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Title: IMF Chief Pushes For More Power, New Global Currency
Source:
RAW STORY
URL Source: http://rawstory.com/2010/02/imf-chief-pushes-power-worlds-stage/
Published: Feb 27, 2010
Author: Stephen C. Webster
Post Date: 2010-02-27 13:22:01 by Brian S
Keywords: None
Views: 217
In a speech to the Bretton Woods Committee, a finance reform think tank in Washington, D.C., he claimed that a stronger IMF also warrants a new global reserve currency that would serve as an alternative to the U.S. dollar. "Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF's special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF," ABC News reported. "It is based on a basket of major currencies." "One day, the Fund might even be called upon to provide a globally issued reserve asset, similar to -- but in important respects different from -- the SDR," he said. Strauss-Kahn added that "having several suppliers of reserve assets would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country." "The challenge ahead is to find ways to limit the tension arising from the high demand for precautionary reserves on the one hand and the narrow supply of reserves on the other," he also said, according to ABC. Both China and Moscow support such a plan, but U.S. leaders have vehemently insisted that empowering the IMF's special drawing rights, or establishing another fund with a global pull similar to the dollar, is not necessary. The United Nations Conference on Trade and Development has also offered its support to the idea, suggesting that an as-yet-unformed regulatory committee oversee the new currency, which would be traded almost exclusively by governments. European leaders such as British Prime Minister Gordon Brown and French President Nicolas Sarkozy have also called for an expanded role for the IMF in the emerging global economy. The IMF's special drawing rights were created in 1969 as a way of supplementing countries' currency reserves. Their value is determined by a formula based on the values of the US dollar, the British pound, the Japanese yen and the Euro. The IMF has been using SDRs to help shore up the finances of poorer nations amid recent economic uncertainty. "There may be a need for a clearer mandate to pursue risks for global economic stability, but also -- I stress -- for financial stability," Strauss-Kahn said. "During the crisis, the Fund proved its worth to the world." But Strauss-Kahn said that as the world slowly emerges from the worst financial crisis since the Great Depression, "we must build on this positive momentum: to transform the Fund into an institution even better equipped to meet the challenges of the post-crisis era." The bulk of the IMF's efforts today are conducted on a country-specific basis, but this will not be sufficient to avoid or even dampen a major crisis in the future. The 186-nation IMF already provides economic assessments of individual member countries and publishes reports on the world economic outlook and the stability of the global financial system. But in the years preceding the crisis, the Fund did not foresee the risk from a US housing meltdown that led to a credit crisis and a financial firestorm that engulfed the globe. "We are floating the idea of a new multilateral surveillance procedure. This would allow -- indeed require -- the Fund to assess the broader and systemic effects of country-level policies, and the associated risks, in a fundamentally different way," Strauss-Kahn said. The role of guardian of systemic stability would be backed up by new financial firepower. The IMF has tripled its lending capacity over the past year, to 850 billion dollars, thanks to loans from member countries. The expanded financial resources "should be sufficient to meet demand in the coming period," he said. Strauss-Kahn recalled that in the global crisis, key emerging market economies seeking financial lifelines had not turned to the Fund as the "first responder," but instead approached the US Federal Reserve and other central banks for currency swaps. "In this context, we are currently exploring various options -- including for short-term, multi-country credit lines that the Fund might extend in a systemic crisis," he said. Strauss-Kahn proposed increasing the flexibility and accessibility of the new Flexible Credit Line that the IMF created last March. Available to any member country whose economy is deemed well-managed by the Washington-based institution, the facility currently allows Mexico, Colombia and Poland to tap credit as needed. Strauss-Kahn also suggested the IMF could work with "regional reserve pools" which he said "can be a positive and stabilizing force in international financing." He cited the IMF's recent cooperation with European Union lending to help three EU members: Hungary, Latvia and Romania. With AFP.
The International Monetary Fund wants more power to police the global financial system and a bigger role in emergency financing, managing director Dominique Strauss-Kahn said Friday.
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