IMF Director Georgieva Says US Stimulus Package Helped Boost IMF Lending to $1 Trillion

Recently, we posted this article where Jim Rickards explained how the IMF might be able to get the US to agree to substantial increases in the amount of SDR's (the currency unit used by IMF members). This is a long standing prediction Jim has made that we have followed here over time since it would amount to major monetary system change if it were to eventually mean the SDR replaced the US dollar as the global reserve currency. 

Now we have this new interview last week on Bloomberg TV with IMF Director Kristalina Georgeiva where they discuss the concept of a massive increase in SDR's. Director Georgeiva notes that the recently passed US $2.2 Trillion "stimulus package" included a "component supporting the authority of the IMF to borrow that boosts our resources". 

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According to Director Georgeiva, It appears that the US was supportive of the increased lending capacity sought by the IMF allowing it to boost it up to $1 Trillion. In this interview, the Director also indicates that further substantial increases in the allocation of SDR's may well be needed in her view. 

Followup news notes 4-15-2020: US is OK with boosting IMF lending capacity, but opposes an increased allocation of SDR's at this time (Financial Times) and this from Reuters - US Opposition Seen Stalling Major IMF Liquidity Boost


These articles say the US prefers not to support an increased allocation of SDR's at the IMF and is discussing other support plans with members of the G7 and G20. The Reuters article specifically says the US does not want to see nations such as Iran and China benefit from a pro rata allocation of increased new SDR's at the IMF.

Below I am posting again the response Jim Rickards gave to my question about how the IMF might get the US to agree to events that could end up replacing the US dollar with the SDR.

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Since we do now clearly have a potential trigger event for another major financial crisis and it could very well be a much bigger crisis than the last one in 2008, Jim's long held view that the Fed won't be able to handle this comes into play as something we must consider and watch for over time. When this scenario has been proposed in the past, I get an important and reasonable question from many readers. 

They ask me:

How will the IMF be able to pull this off? Why would the US be willing to go along with a major monetary system reset that gives up the global reserve currency status for the US dollar? Readers point out to me that the US holds a 16% vote at the IMF (see footnote below) and the IMF would require an 85% approval vote to do a massive issuance of SDR's. I am asked why the US would ever give up this veto power vote and just allow the IMF to essentially replace the US dollar with the SDR?

I asked Jim if he would be willing to address this important issue and he kindly replied that he would. Below is the answer he provided to these questions by email:

"This is not something the U.S. would ever desire, but the U.S. may have no choice. If the world turns to the IMF and massive SDR issuance to reliquify capital markets (after central bank efforts fail), they will need approval from China, Russia and other nations that collectively hold 16% veto power. To overcome the veto, they will insist the SDR replace the dollar as the leading reserve currency. The U.S. will have to go along or else face a complete shut-down of the global financial system. That's checkmate."

James Rickards

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Added note related to this topic: A thank you to a reader who forwarded this link to an article by Jan Nieuwenhuijs. In his article he explains why he believes the SDR will not replace the US dollar as global reserve currency. Here is an excerpt from the article:

"It’s always best to look at what central bankers do, not what they say. Across the globe many central banks have been shifting towards gold since 2009, not SDRs."

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What we do here is follow events over time and see what actually happens which, in the end, is what matters the most in trying to make personal financial decisions.