Rocky Vega

With the rather ho-hum title, “Reserve Accumulation and International Monetary Stability,” one would hardly expect the dry-sounding April 13th IMF paper to essentially come to the conclusion that the final long-term idea to “mitigate demand and diversify supply of reserves for IMS stability” is to institute a global currency. Where’d that come from? A recent article mines the few months-old IMF paper… to understand how it could be interpreted as the IMF’s blueprint for a global currency.

From the Financial Times Alphaville:

“…in the eyes of the IMF at least, the best way to ensure the stability of the international monetary system (post crisis) is actually by launching a global currency. And that, the IMF says, is largely because sovereigns — as they stand — cannot be trusted to redistribute surplus reserves, or battle their deficits, themselves.

“The ongoing buildup of such imbalances, meanwhile, only makes the system increasingly vulnerable to shocks. It’s also a process that’s ultimately unsustainable for all, says the IMF.”

And, from the IMF report:

“From SDR [Special Drawing Rights] to bancor. A limitation of the SDR as discussed previously is that it is not a currency. Both the SDR and SDR-denominated instruments need to be converted eventually to a national currency for most payments or interventions in foreign exchange markets, which adds to cumbersome use in transactions.

“And though an SDR-based system would move away from a dominant national currency, the SDR’s value remains heavily linked to the conditions and performance of the major component countries. A more ambitious reform option would be to build on the previous ideas and develop, over time, a global currency. Called, for example, bancor in honor of Keynes, such a currency could be used as a medium of exchange — an ‘outside money’ in contrast to the SDR which remains an ‘inside money’.”

Interestingly, “in honor of Keynes” isn’t necessarily a good time… or a worthwhile honor. Yet, there it is, splayed out for all to see… the IMF busily at work on a global currency.

You can read more details in Financial Times coverage of the IMF blueprint for a global currency.


Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

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