Zero Hedge: Dollar to be Replaced with IMF's SDR as Reserve Currency?

[FrankRep]

Will The USD Be Replaced By The SDR Or The CNY As The Next Reserve Currency?


Zero Hedge
May 27, 2010


SOURCE:
http://www.zerohedge.com/article/will-usd-be-replaced-sdr-or-cny-next-reserve-currency
---


Flashback:


Confirmed: International Monetary Fund (IMF) set to be the World's Federal Reserve!
The G20 Push to "Supersize" the IMF

William F. Jasper | The New American
06 March 2009


SOURCE:
http://www.ronpaulforums.com/showthread.php?t=182725



Flashback 2:

UN: International Monetary Fund presses for authority to become the Federal Reserve of the world. The plan is to tie all the world's fiat currencies together so that, when one country gets deeper in debt than the others, the IMF can rush money from frugal countries to the reckless ones. Yes, that will do it! Yahoo News 2010 Feb 26 (Cached)​

- G. Edward Griffin


IMF wants new power to supervise global financial system

AFP / Yahoo News
Feb 26, 2010


SOURCE:
http://news.yahoo.com/s/afp/20100226/bs_afp/financeeconomyimfsupervise

 

[Original_Intent]

It's the bottom of the 9th folks. Hope you all have SHTF plans.

Hope mine are sufficient.

 

[Zippyjuan]

SDRs are basically dollars (44%) and Euros (34%). The Japanese Yen and British Pound both comprise 11% each. What would a country gain which wanted to get away from holding dollars and Euros go with SDRs?
http://en.wikipedia.org/wiki/Special_Drawing_Rights

Potential pitfalls as a reserve currency
There are potential pitfalls of using the SDR as a reserve currency.

The current SDR is a relatively small basket of currencies, this is both a strong point and weak point of the SDR.
The US Dollar, Euro and UK Pound are contained in the SDR—these currencies have been losing value against a larger basket of secondary reserve currencies since the late 2000s recession started in 2007.
The SDR does not contain the Chinese Yuan, Indian Rupee, Australian Dollar, Swiss Franc or Canadian Dollar, which are important benchmark or secondary global reserve currencies.
The lack of global banking support for consumers (that is to say private persons and businesses) for the SDR.
The possible loss of national sovereignty of the nations involved.[16][17]
The potential harm of further centralization of power over monetary policy. See inflation.[16][17]
Other important externalities that have been occasionally cited by economists, but where economic research relating to these externalities may not be readily available

China & India's (Gold/Silver/Platinum/Palladium) Physical Reserves are not equivalent in size to those of the US with respect to SDR conversion.
The Gulf States, that is to say the Petrodollar states, have (Gold/Silver/Platinum/Palladium) Reserves that are potentially undersized for the current recessionary conditions.
Many other nations that could move over to the SDR have (Gold/Silver/Platinum/Palladium) Reserves that are too small for the size and importance of their economies.

 

[FrostyLeaf]

This isn't new.

Many major investors including George Soros can be qouted saying the SDR will replace the USD. I mean we really have to seperate commercial banking and investment banking, protect the commercial legit debt, and let the waste go...we are screwed.

The SDR is probably seen as a Plan B to Germany's push against Derivatives and the Euro in general. We had the chance with the SA 3884 Cantwell-McCain Amendment to the so called "FInancial Reform Bill". We could have joined with Germany against this speculative madness. Such measures found in that ammendment have to be applied immediately.

So yea its the move being made to dodge the fight to restore Glass-Steagal. Germany is doing it, we had a chance and have some-what blown it but still have time. Obama sent Geithner over there to probably try and stiff arm Merkel for what shes doing.

 

[hugolp]

Many major investors including George Soros can be qouted saying the SDR will replace the USD. I mean we really have to seperate commercial banking and investment banking, protect the commercial legit debt, and let the waste go...we are screwed.

The SDR is probably seen as a Plan B to Germany's push against Derivatives and the Euro in general. We had the chance with the SA 3884 Cantwell-McCain Amendment to the so called "FInancial Reform Bill". We could have joined with Germany against this speculative madness. Such measures found in that ammendment have to be applied immediately.

So yea its the move being made to dodge the fight to restore Glass-Steagal. Germany is doing it, we had a chance and have some-what blown it but still have time. Obama sent Geithner over there to probably try and stiff arm Merkel for what shes doing.

I opened a thread trying to understand why Glass Steagal Act was important but nobody answer and the evidences are against restoring Glass Steagal Act. Maybe you can join and give your opinion: http://www.ronpaulforums.com/showthread.php?t=246747

 

[xd9fan]

YouTube - Managing Market Volatility, SDR's or Gold?

Jim Rickards at 1:50 in the video explains the OP back on May 5th on cnbc.

 

[shocker315]

Economy Kept On Life Support While Global Governance Is Organized

Nice overview with section on SDR's mid way down.

http://neithercorp.us/npress/?p=268

 

[YumYum]

The only way the FRN's will become worthless in the U.S. is if people refuse to accept them. FRN's can't be too bad. The guy I bought my gold from took FRN's from me. He should have kept the gold, shouldn't he?

 

[Travlyr]

The only way the FRN's will become worthless in the U.S. is if people refuse to accept them. FRN's can't be too bad. The guy I bought my gold from took FRN's from me. He should have kept the gold, shouldn't he?

No. My guess is that he smiled, took his profit and bought more gold.

 

[YumYum]

No. My guess is that he smiled, took his profit and bought more gold.

Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.

 

[Travlyr]

Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.

And some people claim that gold does not have intrinsic value... sheesh.

