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Rise of (SDR) — IMF issues new SDR to support the fight against pandemics

Most financial observers know that the Fed has a printing press and can print dollars. The European Central Bank has a printing press that can print the euro. The same applies to other central banks around the world. Each of them can print their own currency. However, far fewer people know that the International Monetary Fund (IMF) also has a printing press.

You can print a type of world money called the Special Drawing Rights (SDR) and distribute it to 190 IMF member countries around the world. This is rarely done. This was last done in several tranches in 2009, both to respond to the 2008 global financial crisis and to compensate certain members who missed previous allocations. The last issue before that was 1981.

However, the IMF is now moving quickly to issue a new SDR that will help reliquefy the world in the wake of a pandemic panic and recession.this paper Provides up-to-date details on this next issue of the newly printed SDR. The current consensus among the IMF’s top economies (basically including the G20 plus the G7 plus China, Brazil, India, and other major economies) should raise the new issue to US $ 500 billion. Is that.

However, as much as US $ 650 billion could be issued without further approval from the US Congress. (The United States is the largest member of the IMF and has veto power over certain major IMF actions.)

Changes to the IMF publishing process may already be in progress

These may include special allocations to poorer countries. Allocations are currently proportional to the IMF’s capital account. In other words, a rich country like the United States wins more than a poor country. The IMF can also issue SDRs to non-member countries such as the United Nations and use them in climate change programs.

After decades of on-the-spots, the SDR has awakened and appears ready to serve as a new major reserve currency managed by the IMF Executive Committee, including China, as a strong member rather than the United States. is. This process is time consuming, but started differently than in previous SDR assignments.

At the very least, this expanded global money supply has some potential for inflation. Beyond that, the SDR may finally be ready to emerge as a rival to the US dollar as a reserve currency of choice for China, Russia, and developing countries.

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in the meantime…

Do you think Congress is running in the trillions of dollars deficit?Think again

With the passage of the new US $ 1.9 trillion deficit spending package, Democrats in parliament may think they will spend some time. Guess again. Parliamentary leaders are already planning a new trillion-dollar deficit spending package to pass later this year, perhaps by August, as the ink for new spending hasn’t dried yet.

New suggestions will now be reported paper.. Details are still under discussion, but some proposals include a $ 4 trillion spending package paid with a $ 2 trillion tax hike and a new $ 2 trillion deficit covered by debt. Again, this new deficit spending is being promoted as a COVID bailout, but has little to do with COVID in the public health sense. This is another big step towards the expansion of the welfare state.

True growth is the only sustainable way to get out of the COVID recession

History has shown that this type of program initially suffers some resistance. But once they are installed and people start getting checks and tax credits, it becomes politically impossible to end the program. The Democratic Party knows this. They also know that they could lose Congress in the 2022 midterm elections. Therefore, they are moving at warp speeds to implement these programs while still dominating Washington. Biden said these spending packages are needed “to grow the economy.”

In fact, these bills slow the economy. Because of the added debt, Americans save more and spend less in anticipation of future tax increases. The only sustainable way to get out of the COVID recession is the true growth that comes from getting people back to work and reinvesting corporate profits. These bills actually prevent people from looking for a job, as handouts are often more than people can make at work.

Slow growth, increased debt, increased handouts … indefinitely?

Higher taxes required to pay handouts slow down job creation because companies have less money to invest in and hire workers. Most Americans have agreed to the COVID Relief Package passed in 2020. Because people and businesses are suffering and need urgent help to prevent far more serious economic disasters. Currently, the business has resumed and activity is recovering. To help economic growth become self-sustaining, the need for qualification spending will decrease and the need for tax cuts and regulations will increase.

These trillion dollar deficit spending packages do the opposite. If Congress continues on this deficit spending path, growth will slow, debt will rise, and handouts will grow indefinitely.

all the best,

Jim Rickers signature

Jim Rickers,
Strategist, Daily Reckoning Australia

PS: This content was originally published by Jim Rickers Strategic Intelligence AustraliaA financial advisory newsletter designed to protect your wealth and help you potentially benefit from invisible world events. Learn more about.

Rise of (SDR) — IMF issues new SDR to support the fight against pandemics Rise of (SDR) — IMF issues new SDR to support the fight against pandemics

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