The New SDR Bond - Boom or Bust?

Larry White, LoneStarWhiteHouse, recently released his latest comments regarding the new SDR bond. Mr. White communicates regularly with some of the true insiders that posses the deepest knowledge of what is going on within the IMF and other components of the global banking cabal. The new SDR was suppose to be issued in front of the G20 meeting scheduled for September 4, however, it doesn't appear the first issuance of bonds are going to meet this objective - it could happen, but unlikely at this late date.

As more information hits the wire regarding the SDR bond there is more speculation about it's role, the yield and the size of the first issuance. According to CNBC this is the latest view:

* World Bank set to issue $700 mln in IMF SDR bonds in China

* Traders unexcited by prospect of coupon rate below 1 pct

* Major state banks seen ensuring auction is successful

* Issue will be first SDR bond created since 1981

This new challenge to the dollar has the potential to permanently change the landscape of the bond market. The banks within China will be adding these bonds to their balance sheets and we may see a couple of larger banks outside of China support this first issuance. I would find it surprising if the banks within the SCO, EEU and BRICS nations did not support this new bond issuance. This is to say nothing of the nations along the One Belt, One Road project. When you have a pool of influence that reaches as many nations as China is working with, it becomes easy to see how a $700 million bond issuance will catch a bid and could potentially be bid higher than original issuance offering.

As Dr. Coates describes it in Larry White's latest article:

"I fully agree that short of a real crisis, developing and expanding the role and use of the SDR will be a gradual step by step process. The development of private SDRs, for example, requires no decisions by the IMF at all if the existing currency basket is used. This was the topic of my "Asian Infrastructure Investment Bank and the SDR” article." ---- Warren Coats

The fact this bond can be freely issued, through China, in my opinion, is the single most significant aspect of this new bond. China's foreign reserves total approximately $3.2 Trillion What to do, with a portion, of all that capital they have amassed over the past several years?

Actual	Previous	Highest	Lowest	Dates	Unit	Frequency
3200000.00	3205162.00	3993212.72	2262.00	1980 - 2016	USD Million	Monthly	Current Prices, NSA

In China, Foreign Exchange Reserves are the foreign assets held or controlled by the country central bank. The reserves are made of gold or a specific currency. They can also be special drawing rights and marketable securities denominated in foreign currencies like treasury bills, government bonds, corporate bonds and equities and foreign currency loans. This page provides - China Foreign Exchange Reserves - actual values, historical data, forecast, chart, statistics, economic calendar and news. China Foreign Exchange Reserves - actual data, historical chart and calendar of releases - was last updated on August of 2016.

The significants of China being able to freely issue this new bond can not be overstated. Will China begin converting a portion of their foreign holdings, like U.S. Treasuries, into the M-SDR bond? How much and how often is the real question. It is no secret the Chinese understand the United States is flat out bankrupt and with the advent of the One Belt, One Road project, the SCO, EEU and BRICS, China's manufacturing focus is currently shifting from the Western "developed" world to the future "emerging markets" where all the economic growth will be centered over the coming decades. The "developed world" is developed and has squandered their privilege through corruption and greed.

The fact that China can set the interest rate on these bonds is also very significant. What if the interest rate is set at the same rate as the U.S. Treasuries? What if it is slightly higher or even slightly lower? (I am not saying this is going to happen) Which economy is viewed as the more stable will be the driving force if either of these scenarios comes into play. Would you invest in a nation that is currently running above 6% annual growth rate or one that is generating less than 2% growth? Which nation would you see as being more stable?

We find another of Dr. Coates comments to support my thoughts in Mr. Whites article:

- interest rate of only 1% and banks that fool with this may lose money on it - not exactly a motivator for banks to get involved [but we don’t know the rate China will set or that will result from the markets biding]-WC

We pointed out, in an article published earlier this month, China will ensure the success of this first issuance of bonds. China will also ensure the success of the second, third and fourth issuance and support as many issuances' as necessary for the market to catch up. The new M-SDR bond, in my opinion, is going to be a success. The only question that I have at this point is - will gold be introduced to this bond at some point down the road? China has massive gold holdings that are much larger than the official gold holdings reported to the IMF. We know China mines approximately 450 tons of gold internally on an annual basis. This gold does not leave the country and is not counted as part of their official gold holdings. It is, however, owned by China. If we just add 450 tons a year for the past 3 years we can easily add an additional 1350 tons to China's gold holdings. This is an extremely conservative estimate. This would place China in third position in global gold holdings, just behind Germany. What to do with all that gold? Make more jewelry, trinkets or coins for sale to the public?

As more glimpses of the future begin to emerge we will certainly keep an eye on any developments and report back to you as quickly as possible. You can read Larry Whites latest commentary, in full, by clicking here.