 

[newbitech]

another flashback

http://www.ronpaulforums.com/showthread.php?t=180514

here is the link I posted still good read.

http://news.goldseek.com/MillenniumWaveAdvisors/1235315243.php

I stand by my prediction.

1.) US Banks are "officially nationalized."
2.) The Fed sends trillions of greenbacks over seas to stabilize Europe in exchange for new Special Drawing Rights Bonds. This reinvigorates demand for SDR Bonds and the US begins monetizing debt exponentially.
3.) The Euro collapses as debt is retired using USD flooding the markets with what appears to be a strong US currency.
4.) As the fallout from the collapse of the Euro reverberates in China, Russia, and Japan, those and other nations begin to dump ALL their currency reserves into the IMF and convert to SDR Bonds.
5.) As the currency trade completely unwinds, the demand for inflated dollars dries up and the value of the dollar plummets.
6.) The IMF quickly realizes the disaster and calls in the SDR Bonds issued to the US and then the mighty American Power makes its last fail by pushing for SDR Bonds to become the new reserve currency, effectively creating
7.) A one world currency.

point 1 is about to happen with the new Fin Reg in the pipe. Tho we won't hear it called "nationalized". Instead, it will be "regulated".

point 2 we already see our money getting shipped overseas now that some of the covers have been pulled back on the bailouts. Also the European debt death spiral has started.

point 3 the Euro is in the process of collapsing and it appears as the Dollar is gaining strength

point 4 China Russia and Japan are going to want chunks of SDRs or add to their chunks in the case of Japan also, add the more stable Eurozone countries namely Germany and possibly the other two BRICs Brazil and India

point 5 currency trade is gyrating wildly now

we are somewhere between point 4 and point 5 with some minor tweaks to the points.

 

[Fox McCloud]

But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.

there's this nasty little thing called "legal tender laws" that coerce her into accepting them

 

[FrostyLeaf]

I opened a thread trying to understand why Glass Steagal Act was important but nobody answer and the evidences are against restoring Glass Steagal Act. Maybe you can join and give your opinion: http://www.ronpaulforums.com/showthread.php?t=246747

http://www.ronpaulforums.com/showthread.php?p=2724906#post2724906

 

[Zippyjuan]

Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.

I'll trade you $20 worth of food for a $20 gold piece right now if you want. Steak, lobster. No problem. Your coin is marked in dollars and so is the meat. Wanna deal?

 

[devil21]

"US Dollar Alternatives" is on the upcoming Bilderberg agenda according to Daniel Estulin. See the thread with videos in Foreign Policy forum.

The "panic" on the Euro over Greece is probably a test run to see what happens when a large currency is suddenly thrown under the bus. The destruction of the USD is the real prize.
Been following it here: http://www.ronpaulforums.com/showthread.php?t=215160&highlight=destruction

SDRs are basically dollars (44%) and Euros (34%). The Japanese Yen and British Pound both comprise 11% each. What would a country gain which wanted to get away from holding dollars and Euros go with SDRs?
http://en.wikipedia.org/wiki/Special_Drawing_Rights

A big thing I've learned is to just plain start thinking outside of the box. It's the box they keep you confined inside by defining everything for you, such as what an SDR is worth or comprised of, through some Wiki entry. The people in charge change the rules whenever they see fit (when it benefits them) so what's to prevent an SDR from being suddenly changed to be 1:1 with gold? Or silver? Or a mix of USD, yen, and gold? Or whatever the hell else they can dream up to benefit THEM. Think outside of the box zippy. You're allowing those people to set the limits of your thinking. ETA: The SDR was originally valued solely in gold. See? They can and will change the rules whenever it fits their long term goals.

 

[YumYum]

I'll trade you $20 worth of food for a $20 gold piece right now if you want. Steak, lobster. No problem. Your coin is marked in dollars and so is the meat. Wanna deal?

I don't have $20 gold pieces. I own 24 ct gold.

Besides, we were discussing the FRNs as a medium of exchange.

As long as our current government remains in power, we are forced to use the FRNs as a medium of exchange.

By the time the FRNs are useless and have no purchasing power, hoarding gold will be a Capital offense.

 

[Zippyjuan]

Sorry. SDRs were not in gold. They were created to REPLACE gold and silver.
http://www.imf.org/external/np/exr/facts/sdr.htm

The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

The SDR is neither a currency, nor a claim on the IMF. Rather, it 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.

There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

 

[Zippyjuan]

Sorry. SDRs were not in gold. They were created to REPLACE gold and silver.
http://www.imf.org/external/np/exr/facts/sdr.htm

The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

The SDR is neither a currency, nor a claim on the IMF. Rather, it 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.

It was defined as, but not backed by, an amount of gold which happended to be the same value as the dollar at the time. There was no gold in the "basket" of currency which made up the SDRs.

The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website. It is calculated as the sum of specific amounts of the four currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.

There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

 

[devil21]

^^^^
Hmm, ok I stand corrected, assuming your link is accurate. I read the tidbit previously that the SDR was originally called "paper gold" and I could research deeper but who cares? Way to ignore the real point of my post and focus on minutae footnotes added later.
(here's a Mises link on it:http://blog.mises.org/9761/imf-paper-gold-vs-a-real-gold-standard/)

POINT:
STOP LETTING OTHERS DEFINE THE BOUNDARIES OF YOUR THINKING! They change the rules whenever they want. They've done it many, many times during the current financial mess already. SDRs aren't immune.

There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

Others have already thought well past your boundaries. The comments in the ZH article cover it pretty well. IMF bonds are the answer, some of which have already been floated. Pour in the USD, euros, etc and come out with IMF bonds. Money printing made quick and easy. This also assumes the $324B figure you quote is accurate. I tend to not believe "official figures" since they tend to be "lies".