Saturday, February 27, 2010

Head of IMF Proposes New Reserve Currency

Word of the future launch of a new international currency floats out every couple of months. Here's ABC's version based on comments from IMF head, Dominique Strauss-Kahn:
Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.

"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF's special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."
What's really going on here is a back-up plan TO KEEP a major role for the dollar. U.S. government officials are aware that the dollar's role as the international reserve currency is one bad news headline away from collapse.

The fear among U.S. government officials is that gold or another currency, the euro or, perhaps, China's yuan may begin to replace the dollar (Note this is long term thinking, it is clear that the euro is on the skids short-term). Instead of allowing this to occur, the U.S. puppet, the IMF, is ready with a back-up plan that would be a basket of currencies where the dollar will play a major role.

It would be a retreat, but U.S. government officials fear the alternative would be a total collapse of the dollar, if central banks around the world bail out of the dollar for another currency or gold. The new currency plan is an attempt to head off an dilute such an occurrence.

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