Executive Summary and Recommendations “Beyond the Dollar”
Rethinking the International Monetary System ~ A Chatham House Report
April 15, 2010
Chatham House and the ESRC World Economy and Finance Programme have looked at the current system, assessed the goals and principles that underpin it and made some recommendations for the way forward.
Dominique Strauss– Kahn is very much pleased with the New World Order plans to make his IMF the World´s Central Bank
This decade will certainly be one of transition. We do not expect a big bang, but a long, gradual process of incremental change and adjustment. However, whether this transition and the rebalancing of the world economy will be smooth remains to be seen.
As a result, the interests and requirements of the emerging economic powers should be taken into account. Policy cooperation should aim to avoid any protectionist reaction to exchange rate movements.
There is an argument for moving towards a multicurrency reserve system in line with the multipolar world, as well as expanding the use of a supranational currency such as the Special Drawing Right (SDR) (see Box 1). The policy recommendations below not only propose the measures that we regard as necessary but also take into account the political and economic costs involved in the transition from the current inadequately functioning system to a more sustainable and functional one.
A multicurrency reserve system for a multipolar world economy
1.1 Develop a multicurrency reserve system that is appropriate for a world of regional trading blocs – Europe, Asia, the Americas – alongside a still preeminent dollar. The disadvantage of losing network externalities would be compensated by gaining stability. Historical experience has shown that two or more reserve currencies can operate simultaneously.
1.2 Encourage a more extensive use of Special Drawing Rights as a supranational currency alongside international reserve currencies that are issued by sovereign states or by sovereign states pooled together in a currency union, as is the case
for the euro.
1.3 Promote cross-border dialogue and policy cooperation in order to manage the transition from a system based on the dollar to a multicurrency one. Institutional arrangements should be strengthened, with a clear mandate to avoid major imbalances.
2. Increase the use of the Special Drawing Rights
2.1 Expand the supply of SDRs in a frequent, predictable and politically independent way, so as to increase the existing stock at least in line with world GDP, gradually reducing the accumulation of dollars.
2.2 Establish a new committee (the ‘International Monetary Policy Committee’) to produce regular recommendations to the IMF board for new SDR allocations. The constitution of such a committee should be designed to ensure that its decisions are independent and fair. It might be chaired by the IMF managing director and composed of the heads of the central banks (All Rothschild´s minions) whose currencies make up the SDR, along with independent experts to allow independent decision-making on changes to the composition of the basket of currencies in the SDRs.
2.3 Establish a substitution account under the IMF into which member countries can deposit dollars, euros, yen or sterling, and receive the equivalent amount in SDRs in their account based on the exchange rate then prevailing. The size of this account should be limited initially and increased gradually, as experience is gained of its use by member countries and of the pattern of deposits and redemptions. Initially the substitution account might allow only one-way transfers, but it should work towards allowing both purchases and redemptions.
2.4 Take steps to increase the use of and demand for SDRs, beyond official circles, in international trade and finance:
2.4.1 The IMF should permit SDR accounts to be opened by private-sector actors.
2.4.2 The IMF or another suitable provider should create a settlement system, so that transactions denominated in SDRs can take place directly between buyers and sellers on a secure and transparentplatform.
2.4.3 The development of SDR-denominated financial instruments and markets in which to trade them should be encouraged. In particular there needs to be a market-maker willing to buy and sell SDR bonds at bid/offer spreads that are competitive vis-à-vis those in existing bond markets.
These measures would greatly strengthen confidence in the liquidity of SDRs (i.e. their marketability, acceptability by all countries, convertibility to the dollar and other currencies, and use as a unit of account and settlement for oil and other commodities).
3. Promote dialogue and policy coordination to provide stability, confidence and balanced adjustment
3.1 Foster greater efforts in the peer monitoring and assessment of the full range of economic policies that impinge on countries’ balance of payments and exchange rates.
3.2 Encourage international dialogue between countries issuing a reference currency and individual or groups of countries using the reference currency. Consultation would pre-specify credible actions that would be taken in the case of growing imbalances and required change in reference currencies.
4. Strengthen the role and legitimacy of international institutions
4.1 Rebalance subscriptions to and voting rights within the IMF more rapidly and more radically than is currently taking place. These changes are needed to improve governance of, and increase international confidence in, the IMF. They are important in paving the way to wider use of SDRs. Without them the IMF risks becoming marginalized as an agent of a group of countries with a dwindling global presence. Following the reweighting of the voting rights, the composition of the Executive Board should also be rebalanced.
4.2 Strengthen the IMF’s ‘score-keeping’ capacity by allowing it to issue its own quarterly reports on exchange rate and other relevant policies. These would help in the evaluation of the full range of economic policies that affect exchange rates and the balance of payments, and establish a set of benchmarks against which countries’ actual policies and policy commitments could be assessed. The IMF would thereby become more vigorously engaged in ‘naming and shaming’. Both the management and the board must adjust the incentives for the staff to raise sensitive issues. IMF management, rather than the board, should have the authority to approve such surveillance reports, to further insulate the staff from political pressures.
4.3 Mandate the IMF to deal with currency misalignments and promote monetary coordination, or establish an institution for this purpose. Such an institution could start as a caucus of the countries issuing the reserve currencies – the United States, the Eurozone, the United Kingdom, Switzerland and Japan – and also include countries with the largest accumulation of reserves. This institution should eventually fulfil the function in terms of international monetary affairs that the World Trade Organization does for international trade.
The SDR is not a currency but a basket of currencies currently comprising the dollar, the Japanese yen, the euro and the pound sterling. The relative weights of these currencies are adjusted every five years. The next adjustment will take place in 2010.
There have been only four allocations of SDRs made thus far. The last two allocations of 161.2 billion and 21.5 billion were made in August 2009 and September 2009 respectively. The total amount of SDRs is currently 204.1 billion.
These SDRs are distributed to the IMF member states in accordance with quotas that are largely decided by the size of their economy and its openness. The quota determines each member’s voting power in the IMF and its access to IMF funding as well as its financial obligations to the IMF. Wikipedia: “SDRs obtain their reserve asset power from the commitments of the IMF member states to hold and honor them for payment of balances”
Comment ~
Now, as stated above this is a summary of well-known suggestions from the UNEP and the technocrats. Their world currency consists of equal quotas of thin air (CO2) allocated to every person on earth. When you have used your allocation you go broke. You cannot make savings. Barroso 4. febr. 2010: The Copenhagen Accord might not be all that we hoped for. But it is a significant step on the road to a low carbon future. In the end, we will get there. No matter science, no matter the exposures of global warming science as fraud, The New World Order is building our future on thin air and lies. The devil is really at large in the NWO, for the NWO is his order. Rothschild minion George Soros advocates SDRs as world currency, too.
In April 2009 , Downing Street 10 affirmed on behalf of the G20 that the IMF was to be endowed with 250 bn dollars of new SDR allocations. This automatically means more inflation, i.e. theft of the value of our money. The remarkable thing is that the Master of the New World Order, The Rothschild Club, the Chatham House, comes into the open, stamping this one-world inititiative as its policy. That China, Russia and the Gulf states are dissatisfied with the dollar as the world´s only reserve currency and have started efforts to replace became clear last fall.
The UNCTAD also wants a new world reserve currency, preferably the SDRs. So instead of gold standard, we are going to have a currency based on – nothing, except the New World order elite´s gracious grants to us subhumans. Did you believe, you could buy a little gold to secure yourself? Oh no. Your gold either consists of Tungsten covered with a thin layer of gold – or your gold certificate is just 1% worth its face value. Well, they are robbing you of your money, anyway, viz. as CO2 taxes.
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Beyond the Dollar - PDF ...
http://www.chathamhouse.org.uk/files/16144_r0310_ims_es.pdf
..............................SDR'S
(box 1) The Special Drawing Right (SDR) is an international reserve asset created by the International Monetary Fund in1969. The SDR is largely used as a unit of account by the IMF, other international organizations (such as the Universal Postal Union), and agreements such as the Warsaw Convention and Montreal Convention. IMF member states can exchange the SDRs among themselves voluntarily. Private entities or individuals cannot hold SDRs.
The SDR is not a currency but a basket of currencies currently comprising the dollar, the Japanese yen, the euro and the pound sterling. The relative weights of these currencies are adjusted every five years. The next adjustment will take place in 2010.
The SDR was initially created to be a potential supplement to the dollar and gold under the fixed exchange rate regime of the Bretton Woods Agreement. However, the demand for SDRs declined after the suspension of convertibility of the dollar for gold in 1971 and the move by major economies towards a floating exchange rate system through the 1970s. More attention has been paid to the SDR recently after China, the largest holder of dollars as reserves, suggested that it might be an alternative international reserve currency.
There have been only four allocations of SDRs made thus far. The last two allocations of 161.2 billion and 21.5 billion were made in August 2009 and September 2009 respectively. The total amount of SDRs is currently 204.1 billion.
