The List: Ditching the Dollar

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The List: Ditching the Dollar
http://www.foreignpolicy.com/story/cms.php?story_id=4796

By Annie Lowrey Posted April 2009

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Your guide to the latest international currency schemes.



China Photos/Getty Images

CHINA

What? A global "supercurrency" to supplant the dollar

The details: Last month, the governor of China's central bank, Zhou Xiaochuan, sent shock waves through the political and financial worlds by suggesting the world's largest foreign holder of U.S. dollars supported the creation of a new global reserve currency.

In an essay published in both Chinese and English, Zhou, without ever mentioning the greenback, articulated concerns about the "inherent vulnerabilities and systemic risks in the existing international monetary system." The world needs a reserve currency "disconnected from individual nations and ... able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies," the essay went on to state.

Zhou recommended building on an existing asset and exchange system, a kind of synthetic currency that the International Monetary Fund (IMF) created in 1969. In the special drawing rights (SDR) program, the 185 IMF member states fund a pool of money that the IMF distributes in shares, or SDRs. This currency could be used for government finance, trade transactions, pricing commodities, and international accounting. G-20 leaders expanded the SDR pool by $250 billion at their recent meeting.

The suggestion comes as the Chinese government attempts to push the renminbi, whose principal unit is the yuan, as a reserve currency in Asia. In past months, China has completed currency swaps with Argentina, Belarus, Indonesia, Malaysia, and South Korea, among others; these allow China's trading partners to buy Chinese goods with the renminbi, rather than the dollar. Soon, some economists predict, the renminbi may become the de facto pan-Asian reserve currency and a much bigger global player.


DMITRY ASTAKHOV/AFP/Getty Images

RUSSIA

What? A global "supercurrency" similar to the Chinese proposal

The details: Speaking in Moscow last month, Russian President Dmitry Medvedev put his support for supplanting the dollar in stark terms: "Many of our partners maintain the point of view that everything is fine in this area, that all that is needed is a slight strengthening of major worldwide currencies, including the dollar. We hold another point of view." He strongly reiterated this idea at the G-20 conference.

Medvedev seconded China's support for expanding the IMF's special drawing rights program. He said the ruble, renminbi, and gold should join the dollar, euro, and pound -- the primary reserve currencies for the past 50 years -- in a multicurrency basket pricing the SDR.

The inclusion of gold bullion in the currency basket caused a press kerfuffle; numerous articles described Medvedev and Arkady Dvorkovich, the Russian government's chief economic advisor, as supporting a gold standard. In fairness, John Maynard Keynes and Franklin D. Roosevelt themselves recommended basing global reserve values on the price of gold and other commodities.


THOMAS COEX/AFP/Getty Images

VENEZUELA

What? The "sucre," a South American bloc currency

The details: At a regional summit last November, Venezuelan President Hugo Chávez called for the creation of an EU-type monetary zone and adoption of the "sucre," a regional currency, to reduce dependence on the dollar. Chávez addressed leaders from the Bolivarian Alternative for the Americas (ALBA) trade bloc, which includes Venezuela, along with Bolivia, Cuba, Dominica, Honduras, and Nicaragua.

The proposal came with a heaping dose of criticism for the United States and other G-20 countries, which Chávez accused of purposely suppressing developing economies. He also recommended that South American countries abandon the IMF, "an imperialist hand to dominate us."

"We're not going to wait here with our arms crossed for the World Bank or the International Monetary Fund to come and solve the problems that this great threat [the United States] unleashed on the world," he said. "The hegemony of the dollar must end," he added.

ALBA members seem to be in favor, agreeing in principle to developing the sucre within two or three years.


ATTA KENARE/AFP/Getty Images

IRAN

What? A common currency for Central Asia

The details: Iranian President Mahmoud Ahmadinejad suggested in March that the Economic Cooperation Organization (ECO) trade bloc -- Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan -- take up a common currency when it debuts its planned free trade zone in 2015. "The process of obtaining one single currency in the trade and exchanges among members, and in the next stages with other countries and neighbors, should be designed," he said.

"After the collapse of the closed socialist economy, the capitalist economy is also on the verge of collapse," Ahmadinejad said, railing against the hegemony of the dollar in foreign trade.

Were the ECO bloc to take up a common currency, it would rival the euro in its scope; the countries together have about 420 million people. Representatives from Kazakhstan and Turkmenistan seemed to support the general idea, and the topic will be taken up again at the ECO's next convention, in 2010.


DANIEL MIHAILESCU/AFP/Getty Images

KAZAKHSTAN

What? The "acmetal," a global currency

The details: In March, Kazakh President Nursultan Nazarbayev, speaking from the capital city of Astana, called for the creation of a world currency called the "acmetal," a word coined from "acme" and "capital."

"There is no other choice available to us, if we really intend to utilize effectively this unique opportunity of overcoming the shortcomings of the Old World and building up a New one," the strongman opined in a pre-translated report. It went on to state, "It so happened that the whole of our world has somehow unexpectedly and imperceptibly got into the tunnel of global crisis from where nobody is able to see where is the 'exit'."

The Kazakh leader described how the G-8 or G-20 countries could band together to create a transitional currency, the "transital," before full global adoption of the "acmetal." He also described a putative new world order brought on by the currency scheme: "acmetalism."

Proposing new currencies is something of a hobby for Nazarbayev, who has advocated a Central Asian regional currency plan since 2003. He has called for the adoption of the "altyn" or "yevraz" in the Eurasian Economic Community (EEC), which includes Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. Moscow takes these suggestions as a slight, though. It has proposed that the EEC states band together and adopt the Russian ruble.

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