Wednesday, October 30, 2013

Ditch US Dollar

Current US debt crisis have highlighted the need to ditch US dollar as a reserve currency.

 The Commission of Experts of the President of the General Assembly on reforms of the international monetary and financial system also recommended that “A new Global Reserve System — what may be viewed as a greatly expanded SDR, with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations — could contribute to global stability, economic strength, and global equity.”

“Currently, poor countries are lending to the rich reserve countries at low interest rates. The dangers of a single - country reserve system have long been recognized, as the accumulation of debt undermines confidence and stability. But a two (or three) country reserve system, to which the world seems to be moving, 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.”

This is the right time to ditch US dollar and adopt the commission’s recommendations given in 2009.