Bernanke is smooth. Smooth as silk. He says “inflation is low.” What he is NOT saying is the POTENTIAL for HYPERINFLATION is at an all-time high. Replacing the “dollar” (actually the U.S. “Federal Reserve Note”) with “Special Drawing Rights” (SDR) will, in my opinion, ignite a hyper-inflationary bonfire – much like pouring jet fuel on a small camp fire. Don’t forget, folks, that the “Fed’s” equation for calculating “inflation” is misleading. It recognizes the housing bubble deflation’s effect on the Consumer Price Index. The true measure of inflation is the cost of food and fuel. Food is up over 25% across the board, and is projected to spike even higher this year. That is the measure of inflation, folks — because everyone has to eat.
IMF calls for dollar alternative
By Ben Rooney, staff reporterFebruary 10, 2011: 4:37 PM ET
NEW YORK (CNNMoney) — The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world’s reserve currency.
The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.
SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs
While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.
Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some “technical hurdles” involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.
“Over time, there may also be a role for the SDR to contribute to a more stable international monetary system,” he said.
The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.
In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks’ dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.
Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.
Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.
SDRs, he said, “will further diversify the system.”
Dollar firms after starting 2011 weak
The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.
After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.
“The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger” said Camilla Sutton, currency strategist at Scotia Capital.
Those remarks reaffirmed the view that “the Fed would be very slow to tighten policy given its dual mandate of price stability and employment,” analysts at Sucden Financial wrote in a research report.
Bernanke also urged lawmakers to come up with a “credible plan” to bring down “unsustainable” federal budget deficits.