UN Panel To Call For Global Currency Reserve, Ousting US Dlr Article
online.wsj.com
NEW YORK (Dow Jones)--A panel of independent experts convened by the United Nations will recommend this week the creation of a new global unit to replace the U.S. dollar as the world reserve currency.
The report comes ahead of the Group of 20 summit of industrial and developing nations in London next week, and as emerging market powerhouses including China and Russia have expressed increasing frustration over their dependence on the U.S. currency.
The U.S. dollar, however, has yet to weaken versus its most widely traded rivals on these reports.
Tuesday afternoon in New York, the euro was down at $1.3514 from $1.3645 late Monday, while the dollar was up at Y98.20 from Y96.91.
The dollar has been the world's reserve currency since the end of World War II. Major commodities, namely oil, are priced in the greenback, and global companies do business in dollars, leading wealthy central banks to prefer to hold dollars to protect against crisis. But, as the U.S. manages the effects of the global financial meltdown by expanding its monetary supply and weakening the value of dollar-denominated assets, some of the U.S.'s largest creditors have grown unhappy as the value of their reserves decline.
The U.N. panel likely will point out that the problems stemming from the dollar's dominance have been long coming.
In a list of recommendations published ahead of the final report, the U.N. commission explains that the dollar's dominant status has led to a system of global imbalances.
They say the answer is "a new global reserve system." This would be "a greatly expanded" special drawing rights, or an international currency created by the International Monetary Fund.
"The dangers of a single-country reserve system have long been recognized, as the accumulation of debt undermines confidence and stability," according to the draft document made public March 19. It adds that even a two- or three-country reserve system that the world seems to be heading to may be equally unstable.
"The new Global Reserve System is feasible, non-inflationary, and could be easily implemented, including in ways which mitigate the difficulties caused by asymmetric adjustment between surplus and deficit countries."
A more detailed report is expected to be released Thursday, March 26, on the second day of a three-day conference entitled "Interactive thematic dialogue on the world financial and economic crisis and its impact on development."
The expert commission, which is independent of the U.N., is chaired by Joseph Stiglitz, university professor at Columbia University in New York and Nobel Prize winner in Economic Sciences. Other members include Youssef Boutros-Ghali, Egypt's minister of finance and chair of the International Monetary and Financial Committee of the Board of Governors of the IMF; and Robert Johnson, former chief economist of the U.S. Senate Banking Committee and former managing director at Soros Fund Management. Members from China and Russia don't currently hold government seats. Andrei Bougrov, formerly the principal resident representative of Russia for the International Bank for Reconstruction and Development, is managing director and member of the board of directors of Interros Co. Yu Yongding was previously a member of the monetary policy committee at the People's Bank of China and now serves as director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences.
Reuters first reported on the U.N. report last week after commission member Avinash Persaud, chairman of Intelligence Capital Ltd. in London and former head of global research at State Street Corp. (STT), spoke about it at a Reuters Funds Summit in Luxembourg. |
