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U.S. Postal Service Starts Quoting SDR to Dollar Conversion Rates, and IMF Endorses Replacing Dollars with SDRs
I have repeatedly pointed out that it is possible that the IMF's special drawing rights (SDRs) will become the world's reserve currency.
And as I noted in April 2009, there is some possibility that the "Bancor" will ultimately fill that role:
But you probably have not heard that:
China's
government has floated a variant of this idea, suggesting a currency
based on 30 commodities along the lines of the "Bancor" proposed by
John Maynard Keynes in 1944.Indeed, the head of the China's central bank wrote recently:
Though
the super-sovereign reserve currency has long since been proposed, yet
no substantive progress has been achieved to date. Back in the 1940s,
Keynes had already proposed to introduce an international currency unit
named "Bancor", based on the value of 30 representative commodities.
Unfortunately, the proposal was not accepted. The collapse of the
Bretton Woods system, which was based on the White approach, indicates
that the Keynesian approach may have been more farsighted. The IMF also
created the SDR in 1969, when the defects of the Bretton Woods system
initially emerged, to mitigate the inherent risks sovereign reserve
currencies caused. Yet, the role of the SDR has not been put into full
play due to limitations on its allocation and the scope of its uses.
However, it serves as the light in the tunnel for the reform of the
international monetary system.Keynes proposed that the
Bancor was to be fixed in terms of 30 commodities, of which one would
be gold. The arguments for currency fixed on a basket of commodities
was that it would stabilize the average prices of commodities, and with
them the international medium of exchange and a store of value.As
China's central banker said, the goal would be to create a reserve
currency “that is disconnected from individual nations and is able to
remain stable in the long run, thus removing the inherent deficiencies
caused by using credit-based national currencies”.But Keynes' Bancor proposal did not only entail pegging SDR's to a basket of currencies:
He
proposed a global bank, which he called the International Clearing
Union. The bank would issue its own currency - the bancor - which was
exchangeable with national currencies at fixed rates of exchange. The
bancor would become the unit of account between nations, which means it
would be used to measure a country's trade deficit or trade surplus.
Every
country would have an overdraft facility in its bancor account at the
International Clearing Union, equivalent to half the average value of
its trade over a five-year period. To make the system work, the members
of the union would need a powerful incentive to clear their bancor
accounts by the end of the year: to end up with neither a trade deficit
nor a trade surplus. But what would the incentive be?
Keynes
proposed that any country racking up a large trade deficit (equating to
more than half of its bancor overdraft allowance) would be charged
interest on its account. It would also be obliged to reduce the value
of its currency and to prevent the export of capital. But - and this
was the key to his system - he insisted that the nations with a trade
surplus would be subject to similar pressures. Any country with a
bancor credit balance that was more than half the size of its overdraft
facility would be charged interest, at a rate of 10%. It would also be
obliged to increase the value of its currency and to permit the export
of capital. If, by the end of the year, its credit balance exceeded the
total value of its permitted overdraft, the surplus would be
confiscated. The nations with a surplus would have a powerful incentive
to get rid of it. In doing so, they would automatically clear other
nations' deficits.
As FT Alphaville's Izabella Kaminska reported recently, the IMF has recently floated the idea of SDR and perhaps ultimately Bancor as world reserve currency:
FT Alphaville missed this IMF paper when it first came out in April, 2010.
Authored by Reza Moghadam, director of the IMF’s strategy, policy and review department, it discusses how the IMF sees the International Monetary System evolving after the financial crisis.
***
In
the eyes of the IMF at least, the best way to ensure the stability of
the international monetary system (post crisis) is actually by
launching a global currency.
And that, the IMF says, is largely
because sovereigns — as they stand — cannot be trusted to redistribute
surplus reserves, or battle their deficits, themselves.
The
ongoing buildup of such imbalances, meanwhile, only makes the system
increasingly vulnerable to shocks. It’s also a process that’s
ultimately unsustainable for all, says the IMF.
***
All in all, the IMF believes there has simply been too much reserve hoarding going on:
Reserve accumulation has accelerated dramatically in the past decade, particularly since the 2003-4. At
the end of 2009, reserves had risen to 13 percent of global GDP,
doubling from their 2000 level, and over 50 percent of total imports of
goods and services. Emerging market holdings rose to 32 percent of
their GDP (26 percent excluding China). Twenty-seven of the top 40
reserve holders, accounting for over 90 percent of total reserve
holdings, recorded doubledigit average growth in reserves over
1999-2008.
Holdings have also become increasingly concentrated, with over half the total held by only five countries.
These numbers exclude substantial foreign assets of the official sector
not recorded as reserves, including in sovereign wealth funds (SWFs),
and yet invested in liquid, dollar denominated financial instruments,
that have grown even more in recent years.1Of
course, in the first instance, the solution probably lies in closer
collaboration between sovereigns, most likely via the more active use
of such things as special drawing rights, says the IMF.
