World Money: Five Hidden Signals From The IMF

Tyler Durden's picture

Authored by Craig Wilson via The Daily Reckoning blog,

Less than a month ago a handful of the world’s policy makers gathered in Washington at the International Monetary Fund (IMF), no surprising headlines were run - but an obscure meeting and a discreet report launched exclusive signals for the next global economic crisis.

The panel, which included five of the most elite global bankers, was held during the IMF’s spring meetings to discuss the special drawing rights (SDR) 50th anniversary.  On the surface the panel was a snoozefest, but reading beyond the jargon offers critical takeaways.

The discussion revealed what global central banks are planning for a future crisis and how the IMF is orchestrating policy for financial bubbles, currency shocks and institutional failures.

Why the urgency from the financial elites?

In theApril 2017 “Global Financial Stability Report,” IMF researchers targeted the U.S corporate debt market and how extreme changes in its equity market has left the global economy at risk. While the report may have been missed by major financial news outlets, it was enough to give major concern to those paying attention.The IMF research report noted:

“The [U.S.] corporate sector has tended to favor debt financing, with $7.8 trillion in debt and other liabilities added since 2010…”

In another segment the IMF report said:

“Corporate credit fundamentals have started to weaken, creating conditions that have historically preceded a credit cycle downturn. Asset quality—measured, for example, by the share of deals with weaker covenants—has deteriorated.”

“At the same time, a rising share of rating downgrades suggests rising credit risks in a number of industries, including energy and related firms in the context of oil price adjustments and also in capital goods and health care. Also consistent with this late stage in the credit cycle, corporate sector leverage has risen to elevated levels.”

This report  together with the panel discussion highlights a very concerning trend. Jim Rickards, a currency wars expert and macroeconomic specialist, has identified the special drawing rights (SDR) as a class of world money that is a tool used to bailout central banks during crisis.

World Money, The IMF and Signals for Economic Crisis

World money was praised for its ability to be a catalyst for international loans during the IMF spring panel discussion.

The panel discussion was moderated by Maurice Obstfeld, an established academic who serves as a Director of Research at the IMF. Obstfeld is connected, knows the right people, and can see the macroeconomic implications of SDRs.

World Money SDR

In his opening remarks Obstfeld identified, “There has been increasing debate over the role of the SDR since the global financial crisis. We in the Fund have been looking more intensively at the issue over whether an enhanced role for the SDR could improve the functioning of the international monetary system.”

“The official SDR is something we are familiar with but is there a role for the SDR in the market or a market SDR? What is the SDR’s role for the unit of account?”

Here’s the five most important signals from the world money panel, what they could mean for the international monetary system and the future of the dollar.

1. China Spars for the SDR Market

Yi Gang, the Deputy Governor of the People’s Bank of China disclosed to the IMF panel that, “China has started reporting our foreign official reserves, balance of payment reports, and the international investment position reports.”

“All of these reports, now, in China are published in U.S dollars, SDR and Renminbi rates… I think that has the advantage of reducing the negative impact of negative liquidity on your assets.”

What that means in real terms is that China views the opportunity of being a part of the exclusive world money club as an opportunity to diversify away from the U.S dollar.

The Bank of China official took that message even further saying that he hopes that China could lead in world money operations by integrating it into the private sector.

Yi Gang

“If more and more people, companies and the market use SDR as unit of accounts – that would generate more activity in the market with focus on the MSDR. [The hope would be] that they could create more products and market infrastructures that would be available for trade products to be denominated in SDR.”

The People’s Bank of China official referenced how this trend was already underway. Just last year Standard Chartered bank began to maintain accounts in SDR’s. “In terms of the first and secondary markets they will develop fairly well.”

Perhaps the most important segment that the Chinese official signaled was his reference that, “The Official Reserve SDR (OSDR) that allocation from the IMF is very important. [This allows] Central Banks to make the SDR an official asset, and easier for them to convert that asset into the reserve currency they need.”

What that means is that China will become an even greater player in the world money market.

Nomi Prins, an economist and historian stated when analyzing China’s economic positioning, “The expanding SDR basket is as much a political power play as it is about increasing the number of reserve currencies for central banks for financial purposes.”

2. Special Drawing Rights: The Case for Liquidity and Central Banks

Jose Antonio Ocampo, one of the foremost scholars on international economics and a board member of the Central Bank of Colombia noted, “The main objective of SDR reform is actually… for it to be a major reserve asset for the international monetary system.”

“First of all, it is a truly global asset. It is backed by all of the members of the IMF and it doesn’t have the problems that come with using a national currency as international currency. Second, it has a much better form of distribution of the creation of liquidity. Because it is shared by all members of the IMF… in that regard, it does serve as unconditional liquidity.”

