United Nations conference calls for new global currency

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United Nations conference calls for new global currency
Published on 09-08-2009

Source: Raw Story

The United Nations Conference on Trade and Development said in a report published Monday that the U.S. dollar should be replaced as the world’s standard reserve currency, giving rise to a new global currency managed by an as-yet undetermined financial regulatory organization.

Heiner Flassbeck, director of the conference, told Bloomberg News that changes needed in the world’s financial systems rival the scope of the Bretton Woods or European Monetary System agreements.

The Bretton Woods agreement established in 1944 the International Monetary Fund and World Bank, following allied victory in World War II.

“[The] dominance of the dollar as the main means of international payments [has] played an important role in the build-up of the global imbalances in the run-up to the financial crisis,” the report says. “Another disadvantage of the current international reserve system is that it imposes a greater adjustment burden on deficit countries (except if it is a country issuing a reserve currency) than on surplus countries.”

The UN adds: “Such a multilateral system would tackle the problem of destabilizing capital flows at its source. It would remove a major incentive for speculation and ensure that monetary factors do not stand in the way of achieving a level playing field for international trade. It would also get rid of debt traps and counterproductive conditionality. The last point is perhaps the most important one: countries facing strong depreciation pressure would automatically receive the required assistance once a sustainable level of the exchange rate had been reached in the form of swap agreements or direct intervention by the counterparty.”

The move should not be surprising to observers of global economics, as a U.N. panel of currency experts came to the same conclusion in March, according to Reuters.

The conference specifically emphasizes the enhancement of the International Monetary Fund’s “special drawing right” (SDR), which may serve as the “supranational” currency.

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