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Home » Archives » 19. October 2009

Predictions of John Mangun

October 19, 2009
The peso and other predictions
Written by John Mangun / Outside the Box   
Wednesday, 09 September 2009 22:24

Actually the title of this column should perhaps be “What’s really behind the numbers.” Because it is only by looking at what makes up the numbers that you can truly understand what is going on. For example:

 

Yesterday, the business headlines from the other dailies told us that the Philippine international foreign reserves hit a record high of $41 billion. Wow, isn’t that great? Except for one thing. As usual, only BusinessMirror told the true and full story. Reserves rose to this level because of the takedown of $1 billion worth of SDR or special drawing rights.

 

SDR are an interesting monetary instrument. It is sort of an interest-free loan given to a country by the International Monetary Fund (IMF). But it is not a loan. SDR are more of an accounting entry that is put on the books of a central bank. The purpose of the SDR is to allow a country to pay off foreign obligations such as for trade purposes using the SDR instead of hard currency or gold. The SDR represent an amount of money that the Philippines, for example, could draw down from the International Monetary Fund (IMF) to pay its foreign bills without having to actually put cash on the table to settle the transaction. The IMF might or could loan money to a country to settle the SDR obligation. Call it sort of a credit line that you never have to use.

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