UN Strongly Recommends SDRs Over Dollar as World Reserve Currency
Yesterday, the United Nations released a new report suggesting it’s time to stop using the dollar as the world’s single major reserve currency, noting it has shown “not to be a stable store of value,” and recommending its replacement with the IMF’s currency basket, called special drawing rights (SDRs).
The report came out of the UN Economic and Social Council and, according to Reuters, here’s what they said:
“‘The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency,’ the U.N. World Economic and Social Survey 2010 said. The report says that developing countries have been hit by the U.S. dollar’s loss of value in recent years.
“‘Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s,’ it said.
“The report supports replacing the dollar with the International Monetary Fund’s special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies. ‘A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency,’ the U.N. report said.”
The UN now joins several vocal critics and nations, especially Russia and China, who have been expressing a strong desire for reserve currency options other than the dollar. Who can blame them? Since the inception of the Federal Reserve the dollar has lost well over 90 percent of its value.
When it comes to stable stores of value, particularly in a time of extreme money printing all over the world, it would make sense to see gold more actively discussed in this type of report. Central banks have certainly noticed gold is beholden to no nation’s printing press and lately have been doing some “peacocking” of their yellow metal assets. Saudi Arabia, for one, recently “restated” its gold reserves… so that they more than doubled in value overnight.
You can read more about the story in Reuters coverage of a UN report on scrapping the dollar as the world’s sole reserve currency.