SDR’S or special drawing rights are an IMF international liquid reserve currency with value based on exchange rates of its members who have quotas. If the quota is exceeded then interest is charged by the IMF and that causes inflation in the borrowing countries economy.
The United States dollar is still the preferred reserve currency but soon its debt to GDP ratio will become so large that it no longer will be a trusted source for money with value since its exchange rate will be radically deflated and not be very valuable. When there will be the next worldwide liquidity crisis the IMF will pump Fiat money into the system and try to prevent a worldwide depression.
The problem with SDR’s is that they are not tied to tangible assets like oil, gold, or other tangible commodities and are in fact an untrustworthy currency which is inflated at will and causes inflationary pressures in member countries who exceed their quotas.
The world is so economically dependent on one another that a liquidity crisis unresolved could potentially lead to a worldwide depression in every developed nation. This is highly unlikely since each developed nation can create inflation of their money supply and thus maintain some temporary stability until the citizens lose their trust and faith in it and resort back to primitive bartering procedures.
The international banks will devise a way out of their mess if the time arises and a radical change is necessary in the financial system of the world.
Ultimately trust in the money supply is essential but the use of money is so ingrained in daily life that no other rational alternatives exist to determine the value of information, goods, and services. Money is here to stay no matter how phony or fiat the ultimate source of the money actually is.
If you want to invest in something which will maintain its value in hyper inflation then invest in real estate and tangible assets or commodities like metals, oil, and food which are vital to daily survival. Buy an emergency supply of food for a year or two and you will be guaranteed that you will not starve no matter how great the financial crisis becomes.
My personal opinion is that SDR currency should be tied to tangible assets or diversified world wide commodity prices. This way if fewer commodities are used in the world then the SDR supply would be reduced and if more commodities are produced and used then the SDR currency would be inflated. This way a supply demand relationship would be established between what the world consumes and produces and the SDR.
Produce more and the SDR would increase and maintain a stable value with time. Produce less and the SDR would shrink yet maintain its overall purchasing power throughout the world. We need a stable world money supply and not one which gets inflated at will and loses value with time.
To be a responsible overseer the SDR should punish countries with bad balance of trades with less money and reward those with good balance of trades with more money. Distribution of SDR money should be proportional to the trade balance or deficit of a country. The greater the deficit, the greater the interest rate and the bigger the balance of trade the more money is given interest free. Disciplining economies is a must and a just way of doing so internationally will have to be found.
What political rights should the country with a favorable balance of trade have when it uses SDR money? It should have the right to purchase assets in any country of the world and even buy an entire country outright if the political leadership agrees to the purchase. This way the productive nations of the world will grow in real estate and value and a just world order will be possible with conquest with money and not military means!!!!!!
Wilderness is also a very vital worldwide resource and not a commodity so a way must be found to invest worldwide in wilderness and preserve it as a vital potential resource for future generations in need when the food supply of the world becomes to unhealthy to consume due to too much technological intervention and not enough organic farming.
It is a myth that gold is a good inflation hedge because gold is just one of thousands of commodities with value and even though gold may spike transiently during a world economic crisis it will not maintain its inflated value for very long and will just be a temporary Ponzi scheme to part you from your hard earned money.
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