| UN Says New Currency Is Needed to Fix Broken ‘Confidence Game’ By Jonathan Tirone Sept. 7 (Bloomberg) -- The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said. UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report. China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability. “There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, said in an interview from Geneva. “An initiative equivalent to Bretton Woods or the European Monetary System is needed.” The 1944 Bretton Woods agreement created the modern global economic system and institutions including the IMF and World Bank. Enhanced SDRs While it would be desirable to strengthen SDRs, a unit of account based on a basket of currencies, it wouldn’t be enough to aid emerging markets most in need of liquidity, said Flassbeck, a former German deputy finance minister who worked in 1997-1998 with then U.S. Deputy Treasury Secretary Lawrence Summers to contain the Asian financial crisis. Emerging-market countries are underrepresented at the IMF, hindering the effectiveness of enhanced SDR allocations, the UN said. An organization should be created to manage real exchange rates between countries measured by purchasing power and adjusted to inflation differentials and development levels, it said. “The most important lesson of the global crisis is that financial markets don’t get prices right,” Flassbeck said. “Governments are being tempted by the resulting confidence game catering to financial-market participants who have shown they’re inept at assessing risk.” The 45-year-old UN group, run by former World Trade Organization chief Supachai Panitchpakdi, “promotes integration of developing countries in the world economy,” according to its Web site. Emerging-market nations should consider restricting capital mobility until a new system is in place, the group said. The world body began issuing warnings in 2006 about financial imbalances leading to a global recession. The UN Trade and Development report is being held for release via print media until 6 p.m. London time. To contact the reporters on this story: Jonathan Tirone in Vienna atjtirone@bloomberg.net Last Updated: September 7, 2009 09:52 EDT Calls For Bank Of The World, New Global Currency
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Steve Watson | |||||||||
The United Nations has called for the establishment of a new global reserve currency to be overseen by a bank of the world in an effort to reduce the role of the Dollar in international trade.
Details of the proposal were outlined in a report from the UN Conference on Trade and Development. The report also calls for the new global reserve bank to monitor and manage the national exchange rates of member states.
“There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, told Bloomberg News.
“An initiative equivalent to Bretton Woods or the European Monetary System is needed.” said Flassbeck.
He also added that while the UN also backed strengthening Special Drawing Rights (SDRs), a synthetic paper currency issued by the International Monetary Fund that was dormant for half a century until earlier this year, that would not be enough to "protect emerging markets".
This latest call for a new reserve currency from the UN echoes previous efforts by the global body to initiate talks on replacing the Dollar.
Meanwhile, an influential Chinese policy maker has slammed the US Federal Reserve's policy of printing money to buy Treasury debt, declaring that it threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy.
Earlier in the year, China expressed support for a Russian proposal for the creation of a new supra-national global currency as an alternative to the Dollar as the world reserve currency.
Other heavyweight elites such as French President Nicolas Sarkozy, German Chancellor Angela Merkel, British Prime Minister Gordon Brown, UK Business Secretary and top Bilderberg member Peter Mandelson and EU heads such as Joaquin Almunia, to name but a few, have called for a new economic world order consisting of vastly increased overarching centralization.
The creation of a de facto world currency to supplant the Dollar would likely lead to a complete collapse of the greenback, of which trillions are held in in foreign exchange reserves by many foreign countries.
As we have repeatedly warned, the introduction of a new global currency system is a key cornerstone in the move towards global government, centralized control and more power being concentrated into fewer hands.
Furthermore, a global central bank will establish a de facto financial dictatorship which will wield power over the economies of every country on the planet with no accountability whatsoever.
Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing". "We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como. "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said. China's reserves are more than – $2 trillion, the world's largest. "Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added. The comments suggest that China has become the driving force in the gold market and can be counted on to Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise. "Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down." Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets. "This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity." Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery. China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult". Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China. "The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis." Yet the consequences are not symmetric. "He who goes borrowing, goes sorrowing," said Mr Cheng. It was a quote from US founding father Benjamin Franklin.China alarmed by US money printing
The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.
buy whenever there is a price dip, putting a floor under any correction.
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