But
in the end, a global currency makes the most sense, the paper concludes
— especially since the SDR is currently just an accounting tool that
draws on the freely usable currencies of member states , not an actual
currency itself.As they summarise:
48. From SDR to bancor.
A limitation of the SDR as discussed previously is that it is not a
currency. Both the SDR and SDR-denominated instruments need to be
converted eventually to a national currency for most payments or
interventions in foreign exchange markets, which adds to cumbersome use
in transactions.
And though an SDR-based system would move away
from a dominant national currency, the SDR’s value remains heavily
linked to the conditions and performance of the major component
countries. A more ambitious reform option would be to build on the
previous ideas and develop, over time, a global currency. Called, for
example, bancor in honor of Keynes, such a currency could be used as a
medium of exchange—an “outside money” in contrast to the SDR which
remains an “inside money”.But before you get ready to burn your fiat currency, it’s not actually a turnaround the IMF sees being executed any time soon.
As they conclude:
It
is understood that some of the ideas discussed are unlikely to
materialize in the foreseeable future absent a dramatic shift in
appetite for international cooperation.
However, in a possible indication of how seriously the SDR is being taken, the U.S. Postal Service is quoting SDR to dollar conversion rates:
- Convert the U.S. dollar amount to the special drawing right (SDR) value and enter it in the SDR value block. For example:
INSURED VALUE
$100.00 (U.S.)
65.76 SDR
(Here is the original web page, without highlighting.).
A search of the U.S. Postal Office website shows that - as of April 2008 - the relevant web page did not have any reference to SDRs. The most recent revisions to this web page were made on July 30, 2010. However, I cannot tell whether the references to SDRs were added in the most recent July revision, or in a previous edit.
I
am not implying that this is nefarious. I'm not entirely sure what this
means, but - as far as I can tell - no other currencies other than SDRs
and the U.S. dollar are mentioned in this section of the Postal Service
website. At the least, it is interesting.
The Swedish postal service is also purportedly giving SDR conversions.
Whether or not SDRs (or Bancors) are coming soon, one thing is for
certain. The dollar is losing its luster as world reserve currency.
See this, this, this and this.
Update: Further digging shows that
some postal services have adopted SDRs as part of the international
multilateral agreements of the Universal Postal Union, an international organization of postal services. See this website from the Czech Republic, for example, from October 2009.
The earliest reference to postal service use of SDR's which I have found is a January 2007 version of the Swedish post office's website, stating: Posten's
responsbility for lost or damaged International Parcel Post is limited
to SDR 40 per mailing + SDR 4.50 per kilogram of the gross product
weight, in accordance with the acts of the Universal Postal Union (UPU).
»
- advertisements -
commonly known as inflation....
Yes; in addition a step function devaluation would be known as a bank holiday.
Hmmmmmm,
Well if Gold is in the basket of 30, wonder if they SET the Price Forever more quoteth the Raven?.
Maybe if so, we get SHAFT-OLA-D.
No, it's not unusual. Several shipping conventions use the unit for liability purposes.
Why?
The web page says it's only relevant for international parcels.
Does anyone in America send parcels to somewhere that the dollar isn't that much use? Cuba maybe?
you're ahead of the curve as usual GW.
this is why Barry is an intentional one-termer. his next j.o.b. sill be at the IMF where the globalists intend to rule the money supply.
It scares the crap out of me how fast this all is moving... and with no resistance at all. I expected this, but not till much later. We (and every other country) have nothing to gain with this plan. I don't say this out of defense of the dollar... if it no longer deserves to be the world's reserve currency, which at this point it doesn't, then we should find another. The amount of freedom that the U.S., let alone the rest of the world, will lose with the SDR is staggering.
WHY do we keep looking to Keynesian ideas?? Have we learned NOTHING?
P.S.- Your MCD is FLYING! LOL
Ping...exactly.
Loss of national sovereignty on a global scale is not the way to go.
If the dollar is relegated to the ash pile of history so be it. Creating ever larger fiat ponzi's is a fools errand.
Great post GW - Tell me when you publish your first book - I will pay handsomely for an autographed copy! Keep up the great work...TD it just keeps getting better.
willien1derland,
Thank you for your very kind comment. I've got a busy professional day-job. If I thought I could put bacon on the table by writing (and doing radio) full-time, I might switch ...
It appears that we already have the first four contestants in our basket of currencies round....
http://www.imf.org/external/np/fin/data/rms_sdrv.aspx
Woa. AM and PM dollar fix just like the AM and PM gold fix. So if you use the same trick with just a slight change is it a new trick or not?
i'd keep your day job if i were you.
VW go Obama yourself.
Go stupid black idiot yourself?
How much does the Obama brown shirt get paid for blogging here?
Nice day job if you can get it. Are they hiring?
It was the bush family that sold nazi war bonds !!!!!!!!!!!
