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
