SDR – China – Dollar


COMMENT: You are wrong. The SDR will destroy the dollar as of October 1st when they include China. You will see. China will sell all its US Treasurys and buy SDRs.

REPLY: Your very statement is totally absurd. The SDR is calculated simply by a basket of currencies including the dollar, yen, pound, and euro (see IMF calculation). So please explain to me, when the SDR is just a basket of currencies that have all declined against the dollar, just how the SDR could destroy the dollar when it is its largest component?

The SDR against the dollar has declined as has the euro, pound, and yen for starters. Now let’s look at the Chinese yuan. This too has declined against the dollar. So I fail to see how the SDR will destroy the dollar without a magical recovery in Japan, China, Britain, and Brussels. The dollar has been rising against the yuan since 2013. So why would you sell all treasury bonds when they have made a fortune on the currency and swap into something that depreciates?