New UN Report Recommends Ditching The Dollar As Global Reserve Currency

http://www.businessinsider.com/un-report-death-of-the-dollar-as-res...

The United Nations has slammed the U.S. dollar in a new report called Retooling Global Development. They're recommending an end to the
dollar's role as dominant reserve currency, and pushing for a new
global reserve regime based on a supranational currency made up of a
basket of developed nation currencies.

While we've heard this kind of recommendation before, the UN is re-energizing its push. For example, they blame the financial crisis squarely on the dollar system:

UN:

The 2008-2009 global economic crisis demonstrates that the accumulation of deficits by the reserve-currency country, sustained by other countries because of their national policy
objectives, is not self-correcting and leads to a crisis of global
proportions whose costs are incurred by many innocent parties.

Thing is, they also admit that the dollar remains immensely popular as a reserve asset, despite its problems and track record. They even predict that it could become more entrenched as a reserve asset going forward:

To reverse global imbalances, developing countries would need to decrease, not increase, self-insurance [accumulating dollar reserves]. Yet, the success of
self-insurance as protection during the crisis suggests that it will
probably become even more popular going forward.
It is
unlikely that countries will become less dependent on self-insurance
without a real decline in the vulnerabilities associated with volatile
international capital flows.

Thus there's only way to end the dollar's reign -- using global regulatory force:

Before the crisis, there had already been a move towards a multi-currency reserve system, which became more pronounced with the introduction of the euro. At this point in time, it
is impossible to predict how the situation will evolve, absent an explicit political process.

They want a new reserve asset managed by global institutions such as the IMF.

Reducing dependence on the dollar through increased use of a created currency made up of a basket of currencies such as the SDR could be a significant step towards greater
stability in the world economy. Greater SDR use would constitute an
additional tool for creating the international liquidity needed for the
conduct of a global counter-cyclical policy, for which there is already
a precedent, as reflected in the April 2009 decision of the G-20.

It's obviously a complex issue that deserves study, but we'll say this -- while it's easy to point out all of the flaws in the U.S. dollar, the world needs to make sure that whatever replacement they
devise isn't even worse.

The regulatory mechanism for a new global currency would be inordinately complex and would represent a substantial increase in power for supranational institutions such as the UN, since they would
likely control many facets of this new currency.

Proposals to shift to the allocation of SDRs based on need or performance, instead of on the economic significance that determines voting shares in IMF, are of great
interest. Ocampo (2009) proposes giving larger allocations to countries
with the highest demand for reserves and allowing IMF to use unutilized
SDRs to buy bonds from devel- oping countries. Ocampo proposes generous
overdraft or “drawing” facilities which could be used on an
unconditional basis by all member countries and recommends that IMF be
authorized to suspend the right of countries with large surpluses or
excessive reserves to receive SDR allocations.

We're not so sure the world would be much more confident in a basket of currencies managed by the UN or IMF, even in comparison America's questionable dollar management. Any new reserve asset would be
completely untested, and likely distorting of global markets in its own
ways over the long-term. Thus it could easily stoke a new crisis down
the road. Yet it's obviously a complex issue, and worth studying since
the dollar is clearly problematic.

What's odd though is that gold isn't even mentioned in the report as part of any alternative to the dollar. It seems gold isn't even being considered.

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