by James Rickards
Daily Reckoning
The International Monetary Fund (IMF) has established a plan for its special drawing rights (SDR) valuation basket to be revised at midnight on September 30. This IMF plan has laid the foundations for a new monetary standard based on world money.
While these SDR plans might seem complex, they’re actually not complicated. People will make it complicated or make it sound confusing but the Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out and could be used to cause inflation.
I am often asked, “What’s an SDR? If I had 100 SDRs how many dollars would that be worth? How many euros would that be worth?”
There’s a formula for determining that, and as of today there are 4 currencies in the formula: dollars, sterling, yen, and euros. Those are the 4 currencies that comprise in the SDR calculation. As of the close of business on September 30th, or in effect when we wake up October 1st, there’s going to be a fifth currency added, which is the Chinese yuan.