That means that IMF and institutional economists view the SDR as a potential way of financing not only national government loans, but markets.

The most fascinating point that Ocampo made about the SDR was about the position of conditional reserves and what it could mean for more SDR reform. Conditional reserves reference the ability of central banks to borrow and repay loans in a timely manner with conditionality.

“Countries that hold excess SDR’s should deposit them in the IMF. The IMF then could use those SDR’s to finance its lending. [This will reduce] the need to have quotas, borrowing arrangements and methods to finance IMF programs. Like any decent central bank in the world they could use their own creation of liquidity as a sort of financing of that central bank.”

While the IMF has been a “central bank for central banks” this proposal would see the international monetary system shift entirely.

Jim Rickards takes his analysis a step further showing that the liquidity and lending offer the IMF the ability to act during a crisis, as it did during the most recent global financial crisis.

Rickards, The New York Times best-selling author, reveals, “The 2009 issuance was a case of the IMF ‘testing the plumbing’ of the system to make sure it worked properly. With no issuance of SDRs for 28 years, from 1981–2009, the IMF wanted to rehearse the governance, computational and legal processes for issuing SDRs.”

“The purpose was partly to alleviate liquidity concerns at the time, but also partly to make sure the system works in case a large new issuance was needed on short notice.”

3. Elites Signaling the Blueprint Plan for World Money

Mohamed El-Erian a former Deputy Director of the IMF and the Chief Economic Adviser at Allianz (affiliated with PIMCO) was the premier panelist to discuss the future blueprint plan of world money.

El-Erian started out his discussion, “If the SDR is to play a really important role you cannot go through the official sector only today.”

He outlined the current political landscape for world money saying, “The politics today do not favor delegating economic governance from national to multilateral levels. Yet the case for the SDR is very strong.”

“It is not only about the Triffin Dilemma and [acting as] the official reserve, it’s because if you ask anybody do you want to reduce the cost of self-insurance, they’ll say yes. Do you want to facilitate diversification? They’ll say yes. If you ask anybody, do you want to make liquidity less reciprocal, they’ll say yes.”

“The SDR helps address every one of these issues. So, it solves problems not just at the official level but it solves problems in the private sector.”

To break that jargon down Jim Rickards offers, “In other words, the latest plan is for the IMF to combine forces with mega-banks, and big investors like BlackRock and PIMCO to implement the world money plan.”

“El-Erian is ‘signaling’ other global elites about the SDR plan so they can prepare accordingly.”

4. The SDR Signals Death of the Dollar

Catherine Schenk, a professor of International Economic History at the University of Glasgow, is one of the top scholars of economic relations. While speaking she took up the case of what the special drawing rights meant for the U.S dollar.

Dr. Schenk when asked whether the international market could proceed without a “lender of last resort” she pressed, “Why would you use a relatively illiquid element when you have the U.S dollar?”

“The U.S dollar has a lot of problems, some of it is unstable but the depth and liquidity of it in financial markets are unrivaled. The history of trying to create bond markets for other currencies or other instruments shows that it takes a long time.”

She then elaborated later in the conversation the premise that, “What we are talking about with the market SDR is trying to turn it and add more facilities to turn it into money. That will take time. Having reluctant issuing, I am worried about how that market it going to be created.”

As the dollar continues to have its issues what central banks like the Federal Reserve select to do matters significantly.

Christopher Whalen pens, “Whether you look at US stocks, residential housing markets or the dollar, the picture that emerges is a market that has risen sharply, far more than the underlying rate of economic growth. This is due to a constraint in the supply of assets and a relative torrent of cash chasing the available opportunities.”

Whalen then asks the bigger question and one that could specifically matter for the SDR when he notes, “What happens when this latest dollar super cycle ends?”

How the competition for the top world reserve position unfolds between the SDR and U.S dollar will be answered in time.

5. World Money Becomes Central Bank Money

During the final Q&A for the panel on the SDR’s, they were asked what the political climate looks like facing the issues of world money and the direction of political headwinds?

In response Jose Antonio Ocampo said, “In the issue of liquidity, we still have a basic problem during a crisis – which is, how do you provide liquidity during crisis?”

Ocampo, the Colombian central bank official disclosed, “My view is that it is a function for the SDR as central bank money, let’s say.”

The SDR specialist took it further, “The real question is whether any of the major actors… and whether the U.S, either from the previous administration or the current administration, was willing [to politically act]?”

He offered, “From the point of view of the U.S the use of SDR’s as a market instrument should be more problematic than the reforms of the SDR to be used as central bank money.”

Under such circumstances the demand and confidence for the U.S dollar as a global reserve would be diminished.

Jim Rickards summarizes, “By the time the final loss of confidence arrives, much of the damage will already have been done. The analytic key is to look for those minor events pointing in the direction of lost confidence in the dollar.”

“With that information investors can take defensive measures before it’s too late.”

As was confirmed by both the IMF report and the elite panel on special drawing rights, the U.S dollar is facing severe competition while undergoing a fiscal crisis.

Rickards leaves a stark warning, “The U.S. is playing into the hands of these rivals by running trade deficits, budget deficits and a huge external debt.”

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dark fiber's picture

World Money.  Because the Euro was such a success.

Manthong's picture

When the Fed, ECB, BOJ and BOE go belly up, they will be re-capped with SDR's.

The crazy cycle will start all over again if we let it.

thedespised's picture

naw. it's gonna hit too hard, no-one is going back.   they will die slaves if they do.

stacking12321's picture

bringing in SDR qualitatively changes nothing.

you get 5 guys to piss in a bucket, all you have a is a bucket of piss.

more liquidity doesn't fix a solvency issue.

more debt doesn't fix the problem of too much debt.

Donnie Duvanie's picture

Piss or no piss, I just wanna know if these SDRS have anything to do with guarantneed income.

Mr 9x19's picture

“The U.S dollar has a lot of problems, some of it is unstable but the depth and liquidity of it in financial markets are unrivaled. The history of trying to create bond markets for other currencies or other instruments shows that it takes a long time.”


or not... only 8 years to double dept of a single country if you ask the good person....


meta-trader's picture

she was a waitress in a cocktail bar now she owns a jet...

philipat's picture

Agreed but this is the final stage of the Global Ponzi isn't it? Last time around the Central Banks were able to step in to absorb the bad debts and ruin their own Balance Sheets. They can't do that again, all of them are already insolvent by any reasonable definition. So at this point, it's either systemic collapse of the final stage of The Ponzi; the IMF stepping in with SDR's to bail out the Central Banks. Those SDR's will be backed by precisely nothing, just the various fiat currencies which comprise the SDR are also backed by nothing so they will be funded by more printing from the constituent Central Banks to create a new "Asset". Then the same game begins again for another cycle. The name of the game is extend and pretend and these folks will never go away quietly and admit that they fucked up the whole Global economy and got it completely wrong. After this last cycle, unless the Moon or Mars establish a Univeral Monetary Fund with Intergalactic Drawing Rights to bail out the IMF/BIS/World Bank etc., it really will be the end of the road and the can can be kicked no further.

sinbad2's picture

And where would that money come from?

I don't think you understand how IMF SDR's work, the only money they have is the money given to them by the countries you say are going belly up.

. . . _ _ _ . . .'s picture

The money is not given to them, it is created for them.

No debt = no economy.

Economic growth = more debt.

The only way out of this trap is resource/commodity-backed notes.

sinbad2's picture

So now they can create gold, great trick, care to share how the countries who deposited 2,800 tons of gold with the IMF created it?

Winston Churchill's picture

Pledged , not given.

Big difference.

sinbad2's picture

No that isn't true, I know that is the model that the western economies currently use, but people/countries have had functioning economies for thousands of years, without the need for debt.

Debt, lending is a Jewish invention, and countries like India and China have been doing business long before the Jews.

. . . _ _ _ . . .'s picture


"The only way out of this trap is resource/commodity-backed notes."

The only way out of this trap (under the present system) is resource/commodity-backed notes.

Sure, there are many other ways to run an economy.

Michigander's picture

Ive got my world money...its sitting in my safe on my cryptocurrency wallet.

Manthong's picture


We really need to get rid of this insane central bank BS.

All it does is transfer resources from the population to bankers and their corporate cronies.

HRH Feant2's picture

Interesting article. Most of the US population are lambs being led to slaughter. They have no idea.

FlKeysFisherman's picture

And they don't want to know. Don't be foolish like I was and spend any time or energy trying to educate friends and family.

If there's one thing I've learned in 63 years it's that most people are sheep and they like it. That doesn't mean you need to be a cruel asshole just accept people for what they are and look out for number one.

Ms No's picture

Nobody has tried and hung these bastards yet? I guess everybody wants to live in slavery.  I bet a simple and complete illiterate moron in South America or Africa has a better idea of the malevolence of all of this.  They still probably have basic common sense.  Everybody in the west has been living under empire so long that they are ponerized Stockholm syndrome idiots.  Europe gave away everything and is bending over for Soros' ISIS army to rape them in the ass.  It doesn't get any dumber than that.  No civilization on earth was ever that stupid.  A spear chucking cannibal is smarter than that.  The idiots from western countries have more power than these other populations.  Twelve thousand a year per kid and they produce the biggest morons that ever lived.


Exalt's picture

Globally socialising central bank balance sheets sounds like a pretty terrible path to tread. You are creating a directive incentive to print to infinity, because your buddy over yonder's currency will absorb the damage. If that doesn't sound good enough to you and you are stubborn about independent monetary policy and are preventing us from borrowing to infinity, hell, we'll just create more of this "money" FOR YOU so now your currency HAS TO devaluate. That way we are sure you are ALL debt serfs to the most reckless of bankers and politicians. Literally creating a derivative of member currencies and calling it money. What could go wrong? /sarc... By the way, anyone interested in taking DJ index futures for goods and services? Anyone? Come on guys... I don't need no stinkin margin... but mah liquidty... but mah low cost of self insurance... but mah diversificashun... look a squirrel! I'll just sign you up then. Bob... listen... Bob it's very simple. You borrow from me, which is borrowing from you and borrowing from me. It's free money.

Arrow4Truth's picture

Well said. "Bob... listen... Bob it's very simple." Beautiful. Yunder... not yonder... yunder.

lynnybee's picture

Or.....we can use silver and gold to circulate freely as our money and NOT use worthless paper money!!! We don't need no stinkin' banknotes!

Manipuflation's picture

We already do to some degree.  The most recent gun I bought was with silver and no paper.  However, at this time PM will not work for everything.

Arrow4Truth's picture

PM will not work for everything, cuz it's commerce. PM's will work if you trade... privately. Get out of commerce.

Ms No's picture

One thing I have to say about the .005% Zionist that I dealt with for a short period of time, is that he is wide open about what he is.  He will straight tell anybody that he has more money and power than God and if you cross him he will scull fuck you and then bring a team of lawyers down on your corpse.  Maybe they hate us because so many people are so stupid.  They can straight tell people what they are doing and it wouldn't matter. 

. . . _ _ _ . . .'s picture

Gold-backed Yuan would be my guess... and as for the IMF - they're history.

My explanation is here.

(Sorry, but there's no way I'm redo-ing all those links.)

sinbad2's picture

No way will China allow that, they don't want to end up like the USA.

. . . _ _ _ . . .'s picture

Yes they do. They think they will be able to do it right.

USA minus the military/intel/domestic surveillance empire would still be a good place.

Thanks for reading, though.

Exalt's picture

China's debt problem is comparable to that of the US. They're hedging their bets with SDRs and gold. Whichever way global finance goes, they're prepared.

Manipuflation's picture

Hypothetical question?  What if guy was willing to go out gold mining somewhere in the world?  What if he was approaching middle-age, had some cash, no debt, a valid passport and didn't have to work for a little while.  What should that person do?  Invest in FB? 

Terrible question because too many variables.

We shall see if the van will make it.  I put more into that van then the trip will cost.  You can't fly from MSP(Minneapolis) to YYC (algary) directly.  {You can't waste that "C".}  That would be because why?  In the time it would take me to fly from MSP to YYC I could already be in SVO plotting to spread the "truth". 

I think gold mining is the best option for me really.  I am not looking forward to the flies though. 

. . . _ _ _ . . .'s picture

I know a spot. Lotsa' flies. The van won't cut it, though. Got a kayak?


Ms No's picture

Try dousing for it.  I am curious how well it works.  I used to work for a locating company and that shit works.  If you don't believe me try it at your own house by crossing your utilities with two bent hangers. 

Manipuflation's picture

No existing pipes will be where I am going. 

Ms No's picture

It doesn't have to be pipes.  I have found glass jars with it on my old property and other things.  You can find all kinds of anomolies.  I am going to try it on a beach sometime.  I can follow and verify a GPR with it and so can my old boss.  After they cross you walk back slowly.  When they uncross there is your depth and it's always right, if it works for you and it does for most.

meatworm's picture

Digital currencies like SDRs are a terrible store of value, because they can and will be inflated - and ultimately hyperinflated.

Jim Rickards:

'In the next crisis when everyone wants their money back from the banks, the liquidity will come from the IMF in the form of trillions of SDR’s. If it works, it will only be because nobody understands it because ultimately it is fiat money. They will then lose greater confidence and begin to ask – where is the gold?'


Apropos gold: Money or Wealth?

Arrow4Truth's picture

Sometimes I can't help but feeling that I'm living a life of illusion. Joe Walsh.

ds's picture

SDR will not fly in a G Zero World. Has China stopped its push for the RMB to be a global reserve currency ? The US hegemony has its costs and benefits depending on global economic cycle. China cannot afford to expose its few tricks ponzi  economy largely dependent on cheap exports of goods and services in the real economy to any reserve currecny that spins on its own global flows. (Even the FED cannot price the US$).

The US$ hegemony is here to stay with no alternative. The US$ is a global currency not a currency of the US tribe who is now feeling its tears upon them. US is the haven of the US $ and America is moving fast to be a habitat (a 5 star hotel) that belongs to the Global elites. Only if the Matrix changes its hq or changes its preferred innerwear, the US$ stays. SDR stands a chance as a replacement if it is to be controlled by the Matrix not by any nation.

The 99% (particularly the inhabitants of US geographies) should have no illusion that they own Habitat US. However, Habitat US will stay with all its protective systems of property rights and armaments for the Gobal elites and by the Global eiites. Beneath the l%, there is are large swates of global People who will defend Habitat America but not Nation America. A US Tribe is disappearing with divisions with more splinters. They are just to be amused and cheered on to huddle to their bags and baggages of their individual cultures, races and religions. New diversified tribes (the top dogs) are emerging with their own meccas in Habitat America.


sinbad2's picture

China was never pushing for the Yuan to become the global reserve currency, they have seen the millstone around the neck of the US economy, because it is the global reserve.

Yes there are advantages for the US, the money changing fees, are a virtual tax the US collects from the whole world, and the US gains great power over other nations because it is the global reserve currency.

However it also has costs, the value of the US dollar has destroyed American manufacturing, because it simply cannot compete in an open market.

. . . _ _ _ . . .'s picture

Chinese manufacturing is already in decline. India/Pakistan/Bangladesh will be their manufacturing center. China needs the reserve to push new tech and investment in R&D.


sinbad2's picture

The world pays US banks half a trillion dollars a year in money changing fees, it's a cost the world can no longer afford.

Death to the money changers.

Ms No's picture

I think the reason why the planet has become a meteor shooting gallery, as evidenced by noctilucent clouds, is that God feels sorry for us.  He decided to correlate the meteor fireballs to the increase in mass human stupidity.  That way when we reach critical mass everything gets incinerated and the world's oceans slosh around like a GMO fed fat kid doing cannonballs in the bathtub.  Literally within 30 miles of you there is probably some chick writing a letter to send with her taxes "Please accept this gift of candy valentine hearts with my tax payment because I appreciate your facilitating my donation to the White Hats, the fight against global warming and preventing anyone from criticizing a blood thirsty Zionist banking oligarchs.  Love Shelly McGillicuddy, third generation fluoridated retard".  God is speechless.  He can't figure out how that orangutan throwing his feces at the zoo windows ended up smarter than most people.

Batman11's picture

The Bancor or the Dollar? / the SDR or the Dollar?

Same question, seventy years apart.

The problems the Bancor was designed to deal with have manifested themselves in the widening gap between surplus and deficit nations.

The Bancor penalized both surplus and deficit nations to ensure imbalances didn’t grow too large.

Just what we need, but let’s call it the SDR.

Batman11's picture

Free market competition creates winners and losers.

In the Euro-zone, Germany won and Greece lost.

With trade, China won and the US lost.

When the winners and losers have been established its game over.

What do we do now?

Batman11's picture

As all the wealth accumulates with the winners, demand falls off a cliff.

“But that was yesterday’s problem, Summers said. The economy now faces secular stagnation, or a chronic lack of demand."  Larry Summers has noticed the problem. 

The IMF have noticed the lack of global aggregate demand.

Warren Buffett has 74 billion but how many cherry cokes can he drink in a day?  

I don’t think anyone has thought this through, wealth concentration kills demand

2017 – Richest 8 people as wealthy as half of world's population

No wonder demand is suffering.

Game over.

Batman11's picture

The Monopoly solution.

Redistribute the wealth for a new game.


squid's picture

These central bankers just make me shake my head....

SDR, liquidity....liquidity in what?

SDR is fiat just like the USD, WHAT IS THE DIFFERENCE?

You cannot give the power to print to ANYONE because history has shown, 100% of the time, that anyone with power to print will.....wait for it....print.


And then soon after the destruction of the currency.


Fiat has a 100% failure rate, not 65%, not 80%, not 90%, its a 100% failure rate.


But oh no, we have to try it ONE MORE TIME and this time, after over 2,000 attempts, we'll finally get it right and not drive the fiat to its intrinsic value.


Right, sure. Got it.



Greenspazm's picture

"Daily Reckoning" -- isn't that part of Porter Stansberry's pump and dump empire? And that Intel front Ricktards has no credibility left, none of his predictions  have been correct.