In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.
It added that the present system, under which the dollar acts as the world’s reserve currency , should be subject to a wholesale reconsideration.
Although a number of countries, including China and Russia, have suggested replacing the dollar as the world’s reserve currency, the UNCTAD report is the first time a major multinational institution has posited such a suggestion.
In essence, the report calls for a new Bretton Woods-style system of managed international exchange rates, meaning central banks would be forced to intervene and either support or push down their currencies depending on how the rest of the world economy is behaving.
The proposals would also imply that surplus nations such as China and Germany should stimulate their economies further in order to cut their own imbalances, rather than, as in the present system, deficit nations such as the UK and US having to take the main burden of readjustment.
“Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability,” said Detlef Kotte, one of the report’s authors. “But you will also need a system of managed exchange rates. Countries should keep real exchange rates [adjusted for inflation] stable. Central banks would have to intervene and if not they would have to be told to do so by a multilateral institution such as the International Monetary Fund.”
The proposals, included in UNCTAD’s annual Trade and Development Report , amount to the most radical suggestions for redesigning the global monetary system.
Although many economists have pointed out that the economic crisis owed more to the malfunctioning of the post-Bretton Woods system, until now no major institution, including the G20, has come up with an alternative.
(Source: Telegraph UK)
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6 Responses
Well too stikin bad on the UN. We are the USA and NOT the UN. The problem is that Barack Hussein Obama is so messed up in his utter disdain for America, he is liable to go along with this trash.
It is hardly a new idea. It isn’t clear if it is in the United States long term interests to have the dollar functioning as a “world currency” (as opposed to an artificial currency based on a basket of major currencies, a single currency, or gold).
Especially if you oppose giving the government (currently led by Mr. Obama) the power to print currency in an unlimited manner to pay for social and other programs, having the dollar stop being a “reserve” currency for other countries would be a good idea.
#1 – Mark
I thought you would favor having the dollar give up being the reserve currency in order to “starve the beast”. If we switched back to the gold standard, or even a synthethic gold standard, the government would be unable to print money without causing inflation. It is LIBERALS who like the status quo.
#1, I concur.
It’s bad and it just keep getting worse.
I propose the food stamp in place of the dollar.
#5– they are talking about how countries settle balances (how much China owes the US) — the alternative would be to gold or create something similar electronically — no one is talking about the currency that real people go shopping with