Source: Zero Hedge

Jim O'Neill, who did not make any friends within the bear community earlier today,
has written an interesting paper on the IMF's Special Drawing Rights,
and whether this hypernational currency can ever become a reserve
currency as is, and/or with the CNY as a constituent member. While
O'Neill as usual focuses on the angle of the "next paradigm" BRICs, and
how they will increasingly dominate global economics, he does pose an
important question: with the dollar likely to suffer the side effects of
either hyperdeflation, hyperinflation, or hyperstagflation, will the
next reserve currency be a diluted melange of other flawed fiat
constructs (i.e., the SDR), or the currency of the one country, which
for all its flaws, still has the cleanest balance sheet backing its own
fiat construct. On the other hand, the question of whether this analysis
is moot to begin with, and the world will revert to the gold standard
as the ongoing crisis of confidence in all paper money flares up, is not
raised even once... We wonder (not really) what Jim O'Neill would have
to say on that particular issue.

Here are the main bullets:

• The issue of the ‘international reserve currency’ and the possible role of the IMF’s Special Drawing Rights (SDR) has moved from
  obscurity to the centre of discussions about the future.
• Given China’s importance in terms of its share of world trade, the CNY should now be part of the SDR. The case for including it can
  only become more obvious as this decade progresses.
• However, actually including the CNY as a constituent of the SDR is likely to remain a challenge without the CNY becoming more widely
  used internationally, including as a reserve asset.
• The case for including other BRIC currencies in the SDR, especially the RUB, is also likely to become stronger over the coming
  decade.
• Although the Dollar will probably not be as dominant in 2020 as it is today, it is far from clear that it needs to be replaced by the
  SDR—or by anything else—as the main reserve currency.
• For the SDR to be attractive to private users, it will need to include the CNY and possibly other BRIC currencies. However, this alone
  would not guarantee that the SDR would be more attractive to private
  investors.

The paper is a critical follow up to anyone who found Albert Edward's earlier analysis of collapsing global FX reserves relevant.

Full paper: