We have covered this before here on the blog, but this web page at the IMF explaining the SDR used at the IMF has a good video for someone wanting to learn about them. Below I have pasted in some of the leading paragraphs from the web page. Go here to view the video. Jim Rickards says for the last 30 years only 500 people had heard about SDR's. Things are changing.
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The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.
In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations. . . . . .
SDR allocations to IMF members
Under its Articles of Agreement, the IMF may allocate SDRs to members in proportion to their IMF quotas, providing each member with a costless asset. However, if a member’s SDR holdings rise above its allocation, it earns interest on the excess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall.
Sounds like a wonderful Ponzi Scheme within a closed system. Cfr.a monopoly game.
ReplyDeleteThere are many critics of the IMF/SDR who agree with you. The goal here is to provide accurate information with as little editorial opinion as possible so readers can make up their own minds. In order to do that (one way or the other) it is important to understand the basic facts of what the SDR is; which is what I am trying to help with here.
DeleteAll comments and opinions are welcome here and I appreciate yours and that you gave it without any kind of personal attack. I think a free and open exchange of views is very healthy so long as people do that with respect for other people's opinions (no personal attacks). A strong opinion backed up by verifiable facts and solid analysis is always worth hearing. I try to present a variety of credible views here on the blog in that regard. Thanks again for your comment!