Changes in the IMF issuance process may already be in the works These can include special allocations to poorer countries. Right now, the allocations are in proportion to your IMF capital account, which means richer countries like the US get more than poorer countries. It is also possible for the IMF to issue SDRs to non-member entities such as the United Nations, to be used for climate change programs. After decades of sleeping on the sidelines, it looks like the SDR is ready to wake up and assume a role as a new major reserve currency controlled not by the US but by the IMF executive committee, which includes China as a powerful member. This process will take time, but it has now begun in ways that are different from prior SDR allocations. At a minimum, this expanded global money supply has some inflationary potential. Beyond that, the SDR may finally be ready to emerge as a rival to the US dollar as the reserve currency of choice for China, Russia, and the developing world. Meanwhile... Think Congress is done with multitrillion-dollar deficits? Think again One might think that with the passage of the new US$1.9 trillion deficit spending package, the Democrats in control of Congress would be done spending for a while. Guess again. With the ink not yet dry on the new spending, congressional leaders are already planning a new multitrillion-dollar deficit spending package to be passed later this year, probably by August. The new proposal is reported in this article. The details are still being debated, but some suggestions include a US$4 trillion spending package, paid for with US$2 trillion of tax increases and US$2 trillion of new deficits financed with borrowings. Once again, this new deficit spending is being promoted as COVID relief, but it has almost nothing to do with COVID in the public health sense. It’s just another giant step in the direction of an expanded welfare state. The only sustainable way out of the COVID recession is real growth History shows that programs of this type incur some resistance in the beginning. But once they are in place, and people start to get their cheques and tax credits, the program becomes politically impossible to end. Democrats know this. They also know they may lose the Congress in the 2022 mid-term elections. So, they are moving at warp speed to get these programs in place while they still control Washington. Biden has said that we need these spending packages ‘to grow the economy’. Actually, these bills slow the economy because the added debt causes Americans to save more and spend less in anticipation of higher taxes down the road. The only sustainable way out of the COVID recession is real growth, which comes from getting people back to work and reinvesting corporate profits. These bills actually keep people from looking for jobs because the handouts are often more than people could be making at work. Slower growth, more debt, and more handouts...indefinitely? Higher taxes needed to pay for the handouts also slow the creation of jobs because businesses have less money to invest with or hire workers. Most Americans agreed with the COVID relief packages that passed in 2020 because people and businesses were in distress and immediate help was needed to prevent a much worse economic calamity. Now, business is reopening and activity is picking up. There is less need for entitlement spending and more need for reduced taxes and regulation to help economic growth become self-sustaining. These trillion-dollar deficit spending packages do the opposite. Slower growth, more debt, and more handouts will be with us indefinitely if Congress continues down this deficit spending path. All the best, Jim Rickards,
Strategist, The Daily Reckoning Australia PS: This content was originally published by Jim Rickards’ Strategic Intelligence Australia, a financial advisory newsletter designed to help you protect your wealth and potentially profit from unseen world events. Learn more here. | 
