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Monday, February 14, 2011

The IMF Suggests Dollar Replacement for Reserve Currency

The IMF is suggesting that the dollar be replaced with the SDR's again as they view the dollar as being to volatile to U.S. policies.  The IMF suggests that its SDR's (Special Drawing Rights), an international asset, would create a more stable reserve currency.  The IMF describes the SDR as the following:
The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate.
The article by CNN make the following point about the IMF's view on SDR's as a reserve currency:
Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some "technical hurdles" involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.  "Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," he said.
This subject of replacing the dollar with some sort of basket of currencies and precious metals (as proposed by China, Russia, Venezuela and other countries) has been gaining momentum.  In the last year the IMF has repeatedly proposed its SDR's as a more stable alternative to the U.S. dollar.  So with the money printing of the FED a constant and the constant questionable position of the U.S. dollar as the future reserve currency, where does that leave the dollar?  (Read More here ...)

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