Drawing Rights. It sounds like a ridiculous name, and it is. This is by design. The SDR is issued by the International Monetary Fund. They’re really world money, but the IMF likes to keep things complicated and make everyday observers incomprehensible what it’s doing.

The Federal Reserve has a printing press that it uses to print dollars. The European Central Bank has a printing press used to print the euro. The IMF also has a printing press used to print world money (also known as SDR).

There is nothing new about SDR. They were invented in 1969 and published several times between 1970 and 1980. After that, no SDR was issued until 2009. At that time, a new issue was distributed to increase liquidity in the aftermath of the 2008 global financial crisis. The problem wasn’t that big, so there wasn’t much evidence that SDR was successful, and it happened a year after the most serious stages of the Lehman Brothers bankruptcy in September 2008.

New issue of SDR

Now we have another financial crisis and the IMF is back with a new SDR issue. The problem this time is much bigger. It consists of S $ 650 billion, which is approximately US $ 9.23 billion at the current exchange rate (SDR1 = US $ 1.42). SDRs are not primarily issued to the poorest countries. They are issued to all 190 IMF member states in proportion to their capital account. Larger developed countries, such as the United States, acquire the most SDRs due to the IMF’s largest capital account (the United States acquires approximately 105 billion SDRs, which is equivalent to approximately US $ 150 billion).

But that’s not the end of the process. The United States and other countries can lend the SDR back to the IMF, which can lend it to poorer countries. These poor countries can easily convert SDRs to dollars or euros using individual facilities within the IMF. Therefore, liquidity can reach where it needs to go through several consecutive swap arrangements.

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More SDRs are coming

this paper Let’s take a look at some of this process. It is also a good introduction to the history and details of the SDR allocation process. This new issue of world money is important and will have some beneficial implications in combating world liquidity and the world’s dollar shortage.

Still, it is best understood as a stalker horse for more SDRs in the near future. Some US Congress want to see SDR allocations of over US $ 2.5 trillion. These members are globalists who want to reduce the role of the United States in world affairs and promote a borderless world funded by world money. More SDRs are coming. And all the new issues with SDR are another nail in the casket of the role of the US dollar as a major world reserve currency.

And speaking of America …

More signs that economic recovery is losing momentum

Don’t agree with the happy story that everything is going well with the US economy. It is true that the unemployment rate has fallen.But as reported in this paper, The first claims of unemployment are on the rise again. This will manifest itself as a tendency for job creation to weaken in the coming months.

The headline of lower unemployment ignores more than 10 million healthy Americans between the ages of 25 and 54 who don’t have a job but aren’t counted as unemployed because they haven’t been looking for a job recently. I will. If you’re a waitress, why are you looking for a job when half of the restaurants in town are closed or out of business? The main indicators of how the economy is progressing are the labor force participation rate, rising real wages, and initial unemployment claims. All three show slowing growth and slow recovery.

Some argue that treatment is more government spending

Biden may or may not understand modern monetary theory, but that doesn’t matter. The important thing is that it is here. MMT is now a land law in the form of extreme deficit spending, such as the trillions of dollars “COVID Relief” law. The size of the deficit and whether the expenditure will be paid in taxes are completely ignored.

With the unprecedented growth in the resulting debt-to-GDP ratio, the United States is now in the same super-debtor league as Lebanon, Greece and Italy. Bernie Sanders is the chairman of the Senate Budget Committee, and his muse is Professor Stephanie Kelton, the bright light of MMT supporters. Congressmen have always been crazy about spending, but now they cover the intellectual air in the form of MMT’s Kalaw analysis.

At this stage of the process, there is no stimulus or actual growth, only increased debt. Slow recovery is even slower and debt remains. That’s what the growing initial claims for unemployment benefits are telling us.

nice to meet you,

Jim Rickers signature

Jim Rickers,
Strategist, Daily Reckoning Australia

PS: This content was originally published by Strategic Intelligence Australia. This is a financial advisory newsletter designed to help protect wealth and benefit from invisible world events. Learn more about.

One step closer to the newly printed “World Money” of US $ 1 trillion One step closer to the newly printed “World Money” of US $ 1 trillion

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