UN wants new global currency to replace dollarThe dollar should be replaced with a global currency, the
United Nations has said, proposing the biggest overhaul of the world's
monetary system since the Second World War.
In a radical report, the UN Conference on Trade and Development (UNCTAD) has
said the system of currencies and capital rules which binds the world
economy is not working properly, and was largely responsible for the
financial and economic crises.
It added that the present system, under which the dollar acts as the
world's reserve currency , should be subject to a wholesale
Although a number of countries, including
China and Russia, have suggested replacing the dollar as the
world's reserve currency,
the UNCTAD report is the first time a major multinational
institution has posited such a suggestion.
In essence, the report calls for a new Bretton Woods-style system of
managed international exchange rates, meaning central banks would be
forced to intervene and either support or push down their currencies
depending on how the rest of the world economy is behaving.
The proposals would also imply that surplus nations such as China and
Germany should stimulate their economies further in order to cut their
own imbalances, rather than, as in the present system, deficit nations
such as the UK and US having to take the main burden of readjustment.
"Replacing the dollar with an artificial currency would solve some
of the problems related to the potential of countries running large
deficits and would help stability," said Detlef Kotte, one of the
report's authors. "But you will also need a system of managed
exchange rates. Countries should keep real exchange rates [adjusted for
inflation] stable. Central banks would have to intervene and if not they
would have to be told to do so by a multilateral institution such as the
International Monetary Fund."
The proposals, included in
UNCTAD's annual Trade and Development Report , amount to the most
radical suggestions for redesigning the global monetary system.
Although many economists have pointed out that the economic crisis owed
more to the malfunctioning of the post-Bretton Woods system, until now no
major institution, including the
G20 , has come up with an alternative.