This poses various economic problems, namely the impossibility of economic calculation under socialism, which Mises talked about in Human Action. Under this scenario, the question one must ask is: why did Niger “only” get $114 million while El Salvador received $389 million? Whether this was determined by a single economist or was a decision by an “expert committee,” we must consider how such an allocation could have been made in a way that was not completely arbitrary or simply based on guesswork.

Supranational organizations such as the IMF and the World Bank raise numerous questions about sovereignty, freedom, and liberty; however, the economics of these organizations also deserve attention. What happens when the IMF runs into a liquidity issue and finds that it is short on funds to lend to member countries?

Enter the SDR

For those unfamiliar with precisely what special drawing rights (SDR) are, a definition can be found on the IMF’s factsheet. The problem is that this definition is not very enlightening:

The SDR serves as the unit of account of the IMF and some other international organizations. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.

According to the IMF, the SDR is not a currency, but like a currency it can be created out of thin air and exchanged for the currencies of other countries. The exchange may be voluntary, but not always, because “if required, the IMF can also designate members to buy SDRs.”

Per Georgieva’s emergency statement:

And we are looking at other available options. Several low- and middle-income countries have asked the IMF to make an SDR allocation, as we did during the Global Financial Crisis, and we are exploring this option with our membership.

If the IMF does exhaust its $1 trillion lending capacity, it could simply issue more SDRs and allocate them among member nations and then instruct some nations to buy SDRs from others using their own currencies. A Financial Times article agrees that a new issuance of SDR is vital to helping poor countries, using an argument that can only be described as anticapitalist in nature:

Help must indeed be forthcoming. This is a moral duty and a practical necessity. The pandemic and its economic outcomes will only be defeated if they are defeated everywhere. But how? A large part of the answer is “with money”, as in rich countries. Worries about moral hazard are absurd.

What does this all mean for the average American? According to the same article, it probably means nothing, since:

Some will argue that a big new issue of SDRs would be inflationary. Yet, set against the monetary expansions now under way, even SDR 1tn is negligible.

In 2020, it does not matter if the economic advice comes from the head of the IMF, a prominent economist, or from a financial news article. The answer is always the same. Whatever the issue is, the economic panacea championed by anyone unfamiliar with Austrian economics is always creating more money. Whether it be a housing crisis, a debt crisis, or global pandemic, the only real question is “How much?” In 2021, when central bank balance sheets across the world are at unfathomable levels and interest rates are still zero bound, will the masses finally learn, or will they just demand more money?