These SDRs are distributed to the IMF member states in accordance with quotas that are largely decided by the size of their economy and its openness. The quota determines each member’s voting power in the IMF and its access to IMF funding as well as its financial obligations to the IMF. The Fourteenth General Review of Quotas is currently under way.
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IMF Quotas
March 11, 2010
Quota subscriptions generate most of the IMF's financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative size in the world economy. A member's quota determines its maximum financial commitment to the IMF and its voting power, and has a bearing on its access to IMF financing.
Boosting representation of emerging markets and low-income countries
On April 28, 2008, a large-scale quota and voice reform in the making for nearly two years was adopted by a large margin by the Board of Governors of the IMF. It aims to make quotas more responsive to economic realities by increasing the representation of fast-growing economies and at the same time giving low-income countries more say in the IMF's decision making. The reform builds on an initial step agreed by the IMF's membership in September 2006 to have ad hoc quota increases for four countries—China, Korea, Mexico, and Turkey.
The April 2008 reform package is more far-reaching, containing the following elements:
A new quota formula.
Ad-hoc quota increases to all 54 countries that were underrepresented under the new quota formula.
Tripling the number of basic votes to increase the voice of low-income countries, as well as protection of the share of the basic votes in total voting power going forward.
Providing resources for an additional Alternate Executive Director for the two African chairs represented on the IMF's Executive Board.
Realigning quota and voting shares every five years.
For the package of reforms to become effective, acceptance of the amendment on Voice and Participation by 112 member countries representing at least 85 percent of total voting power is required. As of early March 2010, 65 members representing about 70 percent of total voting power had accepted.
Governance reform is currently being accelerated.
In April 2009, the International Monetary and Financial Committee (IMFC), which advises on IMF policies, called for a prompt start to the Fourteenth General Review of Quotas so that it is completed by January 2011—some two years ahead of the original schedule. The Fourteenth General Review is now underway.
In October 2009, the IMFC endorsed a call by G-20 leaders for a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries using the current quota formula as the basis to work from. In addition, there is a commitment to protecting the voting share of the poorest members.
How member countries' quotas are determined
When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members that are broadly comparable in economic size and characteristics. The IMF uses a quota formula to guide the assessment of a member's relative position.
The newly agreed quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent). For this purpose, GDP is measured as a blend of GDP based on market exchange rates (weight of 60 percent) and on PPP exchange rates (40 percent). The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members.
Quotas are denominated in Special Drawing Rights (SDRs), the IMF's unit of account. The largest member of the IMF is the United States, with a quota of SDR 37.1 billion (about $56.7 billion), and the smallest member is Palau, with a quota of SDR 3.1 million (about $4.7 million).
Quotas play several key roles in the IMF
A member's quota delineates basic aspects of its financial and organizational relationship with the IMF, including:
Subscriptions. A member's quota subscription determines the maximum amount of financial resources the member is obliged to provide to the IMF. A member must pay its subscription in full upon joining the Fund: up to 25 percent must be paid in SDRs or widely accepted currencies (such as the U.S. dollar, the euro, the yen, or the pound sterling), while the rest is paid in the member's own currency.
Voting power. The quota largely determines a member's voting power in IMF decisions. Each IMF member has 250 basic votes plus one additional vote for each SDR 100,000 of quota. Accordingly, the United States has 371,743 votes (16.74 percent of the total), and Palau has 281 votes (0.01 percent). The number of basic votes will change once the April 2008 reforms become effective.
Access to financing.
The amount of financing a member can obtain from the IMF (its access limit) is based on its quota. Currently, under Stand-By and Extended Arrangements, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances.
How quota reviews work
The IMF's Board of Governors conducts general quota reviews at regular intervals (usually every five years). Any changes in quotas must be approved by an 85 percent majority. There are two main issues addressed in a general quota review: the size of an overall increase and the distribution of the increase among the members. First, a general quota review allows the IMF to assess the adequacy of quotas both in terms of members' balance of payments financing needs and in terms of its own ability to help meet those needs. Second, a general review allows for increases in members' quotas to reflect changes in their relative positions in the world economy. The Thirteenth General Review was concluded on January 28, 2008 with no proposal by the Board of Governors to increase quotas.
Ad hoc quota increases outside general reviews do not occur often, although the increase in quotas approved on April 28, 2008 does qualify as ad-hoc because it was agreed outside the realm of the general quota reviews.
In future, the Executive Board has decided that such further realignments of quota shares should be recommended in the context of future general quota reviews. The goal is to have a dynamic mechanism to adjust quota shares every five years to reflect members’ evolving weight in the world economy and to increase the shares of underrepresented countries
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http://euro-med.dk/?p=14853
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