Yep, I was wondering that......I may join up, and be an Agent Provocateur.(:>)
You have not been here long enough to learn anything useful.
Please refrain from commenting until (if) you actually take the time to read quite a bit.
JG
I can always count on your for support, VWBug...
of course you can gw!
actually, i probably won't hang around much longer,I really have better things to do, or should have.
right now going to a bbq at a friend's house, we'll drink some wine, talk stocks, philosophy and politics, and eat too much.
i will sleep well tonight, not even worried at all about waking up tomorrow to a world with a new reserve currency, or ameros, or global warming, or asteroids, volcanoes, etc etc
so have a nice afternoon, but seriously, don't quit your day job.
oooohhhh, a bbq. lol...with wine? For fvck's sake, man. Men don't drink wine at BBQs
i'm sure at age 15 i also thought a bbq was beer and hot dogs, but now that i have matured, a bbq is steak and a good cabernet sauvignon.
i do keep forgetting that i'm talking to dirt farmers here though.
where i come from men don't cower in fear waiting for post office SDRs or ameros to mark the end of the world
VW,
While I think you and I agree that a lot of GW's posts are hyperbolic, (like the increasingly bizzare GOM oil spill thread's) I don't think we can say he does not put in the time & effort to research a topic and relay it into something readily understood.
While I support your right to have your opinion I also think it's wrong, regarding his skills as a writer.
Then we get to this;
"i do keep forgetting that i'm talking to dirt farmers here though."
Unless your a Rothschild blue blood type, we all come from dirt farmers...LOL.
There are a thousand ways to commit on-line ID suicide. Choosing the blaze of glory route by pissing down everyones leg is fine...but don't expect a proper burial by your peers ;-)
And I didn't junk you, majorities, wherever found, are something to be suspicious of, if for no other reason than to gain balance.
He misspelled whine. A common mistake for snoots.
Touché
LOL!
http://www.youtube.com/watch?v=O4Ccfpwc6bg
http://www.youtube.com/watch?v=gf7Tbt9ewY8
VW, When did you start being a douchebag?
Did your mom look down at you when you were little and say: "VW, when you grow up you will be a douchebag" Or did she say: "VW, when you grow up you will be a douchebag just like your daddy" ????
RC, Someone who shits on others hard work and accomplishments and brings nothing of merit to the table, gets no food, no feedback, no oxygen from me. I would further comment that the poster was not born and had no mother, but was grown in a dark alley by union of a moldly burger and a bottle of Maddog 20.20.
really intolerant of any dissent here huh?
must be hitting a nerve.
if telling someone they are a fear mongering disinformationist makes me a douchebag, i'm happy to wear the label.
now run off and call some other people bad names, maybe you'll find some at the schoolyard that actually care, lol.
I would say the sheeple never read ZH. The seem to be unaware and fat/happy believing the New World Order machine. They like you are unprepared for the planned destruction of our nation. They like you are not worried about anything.
Instead of tossing out an insulting quip, it would have been more appreciated if you actually PROVIDED a counter argument to his story. No need to try and stir up a fight VW.
Being junked pasted 10 on every post implies something. I mean it could point in a certain direction. Not trying to force you to change your thought process or belief system, but repeated mega junking could indicate your a fucking piece of shit or something like that. Hope you have a great day.
holy shit! you're right! what was i thinking??!!
must conform, must conform, don't think for yourself, sheeple is good, sheeple is good, disagreement bad, the nail that sticks up gets hammered down, must not speak out, toe the line, head down...
Laugh your ass off bitch. GW does consistently good work and has been around for some time and has a large following.
You on the other hand are a recently hired by shitbag TROLL.
I could go on in verb based detail about your "hitting a nerve" comment but you would run to the cops and your lawyer like the whining shitbag bitch that you are.
for you 'good work' is cut and paste a lot of useless disinformation and dogmatic bullshit.
as for whining, that's too funny, talk about the pot calling the kettle black, lol
There is a difference between "dissent" and "being a douchbag".
Your other comment was not dissent, but rather was a trite insult towards GW's writing skills, something that is totally uncalled for even if you don't agree with what he says. Hell, I've been at it for a long time with Johnny Bravo, but I never called him a bad writer just because I disagreed with him. He would probably have some success as a professional writer, as John Nadler has (including the fact that both have been consistently wrong on many subjects throughout their careers).
for gun packin' ammo storin' hard money, survivalists, you people sure are sensitive.
but only when someone disagrees.
other people here brag about paying money to enjoy watching their grandmother die in pain (dr sandi) and ...nada.
truly fascinating mindset.
I'll have to remember though that 'keep your day job' means that '[you] are a fear mongering disinformationist'. I could get into some trouble otherwise.
Thank you.
well see, here's the thing, this is not the first time GW and i have interacted.
hard concept for some people to grasp i know, but it's ok, i expect nothing more.
you are welcome.
+11