I’ve previously commented on this developing story here and here.
The proposal for a new reserve currency that began with the Kazakh president a couple of weeks back has now been endorsed by the Kremlin for consideration at the G20 meeting next month. From the Moscow Times:
The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.
The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a “superreserve currency accepted by the whole of the international community,” the Kremlin said in a statement issued on its web site.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.
As the Moscow Times reports, the Russian government doesn’t like the fact that the U.S. dollar is the world’s de facto world currency and their suggestion that the ruble could take the dollar’s place has been met with skepticism, to say the least. And most observers don’t seem to think that the dollar has much chance of being dethroned any time soon.
But the fact that this idea is being openly discussed should give us pause. A good deal of our economic power and political clout is due to the dominance of the dollar, which is backed by the strength of the U.S. economy itself. And that economy is based on sound banks and good fiscal and monetary policy.
Instead of hyperventilating over bonuses and trying to implement every crack-brained social engineering project, Hope ‘n Change should be focusing on rebuilding the banks, first and foremost. Because right now that’s the key to everything else.
And reducing government spending and implementing tax cuts wouldn’t hurt either.
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