In other words, any party receiving SDRs can convert them for currencies of other IMF designated countries. This means those designated countries that buy the SDRs are in fact financing whatever funding is being conducted by the IMF. Whether this becomes inflationary or not depends on how the governments of the designated countries finance the SDR purchases. They can squeeze their own taxpayers or they can print more of their own currency to buy the SDRs.
It's a means by which countries like the PIIGS could be bailed out by financially strong countries with the sleepy public not knowing what hit them. Step one is this proposed new enhanced financing role for the IMF will be conducted at the government central bank level, but can one really believe that it will stop there? How long before some pink paper is designed to represent a physical SDR, and in the same fashion the euro absorbed currencies like the German mark and the French franc, the SDR will absorb the dollar and the euro?
But aside from the SDR eventually being forced upon us all, Stiglitz clearly wants to make the SDR the money of central bankers, now. Stiglitz, Geithner, Bernanke and the rest of crew know the days are limited for the dollar as the reserve currency. They are deathly afraid that either gold or the Chinese yuan will emerge as the new global reserve currency. At such point, they will lose total control.
The new push to increase the role of the SDR is an attempt to prempt a move towards gold or yuan options. It is also designed as a method to coordinate global inflation. Should some country actually run a fiscally conservative government, bang, that country will be designated by the IMF as a buyer of SDRs. The country will more than likely pay for the SDRs it buys by printing up more of its own currency. Viola, global coordinated inflation, the dream of every economic technocrat that is afraid somewhere, for some reason, a central banker may not buy into the call for Keynesian government spending, and may actually attempt to run a responsible, non-inflationary policy. Well, global coordinated inflation, i.e. an expanded role for the SDR, will take care of that!