The G-20's Funny Money

If the G-20 leaders meeting in London this week have one goal, it is to find a way to reflate the global economy with the least political cost. As bad luck would have it, the International Monetary Fund is standing by to help.

A hint of what's in store came from Japanese Prime Minister Taro Aso earlier this week when he said that he will propose an increase in "special drawing rights," or SDRs, at the IMF. If the term "SDR" sounds vaguely familiar, perhaps that's because it was the subject of a short-lived proposal last week from the head of the People's Bank of China to create a new global reserve currency that could replace the U.S. dollar.

But Mr. Aso's reference to SDRs is something altogether different.

He is proposing a massive expansion in foreign aid, which we will explain below. What is important to understand is that the plan means hundreds of billions of dollars in handouts going to emerging market countries with no strings attached: All governments qualify, including those that lock political dissidents in dungeons and steal from their own people. Treasury is widely believed to support the SDR expansion, despite the fact that it will increase, yet again, costs for American taxpayers and the debt burden of future generations and will reward dictators the world over... [snip]

If Americans decide they want to give more to the neediest, there are honest ways to do it. But to simply blanket the world with conjured dollars and ask already-stretched American taxpayers to pay for it is bad economic policy and even worse governance...

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