You are currently browsing the Capital Comments weblog archives for the day 5. September 2009.
5. September 2009 by Dan Walkow, CFA, CMT.
Most people have never heard of the International Monetary Fund (IMF) never mind what Special Drawing Rights (SDRs) are. The IMF is like an international bank where various countries “own” or contribute funds in proportion to their GDP. Sort of.
SDRs are the “currency of the IMF”. There is renewed interest in the SDRs, particularly by the BRIC countries who want to become less reliant on the US dollar as a reserve currency.
At the G20 meeting this weekend there is a “bun-fight” on realigning the proportionate weightings of each country’s SDR allocation relative to their GDP.
As it stands today Europe is over-weighted and the BRICs are under-weighted. The politics are hot and heavy.
Why is this worth paying attention to? It impacts investment policy as it has a direct impact on investing in BRIC securities as well as protecting oneself against a continued devaluation of the USD.
Over time, if the BRICs continue to grow the SDRs must be realigned, but in the short term it is all politics.
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