The world is looking to reduce its reliance on the US. A global reserve bank with a truly international currency is the solution
Nick Dearden
guardian.co.uk, Wednesday 2 September 2009 11.30 BST
Emerging states such as China, Russia, and Brazil have finally had enough of the rule of the dollar. When Alistair Darling meets his counterparts at the G20 finance ministers' meeting this weekend, he should join them and right this "exorbitant privilege" that allows US overconsumption to be subsidised by the rest of the world.
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Last week Stiglitz told Americans that it was not merely that "there is something a little unseemly about poor countries lending the United States trillions of dollars, now at an interest rate of close to zero" but it also damaged the US because "we are exporting T-bills rather than automobiles, and exporting T-bills doesn't create jobs."
Reformers are not asking for the dollar to be replaced by an alternative national currency. That would simply tie the global reserve to the domestic politics of a different country. But they do believe the IMF's own "currency" known as special drawing rights (SDRs) could show the way to a better solution.
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But this doesn't mean the IMF's action has nothing useful to offer. A new institution – a global reserve bank – could be established that would regularly issue an international currency like the SDR to those who need it most and at times (such as recession) when it is needed most.
The global reserve currency would no longer be tied to the volatile exchange rate of a national economy, making it more stable, and poor countries would not have to spend precious funds insuring their economies against collapse. And, if tied to a new global framework, such a mechanism could ensure that debtor and creditor countries share responsibility for returning the economy to equilibrium by discouraging large deficits and excessive surpluses.
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http://www.guardian.co.uk/commentisfree/2009/sep/02/dollar-world-reserve-curreny
Pick your poison IMF or FED?