Rickards: Treasury shorting the Dollar

[pmbug]

I read it once through and I'm not sure I grokked it yet:

... Some legislation authorized a $100 billion line of credit from the United States to the IMF. It suddenly occurred to me how this actually works. The IMF puts in the borrowing notice for the $100 billion and the Treasury sends the $100 billion to the IMF. They (the IMF) then use it to bail out Europe.

But here’s what happens, the Treasury sends the money and the SDR gives the Treasury a note because it’s a borrowing. So that’s very significant because for the first time in history the IMF would be leveraging its balance sheet. But the note they give the Treasury is not denominated in dollars, it’s denominated in SDR’s.

The SDR includes dollars, but it also includes other things such as Swiss francs, pounds sterling, euros, Japanese Yen and eventually the Yuan. Now when the note matures, the IMF pays you back in the dollar equivalent of the SDR at that time. In other words, they don’t give you $100 billion back. They take the SDR equivalent back and convert it into dollars at whatever the exchange rate is at the time.

What that means is that the Treasury is going short dollars. ...

http://kingworldnews.com/kingworldn...ards_-_The_US_Treasury_Shorts_the_Dollar.html

 

[swissaustrian]

The whole interview is now available as an audio:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/12/17_Jim_Rickards.html

 

[ancona]

Shouldn't we be a little bit scared??

 

[pmbug]

Scared? no. Prepared? Yes.

IMO.

 

[ancona]

Bug,
Isn't this kind of like a treasury circle jerk? The way it is written, it sounds like a back door loan, so that we don't appear to be directly bailing out someone else, when in fact, we should be getting our own damn house in order.

Additionally, every one of those dollars we do not actually have.

 

[mmerlinn]

It is a back door loan as I have stated elsewhere.

More importantly, if the Treasury is shorting the dollar, they think the dollar is going to tank and are betting that it will. What it boils down to is that the more fake money is created, the more the Treasury can short. That is like insider trading.

If they are shorting the dollar, betting on its demise, it should be a wake up call to everyone who does not have his head buried in the sand. They have the means to make it crash and woe unto any of us that ignore the handwriting on the wall.