If the IMF wants to replace the USA as World Savior, is that good or bad?
http://www.brookings.edu/articles/2009/0504_IMF_bonds_prasad.aspx
IMF Bonds: Details and Implications
May 04, 2009 —
Editor’s Note: On May 27, 2009, Russia announced its intention to buy up to $10 billion of the International Monetary Fund’s first-ever bond sale. Russia’s announcement makes good on its April G-20 Summit pledge to purchase bonds to help bolster the IMF’s resources in order to aid countries suffering from the global financial crisis. China, India, Brazil and other emerging economic powers are expected to announce similar purchases soon. In the following article from early May 2009, Eswar Prasad discusses how the bonds might be structured, and implications for the U.S. and global economy.
The Brookings Institution, October 2008
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At their meeting in April 2009, the G-20 leaders committed to increasing the IMF’s resource base by $500 billion. This increase was to take place through an expansion of the New Arrangements to Borrow—a credit line provided to the IMF by a small group of its member countries. Commitments for only $325 billion have been received so far, including a $100 billion U.S. commitment that still needs Congressional approval.[1]
No emerging market has announced a contribution yet, although many of them have enormous stocks of foreign exchange reserves. These countries have sought instruments that would allow them to make a temporary contribution to the IMF’s resource pool, deferring permanent contributions or commitments until they see real progress on governance reforms at the IMF that would give them larger voting shares.
The IMF is therefore considering issuing bonds that would help emerging markets make contributions in a manner that these countries deem acceptable. This note provides some background information on such bonds and discusses the implications of the IMF having access to this new source of financing for its operations. Depending on how they are structured, these bonds could prove attractive to emerging markets by giving them a tool for diversifying the currency composition of their foreign exchange reserves. This could have some implications for the demand for U.S. treasuries, possibly pushing up U.S. interest rates modestly.
The article is much longer. Use the link to read it, if you desire.
