IMF caveat 2 – what would stop China from leaving?

Michael Hudson has some great talking points about the International Monetary Fund, its potential funding and staffing increases and related items.

He starts with looking at the massive U.S. deficit. He claims the global “dollar glut” helps finance American military expansionism.

Keeping international reserves in “dollars” means recycling their dollar inflows to buy U.S. Treasury bills – U.S. government debt issued largely to finance the military.

Hmm… Beijing and/or Moscow wouldn’t be at all upset about that now, would they?

Hudson points out that when sovreign wealth funds, whether from China or elsewhere, look at making major investments in things besides various aspects of the financial market, “national security” or other red flags get waved. (Sidebar: That ought to tell you just how important the “financial sector” actually is.)

So, if all this is the case, why wouldn’t China (and also, in all likelihood, Shanghai Cooperation Organization co-founder Russia) just up and leave?

Well, Hudson says it could just happen. He says for the first time in half a century (i.e., right after the founding), this is a real possibility.

The SCO could probably use what China wants, an electronic transfer currency, as the reserve currency, and maybe make the dollar and euro equal backup reserve currencies. With India having observer status, the threat is real.