It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
"Dominique Strauss-Kahn, managing director of the International Monetary Fund, has called for a new world currency that would challenge the dominance of the dollar and protect against future financial instability..... He suggested adding emerging market countries' currencies, such as the yuan, to a basket of currencies that the IMF administers could add stability to the global system....Strauss-Kahn saw a greater role for the IMF's Special Drawing Rights, (SDRs) which is currently composed of the dollar, sterling, euro and yen, over time but said it will take a great deal of international cooperation to make that work." ("International Monetary Fund director Dominique Strauss-Kahn calls for new world currency", UK Telegraph)
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as theunit of account of the IMF and some other international organizations.
The yuan needs to be more widely used and more freely convertible to be included in the special drawing rights basket, John Lipsky, acting managing director of the International Monetary Fund, said Thursday.
The yuan hasn't moved very much over the past few years, and shifting toward a more market-based exchange rate is important to economic rebalancing in China, Nigel Chalk, IMF mission chief for China, said at the same briefing on the release of the fund's latest assessment of the Chinese economy.
Chalk also said he would like China's central bank to rely more on interest rates and the exchange rate in using its monetary policy tools, and rely less on reserve requirement ratios for banks and lending controls.
Lipsky said China's economy continues to be a "bright spot" for global growth but its financial system faces near-term challenges from rapid credit expansion and increased off-balance-sheet exposure. China's economy is expected to grow 9.5% this year and next, while inflation in China is expected to be around 4% by the end of this year, Lipsky said. However, China's financial system faces risks associated with a lending boom that has resulted in a property bubble, Lipsky said, citing credit expansion and off-book exposures as near-term challenges facing China.
The Swiss investment bank UBS published a survey of 80 central bank reserve managers last week. More than half predicted the US dollar would be replaced as the world’s reserve by a “portfolio of currencies” sometime in the next 25 years.
The International Monetary Fund could step in with regards to currency baskets. It’s “currency’, known as Special Drawing Rights, or just plain ole SDRs, are based on a basket of currencies, mainly the dollar, euro and the Japanese yen. SDRs have enjoyed renewed attention lately in the context of debates on international monetary reform. It could be used as a composite reserve asset; tradable SDR denominated securities issued by the IMF or an investment vehicle backed by IMF member nations; or SDRs could be used as unit of account to price internationally traded assets like government bonds and commodities, to peg currencies like the yuan (currently pegged to the dollar at a deep discount), or to report balance of payments data. All three are strong possibilities.
SDRs were created in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF and SDRs were born. However, in 1971 under President Richard Nixon, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. The dollar became the gold standard in which every tradeable good is priced. The new gold alchemists are members of the Federal Reserve, owners of the priting press that creates dollars from nothing.
China to boost IMF funding through SDR bond 05.10.09, 03:37 PM EDT pic
LONDON, May 10 (Reuters) - China will invest in a bond denominated in Special Drawing Rights (SDRs) as part of efforts to increase the resources of the International Monetary Fund (IMF), a senior central bank official said on Sunday.