IMF Head Proposes New World Currency

by Gold Alert

Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), proposed a new global currency that would challenge the reserve status of the U.S. dollar and guard against future financial instability.

The IMF head stated at a speech in Washington, D.C. that ”Global imbalances are back, with issues that worried us before the crisis – large and volatile capital flows, exchange rate pressures, rapidly growing excess reserves – on the front burner once again.  Left unresolved, these problems could even sow the seeds of the next crisis.”

“When we worry about the deficiencies of the international monetary system, we are mostly worrying about volatility.” There is “a sense that money sometimes flows around the globe in too-volatile a fashion and that countries need a more stable, more predictable external environment in order to prosper.”

Strauss-Kahn went on to say that he sees a larger role for the IMF’s Special Drawing Rights (SDRs), which is presently comprised of the dollar, sterling, euro and yen.  However, he noted that it would take a significant amount of international cooperation for that to be effective.

SDRs were originally implemented in 1969 in support of the Bretton Woods fixed exchange rate system. Once U.S. President Richard Nixon closed the gold window and effectively ended the fixed exchange rate system in 1971, the role of SDRs declined.  However, in 2009 at the London G20 meeting, policymakers from across the globe agreed to increase the SDRs to $250 billion.  This decision fueled speculation that their use could return in the years ahead.

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