"From Saddam to Stiglitz": Heading Towards a Global Currency?

It is hardly a coincidence that following Saddam Hussein who was eager to replace the dollar with euro as the currency for oil trade Qaddafi was like minded operating back in 2007 along the OPEC with the Iranian and Venezuelan presidents,  Mahmud Ahmadinejad and Hugo Chavez . On 2009 appointed as the new chairman of the African Union he was complaining about the losses from the barrel – dollar connection intending to create a new Pan – African currency while talking about the need of this replacement with the BIRCS. But he wasn’t alone.

By the September of the same year, for the first time, the UN Conference of Trade and Development produced a radical report that emphasized the same considerations in the aftermath of the economic crises of 2008. While other countries like China and Russia had suggested replacing the dollar this was the first time that an international organization pointed to the same direction claiming that the present system, under which the dollar acts as the world’s reserve currency should be subject to a wholesale reconsideration. On March Russia had proposed the creation of a new currency backed by China to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit.

On February 2011 the IMF and its head Dominique Strauss – Kahn expressed the same opinion. In his speech in Washington he stated that the reserves that member countries held with the fund could be used, instead of the dollar, to price international trade. These so-called special drawing rights (SDRs) could also act as an alternative to the dollar in central banks' foreign currency reserves. Of course this was before the recent scandal broke up depriving him from his position. By the same time China launched trading in her own currency as for the first time as the state controlled Bank of China LTD allowed customers to trade the yuan, Known as renminbi, in the US.

 On April the well-known Nobel - prize winning economist Joseph Stiglitz said at Columbia University that the existing monetary system means “there’s a very good risk of an extended period of low growth, inflationary bias, instability”… “It’s a system that’s fundamentally unfair because it means that poor countries are lending to the U.S. at close to zero interest rates.” He also emphasized that a “global system” is needed to replace the dollar as a reserve currency and help avoid a weakening of U.S. credit quality. 

Stiglitz  took part in the  INET Bretton Woods summit, summoned by George Soros where “New ideas for a New World” were presented while Soros have expressed the possibility for the replacement of dollar in his book “"The Crash of 2008 and What it Means" back in 2009. 

By the same time (April 2011) the development banks of the five BIRCS’ nations agreed to establish mutual credit lines denominated by in their local currencies , not the U.S. currency. The BIRCS accounting for 40% of global population and 20% of global GDP in their third summit in the southern Chinese island of Hainan released a declaration in which among others stated that “We welcome the current discussion about the role of the SDR in the existing international monetary system including the composition of SDR's basket of currencies”.

To the present the most appropritate regulator fostering international monetary and financial cooperation and serving as a bank for central banks is the Bank for International Settlements (BIS).  Although two of the key players for its establishment back in 1930 were the then-Governor of The Bank of England, Montagu Norman, and his German counterpart Hjalmar Schacht, later Adolf Hitler's finance minister, and despite that after World War II was accused by the US and others for helping the Germans looting assets from occupied countries, BIS through the British intervention and the death of Roosevelt managed to avoid liquidation and now is still alive and kicking.  The BIS have recommended the “new currency scheme” in its annual report commemorating its founding back in 2005.

The Post – Cold War era in which we live gave us the opportunity to see the “power to the people” slogan in action: First some US citizens striving to “get a roof above their heads”,  as we say in Greece for someone who’s buying his first house, managed to put in serious threat the global economy and then the Greek plumber  – well Known for not declaring properly his income – along with the lazy Greek worker managed to almost destroy the Eurozone. It remains to be seen if at the end of the tunnel a new global currency will emerge…