Virtually everybody knows what a dollar is, but not as many know about the SDR. The International Monetary Fund’s (IMF) Special Drawing Rights is an international, monetary reserve system created specifically to address limitations of gold and standard fiat currencies such as the USD. In short, should these fail, central banks and their governments retain the ability to trade and plan with liquidity via another, exclusive instrument — the SDR.
An Artificial Currency
The SDR is not an actual currency, according to the IMF, but a “potential claim on the freely usable currencies of IMF members.” As the official unit of account for the group, and an instrument only available to member countries’ central banks, the IMF itself and “designated, official entities,” SDR are exclusive assets. The average individual cannot get their hands on SDR. Comprising a basket of major global currencies, the composition of the Special Drawing Rights is reviewed in five-year intervals. Currently the SDR utilizes USD, EUR, CNY, JPY, and GBP.
The system is said to enable liquidity in international finance when assets like gold or other fiat currencies fail to
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