China’s government has said it will buy $50 billion in notes. Russia and Brazil last month said they would each buy $10 billion of bonds from the IMF. India has also indicated it would contribute to an IMF bond program. The four nations make up the so-called BRICs. “This is a victory for the BRICs, particularly China,” said Claudio Loser, the former director of the IMF’s Western Hemisphere department. “Because they will be investing in the fund they will have, directly or indirectly, some say in the governance of the fund that goes beyond their quota.” The IMF’s “quota” system allocates voting rights to member states based on their financial contributions.
The notes will be denominated in Special Drawing Rights, or SDRs, which represent a basket of currencies consisting of the U.S. dollar, the euro, the yen and the British pound. Note sales denominated in SDRs would be paid interest on a quarterly basis, the IMF said. Chinese officials have sought a greater role over time for SDRs in an effort to reduce the U.S. dollar’s dominance in the global economy.
http://www.bloomberg.com/apps/news?pid=20601087&sid=amDBHW9pdG28 This is REALLY bad news for us. Expect the value of the dollar to drop quickly.
China’s central bank last month renewed its call for a new global currency and said the IMF should manage more of members’ foreign-exchange reserves, triggering a decline in the U.S. dollar. Lipsky said on June 6 it’s possible some day to take the “revolutionary” step of making SDRs a reserve currency.