Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
SPX Wedge Breaks and Double Gaps: Capatulation but GOLD is Coiling for Breakout - 24th Mar 18
The Fed’s Interest Rate Hikes Aren’t Bearish for the Stock Market - 24th Mar 18
Will Gold Price Breakout? 3 Things to Watch… - 24th Mar 18
Gold Junior Mining Stocks GDXJ Fundamentals - 23rd Mar 18
Global Trade War Fears See Precious Metals Gain And Stocks Fall - 23rd Mar 18
Stocks Recovering from a "deep dive" Overnight - 23rd Mar 18
Blaming the Fed for Weaker Greenback US Dollar - 23rd Mar 18
Watch This Group Signal Stock Market Trend Changes - 22nd Mar 18
Stocks are Gapping Beneath the Trendline Support - 22nd Mar 18
Fed Action Casts Shadow on Bullish Case for Stocks - 22nd Mar 18
A Strong Economy and Weak Stock Market is Bullish for Stocks - 22nd Mar 18
Fed Raises US Interest Rates 25bp – Where Are We In The Stock Market Cycle? - 22nd Mar 18
Why Spotify Will Likely Surge During Its IPO - 22nd Mar 18
SY Police Arrest Woman for Blowing Trumpet at Sheffield Tree Felling Protest - 22nd Mar 18
Facebook: The Anti-Social Network Covert Data Gathering - 21st Mar 18
Additional Signs for Gold and Silver Amid Increasing FOMC Tension - 21st Mar 18
Credit Concerns In U.S. Growing As LIBOR OIS Surges to 2009 High - 21st Mar 18
Stock Markets Are Flat-to-lower Before the FOMC - 21st Mar 18
Will Powell’s Actions Pop Stock Market Perfection - 21st Mar 18
Economic Moral Hazards of the International Criminal Court - and Philippines Withdrawal - 21st Mar 18
Larry Kudlow vs. Vladimir Putin on Gold - 21st Mar 18
Trump Builds Economy and War Machine - 21st Mar 18
This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios - 21st Mar 18
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Impact of IMF SDRs on Commercial Trade

Politics / Global Financial System Jul 09, 2014 - 04:38 PM GMT



The global corporatist economy works differently from business transactions at your neighborhood convenience store. Ostensibly, the International Monetary Fund was set up to allow the G20 nations to umpire the ground rules to play nice in macro trade. Platitudes about promoting job growth or third world development are the realm of public relations for the central banks. The impact of the IMF on virtually all countries, vividly seen in every crisis whether real or contrived, always has a political objective that underpins the economic functions. As confidence in national currencies falter, the big sugar daddy loves to intervene, provided they pull the strings.

The use of SDRs is one tool used to paper over insolvency. Investopedia explains 'Special Drawing Rights - SDR' in the following manner.

"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."

From the International Monetary Fund press release: The IMF is Using SDRs to Bailout the Ukraine.

"The Executive Board of the International Monetary Fund (IMF) today approved a two-year Stand-By Arrangement (SBA) for Ukraine. The arrangement amounts to SDR 10.976 billion (about US$17.01 billion, 800 percent of quota) and was approved under the Fund's exceptional access policy. The authorities’ economic program supported by the Fund aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable."

As this example illustrates the IMF interposes their lending schemes on non-G20 counties. While the proposed BRICS Development Bank offers a competing banking scheme, the reigns of global financial control are still in the hands of the BIS gang of banksters. As the Towards an expanded role section of The case for a real SDR currency board, points out; the magnified role of a substitute function for SDRs allows for reserve assets collateralization.

"A more significant reform would allow international commercial banks to hold official SDRs (open accounts in the SDR department) thus allowing foreign exchange market intervention in SDRs directly. The ability to settle market transactions with SDRs directly without first exchanging them for US dollar or euro would further enhance the attractiveness of official (allocated) SDRs as reserve assets. Such an SDR would take the form of current account balances with the issuer (the IMF or a third-party clearing bank such as the Bank for International Settlements (BIS). Account holders might be limited to IMF members as now or could be opened to all international banks. A two or three-tiered structure could be used to tie all banks into the system for the clearing and settlement of SDR payments."

The Bank for International Settlements on Big Banks describes an even more insidious method to use SDRs as "deposits of the central banks become claims on those currencies", thus diminishing even further stated goals and purposes for the IMF.

Complicating matters further, in a staff working paper ERSD-2012-10 from the WTO, cites the issue that "SDRs can only be used by governments and not by private entities in regular transactions". Elena Flor in an essay, The Debate about the SDR as a Global Reserve Currency and SDR Denominated Securities, proposes a further ploy to obscure an already convoluted currency arrangement.

"One can make the hypothesis that initially the IMF itself, some Governments and special international financial institutions such as the World Bank could issue SDR denominated securities, which could then be followed by banks and non-financial firms. In fact, in those markets where global imbalances emerged, there is the more impelling and greater need to have debt securities in a supra-sovereign reserve currency."

Just think about all the inventive security-based swaps, if SDRs became an added vehicle for payment settlement to the derivative circus. So, what do any of these exotic financial gyrations contribute to the actual business of commercial trading? The constructive profitability or gain of consumers and the trading principals see little advantage. Only the Central Banks Game Plan: One World Currency benefits from their fees, costs and controls over these commercial transactions. Since, SDRs are potential claims on the freely usable currencies, citizens of countries bear the burden of a further debasement in their national coinage.

What better excuse for rationalization of additional regulations and hoops to jump through so that the banking system can charge extra handling expenses and the taxman can obtain transactional verification?

Henri Erti in the article, Instabilities in the IMS: Prospect of SDR as Stabilizing Tool, argues that adopting the SDR for commercial trading payment settlement, means more financial consolidation is required.

"The SDR serves as a convenient risk diversifier given the fact that its value is a combination of imperfectly correlated instruments (currencies) (Hogue and Tadesse, 2011). However, initiating an instrument for a large-scale utilization, an expanded market must be established, in which both private and public sectors may trade, settle, peg, denominate and most importantly profit from the SDR.

Finally, the success of the SDR hinges upon the evolution of financial globalization and the IMS. In order to empower the SDR, IMF would have to become more like a global central bank and accepted lender of last resort."

Well, there you have it. As long as the currency market allows for floating exchange rates, the pricing of trade is ripe for manipulation. Substituting an SDR standard as opposed to a fixed exchange rate pegged to physical gold is nothing more than an attempt to demand a one world monetary model.

Allowing the IMF to manage the economic outcomes of all trading nations’ commerce is like putting the fox in charge of the chicken coop. The success or shortcomings of individual nation’s trade transactions need to rest upon the economic fundamentals of the deal, not compliance with IMF rules and regulations. The impact of using SDRs translates into the loss of sovereignty.

James Hall – July 9, 2014 


Discuss or comment about this essay on the BATR Forum

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2014 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

BATR Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules