Because Central Banks Just Aren't Enough: G-20 Will Ask IMF To Print Reserve Currency

Tyler Durden's picture

Four months ago we predicted that in response to the latest round of global economic deterioration, every central bank would very soon join the toner party. Since then we have seen the Fed commence Operation Twist and telegraph another episode of MBS asset purchases; a new QE episode at the Bank of England; a new round of covered bond purchases at the ECB, coupled with an interest rate cut by its latest Goldman Sachs-based president, not to mention the persistent attempts to generate a backstop central bank in the form the EFSF Frankenstein Swiss Army knife; a new round of asset purchases and a massive, several hundred billion snap FX intervention by the Bank of Japan; and last but not least, that stalwart of stability, the Swiss National Bank, went ahead and destroyed the Swiss Franc as the sanest among the fiats by pegging it to that most unstable of currencies, the Euro. In light of the above how gold is not trading north of $2000 is still beyond us, although whether by manipulation or market inefficiency, we can not complain: it is easier to buy gold at $1,750 than at $7,150. Yet not even we could possibly predict just how far the global ponzi cartel would fall to extend the status quo by a few extra months. Because according to Dow Jones, the latest and greatest purchaser of Heidelberg Mainstream 80 machines will be the, drum roll, the IMF! Yes, the same organization that DSK swore would never join the global central banking stupidity, since deposed with a false allegation, and now headed by the woman who brought France to the brink of ruin, will be the marginal printer, now that everyone else is "dodecatuple all in" and sitting all day on the Turbo Print button.

From Dow Jones:

World leaders may mandate the International Monetary Policy to print more of its special currency to help solve the euro zone crisis, according to several people familiar with the matter.

 

Asking the IMF to print more of its Special Drawing Rights, essentially an IOU that countries can exchange for cash, is one of the ways the Group of 20 industrialized and developing countries is considering supplementing European efforts to stem a debt crisis threatening to spark a global financial meltdown and another recession.

 

G-20 leaders are pressing euro zone leaders to deliver a detailed and credible plan to leverage their own bailout fund, boost bank capital buffers and restructure ailing economies. Political disarray in Greece and the inability of euro-zone officials to so far agree on exactly how they plan to build a firewall to prevent contagion is fueling talks on alternative emergency measures.

 

If Europe is able to agree on a credible strategy that can assure its colleagues in the G-20, then the group would be willing to consider the SDR allocation and other financing options to bolster European action, the officials said.

 

The ECB itself has said the scope of its own rescue efforts through a bond buying program would be limited both in time and volume. But under the idea currently being considered by officials, the IMF would be the lender of last resort.

How much are we talking here? Oh enough.

Two people familiar with the matter said the SDR issue could total $250 billion. One option under discussion is to use some of that money to beef up the European Financial Stability Facility, the euro zone's bailout fund.

Obviously, the SDR does not exist as an actual currency in circulation, and would merely be another "confidence symbol" in a fiat system in which ever fewer have any confidence. Yet there is no such thing as a free "confidence symbol" - someone always has to pay. Who you may ask? Well, if you are sitting at a table, and nobody else is paying... the answer is obvious.

IMF member country Quota: millions of SDRs Quota: percentage of total Governor Alternative Governor Votes: number Votes: percentage of total
 United States 42,122.4 17.72 Timothy Geithner Ben Bernanke 421,964 16.77
 Japan 15,628.5 6.57 Yoshihiko Noda Masaaki Shirakawa 157,025 6.24
 Germany 14,565.5 6.13 Jens Weidmann Wolfgang Schäuble 146,395 5.82
 United Kingdom 10,738.5 4.52 George Osborne Sir Mervyn King 108,125 4.30
 France 10,738.5 4.52 François Baroin Christian Noyer 108,125 4.30