Breitbart.com had this interesting article about new UN money:
Maybe they will call it the ‘Niewe Zimbabwe Dollar’!
A UN panel of expert economists pressed Thursday for a new global currency reserve scheme to replace the volatile, dollar-based system and for coordinated steps by rich countries to stimulate their economies.
“A new Global Reserve System — what may be viewed as a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity,” the panel said.
As part of several recommendations to tackle the global financial crisis, the panel also noted recovery would require all developed countries, in the short term, to take “strong, coordinated and effective actions to stimulate their economies.”
And it stressed the need to “lay the basis for the long-run reforms that will be necessary if we are to have a more stable and more prosperous global economy and avoid future global crises.”
The commission, led by US economist Joseph Stiglitz, a frequent critic of globalization and unbridled free markets, is primarily aimed at finding solutions for developing countries.
On the monetary front, Stiglitz, the 2001 Nobel economics laureate, told a press conference here there was “a growing consensus that there are problems with the dollar reserve system.
He noted that such a system was “relatively volatile, deflationary, unstable and (had) inequity associated with it.”
“Developing countries are lending the United States trillions dollars at almost zero interest rates when they have huge needs themselves,” Stiglitz noted. “It’s indicative of the nature of the problem. It’s a net transfer, in a sense, to the United States, a form of foreign aid.”
It said a new Global Reserve “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.”
Stiglitz said his panel’s experts were currently trying “to lay out the conceptual framework of how this might be done.”
The issue of the world currency reserve is expected to be raised at the April 2 summit of the G20 club of developed and emerging economies.
Among other recommendations, the Stiglitz panel proposed western aid to help developing nations out of the crisis, better market regulation, a reform of central bank practices and of international financial institutions, as well as the creation of a new structure such as a United Nations economic council.
It specifically called for immediate, additional funding for developing countries “just to offset the imbalances and inequities created by the massive stimulus and bail-out measures introduced by advanced industrialized countries.”
It said the funds could come through the issuance of SDRs approved by the IMF board in 1997.
A panel of expert economists, is there any other kind?
I can’t believe Robert Stiglitz would sign his name to this crap. He must have gotten paid to do so.
I don’t like to think of myself as a doomer. I believe that reasonable, intelligent people can contrive innovative solutions to difficult situations and with discipline and hard work enable these solutions. Obviously, this is hopelessly romantic on my part. The leadership doesn’t want work and innovation, it wants easy!
Bring on the Parade of the Easy Ideas! Send in the Clowns!
The currency problems of today are rooted in the reality that all currencies are fiat – lent into existence. The Niewe Zimbabwe Dollar could not be anything other than a fiat currency … based on what? The number of parking tickets the UN staff accumulates per year?
In this case, the UN wants to use IMF’s Special Drawing Rights in order to launder US dollars, presume ably for the poor little countries out there like China who find it inconvenient to have to buy dollars in order to buy … petroleum? Why else would they need dollars?
Stiglitz’s remarks sound as if they were written by the Chinese Central Bank.
“Developing countries are lending the United States trillions dollars at almost zero interest rates when they have huge needs themselves,”
There isn’t anyone else who is lending vast sums of money to the United States @ zero interest, certainly not the Saudis, the Kuwaitis, the Japanese nor the Koreans. The reason the Chinese have done so is that this is a part of their strategy to ship US manufacturing jobs to China. As far as his claim that a new currency could be fundamentally non- inflationary:
It said a new Global Reserve “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.”
Almost every part of that remark is either an error, untrue or misleading. The idea suggested is that inflation is a simple administrative matter, that putting the printing press in the basement of the UN building will keep inflation in check. Nonsense! It is banks and financial institutions, though margin, fractional reserve lending and currency exchange which increase available money – which is inflation. The financial system(s) can create money with little or no reserves at all … just look at what has been happening world- wide for the past thirty years!
How is the UN proposing to ‘regulate’ – oversee – all the actions of all the banks and the shadow banking system?
The managing bureaucracy would be immense, implementing would be a nightmare. The ‘asymmetric adjustment’ would appear to favor developing countries who would presumably have these Niewe Zimbabwe Dollars drizzled like manna upon them. This is false, the developing countries would have one more currency hurdle, only China and the energy states who could avoid the dollar seigniorage tax on their product would benefit.
Finally, who would act to stabilize ‘fluctuations’? Who would be the lender of last resort for the Niewe Zimbabwe Dollar? The US taxpayers via the Federal Reserve, that’s who.
Why do people in the UN think the United States citizens would sign off on something this counterproductive? Obviously, it will be done!
Rather than trying to find easy solutions – that are also stupid solutions – the UN and G20 need to go back to fundamentals. If a managed exchange rate is important – and it is – the first step is to nudge the various countries to adopt hard currencies. They can do this alongside their current fiat currencies then, when the time is right (desperate) devalue the fiat currencies into well- deserved oblivion. Hard currencies are deflationary, but the alternative to that is not more and more inflation but the desired stability and predictability that is inherent to hard currencies. Countries could then control asymmetries by exchanging reserves as they did in the ‘Good Old Days’.
Also, the US needs to get rid of the currency and interest rate swaps by taxing them out of existence. The swaps are the instruments of the ‘Cowboy financiers’; the ‘hot money’ unbalances the system.
Doing so would also mean acknowledging reality and abandoning the flawed ‘industrial growth’ paradigm and the world- without- borders supply chains. The overall outcome would be to create more Tuscanys world- wide and fewer Manchesters. This would seem to be a no- brainer, but I am not an economist.
Since this is the outcome that circumstance will impose on the world’s economies anyway, it would be the most realistic starting point.