Plan for 'Special Drawing Rights' creates competition for reserve currency

THE NEW WORLD DISORDER

Is alternative to dollar in works?
Plan for 'Special Drawing Rights' creates competition for reserve currency

Posted: October 20, 2009
9:38 pm Eastern

By Jerome R. Corsi
2009 WorldNetDaily


The administration of President Barack Obama, without congressional authorization, is advancing a plan that could end the use of the U.S. dollar as the world reserve currency by setting up International Monetary Fund Special Drawing Rights to compete.

The move comes as the dollar heads toward a 14-month low of $1.50/euro and as some top fund managers, including some of President Obama's top financial supporters, worry the decline will continue as long as Obama depends on China to fund trillion dollar budget deficits.

It is Obama's promise to participate in a G20 nations agreement by giving $250 billion to the IMF to set up the alternative reserve currency that now has been documented in the final communiqué of the London meeting, according to the G20 website.

At G20.org, a report under "The London Summit 2009" reveals the LondonSummit.gov.uk/en/ site where "Point 5" of the final communiqué says the G20 agreed to allocate that amount to Special Drawing Rights in a move calculated to provide the liquidity needed to position SDRs as a dollar alternative in international trade.

Plans for the dollar alternative are coming into play just as a former science adviser to British Prime Minister Margaret Thatcher says the real purpose of the United Nations Climate Change Conference in Copenhagen on Dec. 7-18 is to use global warming hype as a pretext to lay the foundation for a one-world government.

"At [the 2009 United Nations Climate Change Conference in] Copenhagen this December, weeks away, a treaty will be signed," Lord Christopher Monckton told a Minnesota Free Market Institute audience recently at Bethel University in St. Paul.

"Your president will sign it. Most of the Third World countries will sign it, because they think they're going to get money out of it. Most of the left-wing regimes from the European Union will rubber stamp it. Virtually nobody won't sign it," he said.

"I think the dollar is now under question," billionaire investor George Soros told CNBC during the G20 summit in London, noting that Obama agreed with the G20 to utilize the IMF to fund a "one-world currency" dollar alternative for international trade.

Soros, one of presidential candidate Obama's leading financial backers, also has launched a new attack against the dollar by calling on China to stop pegging Chinese currency to the dollar, a move that would cause the dollar to fall in value.

The Soros-run hedge firm Soros Fund Management continues to bet against the dollar in keeping with the hedge firm's reputation for betting against currencies Soros sees as weak.

International investment managers take warnings by Soros seriously, remembering that Soros earned his first $1 billion in 1992 by betting against the British pound.

Legendary hedge fund manager Julian Robertson Jr. joined Soros in warning that the United States' increasing reliance on China to fund trillion dollar Obama administration budget deficits will prolong the painful effects of the current economic recession.

"I think that if the Chinese stop buying our debt, it is virtually the end of the financial world as we know it," Robinson told the Financial Times in London last week. "The conventional thinking is that they will continue buying. But I don't think it's logical to assume somebody will continue to buy paper that declines in value.

"Our dollar is declining in value, and it's been pretty shocking over the last four or five months," he said.

At its height in the late 1990s, Robertson's Tiger Management Fund had a reported $22 billion in assets under management

US dollar likely to remain reserve currency-paper
Tue Oct 20, 2009 3:16pm

SANTA BARBARA, Calif., Oct 20 (Reuters) - The U.S. dollar is likely to remain the world's reserve currency for decades, a prominent economist told a conference of international monetary policy makers hosted by the San Francisco Federal Reserve on Tuesday.

"I don't think the dollar is going anywhere, and I don't think the SDR (International Monetary Fund-issued special drawing rights) will become an important rival to the dollar until we have liquid private markets in SDR-denominated claims," said Barry Eichengreen, a professor of economics and political science at the University of California at Berkeley.

The dollar has slid in value relative to other currencies in recent months as investors have questioned the sustainability of the large U.S. budget deficit. Some countries, including China, a large holder of dollar-denominated assets, have suggested that there may be room for other options besides the dollar as the global reserve currency.

"The future of the global reserve system looks a lot like the past of the global reserve system," Eichengreen said.

An alternative approach to an IMF SDR currency would be to diversify reserves among the United States, the euro area, and China, Eichengreen said. That is a more likely outcome but would also be at least 20 years in the making, he said.

"The euro and the renminbi will match the dollar as an attractive form of reserves only when they possess equally deep and liquid markets," he said.
The crisis of 2007-2008 should teach monetary policy makers to worry about trade and capital flow imbalances and embolden them to raise interest rates even when inflation is not a worry, Eichengreen said.

Fiscal policy makers should not allow the current account gap to widen during periods of solid national economic growth, he said.
That is one lesson from the period between 2003 and 2006, when U.S. public sector borrowing and budget deficits rose during a period of growth, Eichengreen said.
"Fiscal policy makers would have done better to keep their powder dry," he said. (Reporting by Mark Felsenthal; Editing by Padraic Cassidy

Some of the statements in the first article did not seem credible. So I did some research to determine if the article had any merit and in my opinion it does not. Windreader1


Quote
It is Obama's promise to participate in a G20 nations agreement by giving $250 billion to the IMF to set up the alternative reserve currency that now has been documented in the final communiqué of the London meeting, according to the G20 website.

At G20.org, a report under "The London Summit 2009" reveals the LondonSummit.gov.uk/en/ site where "Point 5" of the final communiqué says the G20 agreed to allocate that amount to Special Drawing Rights in a move calculated to provide the liquidity needed to position SDRs as a dollar alternative in international trade.

The following is "Point 5"

Quote
The official communique issued at the close of the G20 London Summit.
1. We, the Leaders of the Group of Twenty, met in London on 2 April 2009.
5. The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.

There are two allocations of $250 billion. One $250 billion was for the additional SDR’s that were distributed to all of the countries belonging to the IMF. In other words, the SDR’s were divided between 180+ countries and have already been distributed. If a country elects to sell back their SDR's they could only trade for one of the currencies in the SDR basket. This is USD, Sterling pound, Euro and the Yen. The purpose of this additional funding to the individual countries was to improve their bottom line . An assumption that it is to be used for alternate currency in trade is not supported by the referenced documents. W1

The second $250 billion in “Point 5” is for support of trade finance. These funds are not to be distributed as SDR’s. This is the explanation of that program and is taken from the same G20 document as “Point 5”. These funds are to be distributed to “export credit, investment agencies and MDBs”. W1

Quote
we will ensure availability of at least $250 billion over the next two years to support trade finance through our export credit and investment agencies and through the MDBs. We also ask our regulators to make use of available flexibility in capital requirements for trade finance.

The statement regarding Obama’s promise to give $250 billion to the IMF cannot be confirmed. The US contributed $100 billion to the IMF as a result of the April G20 meeting that is referenced in the following excerpts. Additionally these funds were not part of the SDR allocation but were to be used in the IMF loan program “New Arrangements to Borrow”. W1

Quote
Wed Apr 22, 2009

WASHINGTON (Reuters) - President Barack Obama will have some persuading to do to get the U.S. Congress to approve more money for the International Monetary Fund, House Speaker Nancy Pelosi said on Wednesday.

Those promises included a U.S. pledge of $100 billion for the IMF to help it combat the global economic crisis. The funding would boost the IMF's "New Arrangements to Borrow," under which countries like the United States provide credit to the fund to deal with severe crises that threaten the global financial system.