The UN Currency

by Crocker on March 11, 2009, 7:59 pm

in Economics,Politics

Is the UN planning to create a new global reserve currency?  That seems to be the rumor – which has been flying around the blogosphere for some time.  But there are hints in the international press. Buried in a story in today’s Moscow Times:

Kazakh President Nursultan Nazarbayev on Wednesday proposed a common currency for five former Soviet republics, a slap in the face for Russia, which has been promoting the ruble for the role.

Senior government officials did not react to the proposal, but a State Duma deputy said Nazarbayev was sending a signal that Russia’s neighbors harbored concerns about embracing the ruble.

Nazarbayev said the Eurasian Economic Community, a loose group of five former Soviet republics including Kazakhstan and Russia, could adopt a single noncash currency — the yevraz — to insulate itself from the global economic crisis.

Yevraz is a newly coined word that sounds close to “Eurasia” in Russian.

“Its exchange rate shouldn’t depend on the fluctuations of the world currencies,” Nazarbayev said in a speech to an economic forum in the Kazakh capital, Astana.

The Eurasian Economic Community also includes Belarus, Kyrgyzstan and Tajikistan.

Now, this is an interesting story in its own right: the Central Asian republics are thinking of setting up monetary housekeeping separate from Moscow. And well they might, given the catastrophic weakness of the ruble and the Russian banking system. And yes, it’s a slap in Russia’s face, particularly after Kyrgyzstan recently went through the motions of accepting a Russian bribe – which, incidentally hasn’t been paid. It just goes to prove that you have to make sure that once you’re bought, you stay bought.

But there’s this odd nugget buried in the story:

Nazarbayev said the yevraz could be a step toward a common global reserve currency that would operate under the auspices of the United Nations. The Group of 20 meeting in London on April 2 should discuss such a global currency, he said.

The yevraz might be introduced in the next 12 months, said Zhamilya Bopiyeva, vice president of the Institute of Economic Research with the Kazakh Economy and Budget Planning Ministry. The new global currency could come into use in 10 to 20 years, she said. . . .

Countries around the world are considering a shift away from the dollar as the international reserve currency after the United States began inflating its money supply to bail out the economy. Russia has been trying to position the ruble as the reserve currency of choice in the former Soviet republics.

Prime Minister Vladimir Putin said last month that the government had decided against imposing any limits on capital outflow because it was still betting on having the ruble to assume that role. President Dmitry Medvedev reiterated last week that the ruble had every chance of eventually becoming a global reserve currency. . . .

The ruble has about as much chance of becoming the world’s reserve currency as something I could print in my basement. Probably the same for the yevraz. However, it’s clear that the idea of a new reserve currency is part of the back channel discussion in the G20. If the dollar inflates too much, the idea may become a reality.

But the thought of the world currency reserve being controlled by the UN is chilling, is it not?

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