According to a report from CNBC, this allocation of $650 billion to the IMF in Special Drawing Rights (SDR) will
help build reserve buffers, smooth adjustments, and mitigate the risks of economic stagnation in global growth.
‘SDRs are reserve assets that countries can use to supplement their foreign exchange assets, such as gold and U.S. dollars,’ says the CNBC report.
This allocation is within the allowed amount the Treasury can give without needing congressional approval.
Some Republicans are not fans of this, and Senator John Kennedy of Lousiana had a sharp disagreement with Janet Yellen, the head of the Treasury and former Chair President of the Federal Reserve.
The remainder of the report is from CNBC:
Essentially, the agreement would allow countries to exchange their SDRs for U.S. dollars. Global demand for American currency has been a recurring issue throughout the pandemic and has resulted in the Federal Reserve also to engage in a robust dollar-swap program around the world.
Treasury would exchange SDRs for dollars that it keeps in the Exchange Stabilization Fund. That in turn would require the government to borrow more money and incur some coasts, namely the difference between the interest on the SDRs and Treasury rates.
This potential implicit cost is much lower than the benefits of a strong global recovery.
Addressing the long-term global need for reserve assets would help support the global recovery from the COVID-19 crisis. A strong global recovery would also increase demand for U.S. exports of goods and services—creating U.S. jobs and supporting U.S. firms.
The Treasury Department said in a statement
During a mandated Senate hearing on how Covid relief money is being spent in the U.S., Kennedy challenged Yellen on the SDR allocation, saying it would be costly to American taxpayers while only a fraction of the benefits would go to poor countries. He said China and Russia also would have access to the SDRs and that borrowing costs to the U.S. could reach $180 billion, but based on an allocation of $1 trillion in SDRs.
However, Yellen said the difference between what the U.S. would have to pay to borrow the money and the interest it receives on the SDRs would be “essentially a wash, and it is not costly.”
AUTHOR COMMENTARY
“Let them eat cake!” While some of the American taxpayers receive their peasant checks of $1,400 that are useless in the long term (and even the short term in so many scenarios), it is more money that is printed out of thin air, leads to more inflation and more debt – another $650 billion out of thin air also created to send to other nations that will only be drops in the bucket for them as well.
These political parasites are not about helping the people of this country. They want to bankrupt this country which allows the Feds to inflate their balance sheet some more and buy it all up. That is where this money is coming from: the Feds. This is why no one in the mainstream dares to ask the question: where is this money coming from? It just exists now, I guess, and we as the dumb peasants are supposed to accept it.
What I am trying to get here is that even though it is appalling to see more money sent overseas, if that money was spent on yet another round of stimulus, we’ll say, it still will just create more debt and inflation.
[26] Be not thou one of them that strike hands, or of them that are sureties for debts. [27] If thou hast nothing to pay, why should he take away thy bed from under thee?Proverbs 22:26-27
The rich man’s wealth is his strong city: the destruction of the poor is their poverty.
Proverbs 10:15
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