By As ALG News recently warned, helicopter money is about to be dumped onto the global economy. In fact, and unless the American people can focus their efforts to opposing it, the U.S. will squander yet another hundred billion dollars in foreign aid to help an international institution create a worldwide reserve currency, burying the U.S. dollar once and for all.
Last month at the G-20 summit, Barack Obama pledged a $100 billion line of credit to the International Monetary Fund (IMF) as part of a $550 billion global effort to bolster the international bank. The summit was preceded by both Russia and China proposing replacing the dollar as the world’s reserve currency, as reported by Reuters. The G-20 then approved a new $250 billion general allocation of Special Drawing Rights (SDR’s)—the bank’s reserve asset.
Now, the IMF bank, which doles out money to developing countries, just needs the U.S. to come through on its pledge of monetary support. Barack Obama stated in his letter to Congress, “We committed to this expansion, and other countries are looking the United States to deliver on our commitment.”
The $100 billion line of credit itself would be “the SDR equivalent of $100 billion on the date of the agreement.” Currently the U.S. has a $10 billion line of credit to the IMF worth SDR 6.6 billion. If invoked, the $100 billion line of credit would be worth SDR 75.0 billion. Additionally, the provisions would authorize the sale of 13 million ounces gold from the IMF—worth about $11.9 billion.
The proposal would also increase the U.S. share in the IMF by SDR 4.97 billion at a cost of $8 billion “in order to maintain its current voting share and veto power within the organization… Because the Fund’s overall quota resources would be expanded to facilitate the realignment of country weights, an increase in the U.S. nominal quota is necessary to keep the U.S. voting share constant at 16.7 percent of total voting power in the Fund…” This comes as the other contributors to the fund—like Japan, Britain, France, and China, amongst others—are increasing their shares.
Unsurprisingly, Obama promised a global economic collapse should Congress not intervene. As he puts it in his letter, “Many of the developing countries that would benefit from the [$550 billion expansion of IMF lines of credit worldwide] are experiencing severe economic decline and a massive withdrawal of capital. Should the situation become worse, and should the IMF not be in a position to stem the crisis, currencies could collapse. The experience with the Asian financial crisis shows that such a massive failure would be a catalyst for steeper drops in U.S. growth, jobs, and exports.”
This amounts to giving the IMF hundreds of billions more dollars to dole out in international aid in a manner that may or may not be effective. It is obscene that in all that is pressing down on the American taxpayer that Barack Obama and Congress want this much money for foreign governments that cannot even manage their own finances. This, on top of the $12.8 trillion that the U.S. has already spent, lent, or committed through the Fed, AIG, Bear Stearns, TARP, “Stimulus,” the FDIC, etc., as reported by Bloomberg News.
The idea behind the IMF expansion is to increasingly anchor the currencies of developing economies with the SDR reserve currency. The head of China’s central bank, Zhou Xiaochuan, recently wrote that the “SDR has the features and potential to act as a super-sovereign reserve currency.”
However, since the SDR’s are in reality simply a fiat currency, they will only become valuable if value is assigned to it. And that is why the Chinese are buying bonds denominated in SDR’s. According to the vice governor of the People’s Bank of China, Hu Xiaolian, speaking on Sunday, “Our contributions to IMF’s fund-raising will come in the form of an SDR bond… We are in discussions with the IMF.”
Through the increased purchase of SDR bonds, not only will the SDR’s take on the features of a super-sovereign currency, it will eventually become one. And China, with the largest cash reserves on hand, will be the chief beneficiary as it stocks up and countries around the world choose to back up their own monetary systems with the new SDR’s.
To make matters worse, the U.S. actually does not have $100 billion to invest in the IMF. More Treasury bonds will have to be sold overseas—to places like China—and to the Fed to create the cash necessary to invest in the international bank as the line of credit is used up through the IMF. So, the U.S. would be borrowing money from the Chinese to invest in the IMF, which as noted would enable China to purchase more SDR bonds and gold from the IMF.
Incrementally, the expansion of the SDR’s will eventually supplant the dollar as the world’s reserve currency.
And then, once China stops purchasing U.S. treasuries and other bonds all together, the scales will have been tipped. Once and for all. If not countered, this could ultimately spark a complete collapse of the dollar and cause unbridled inflation here at home.
In other words, to shore up the global monetary system, the G-20 in a desperate move has all but proposed shifting the economic epicenter of the world from the West to the East.
And now Congress is making good on Obama’s pledge to make it so. The Senate Appropriations Committee voted yesterday on the $100 billion line of credit to the IMF yesterday by attaching it to a $91.3 billion supplemental spending bill to fund the wars in Iraq and Afghanistan. It now proceeds to the Senate floor for a full vote.
Senator Jim DeMint (R-SC) will be offering an amendment to remove from the supplemental both the $100 billion line of credit to the IMF and the $8 billion increase the nation’s SDR holdings. But it is unclear where the rest of the body stands on the issue and if anyone else will come to the dollar’s defense.
The House voted on their $97 billion version of the supplemental yesterday, but conveniently did not vote on the $100 billion IMF credit line. They’re waiting until it arrives from conference committee. With any luck, the American people might even get a roll call of the traitors who put the first shovelfuls of dirt on the dollar’s coffin.
Back in March, Treasury Secretary Timothy Geithner supported “[increasing] the use of the IMF’s special drawing rights,” but backtracked after the dollar started tanking, saying that the U.S. dollar should keep its place as the world’s reserve currency.
It’s time to be blunt. He did not really mean it. But for everyone else who does support the dollar—and that includes U.S. allies around the world that currently use the dollar as their reserve currency—it’s time to wake up.
The money helicopters are being fueled. And Barack Obama is paying dollars on the SDR’s for the gas.
Robert Romano is the Senior Editor of ALG News Bureau.
