London, Mar 27 (Prensa Latina) The Presidents of Brazil and China, Russia and India have already agreed that a solution to the financial crisis could be to create global reserves based on a basket of the strongest currencies, putting an end to the reign of the US dollar.
The London-based economic online news service, Money Morning reported today that while exchange rates may improve again one day, the headlines on the main economies lead people to realize this is not likely to be any time soon.
The US has gone on a spending spree like no other nation in history. The debt, if social security obligations are included goes up to $11 trillion and counting, says Money Morning.
Chinese Central Bank Governor Zhou Xiaochuan has called for a “super sovereign reserve currency” that would be run by the International Monetary Fund (IMF). Russia, Brazil and India have backed the idea as well.
According to the online news service, losing the preeminence of the dollar might be healthier for the global economy in the long run, but it would not be very comfortable for the US, as it usually countered its debts by printing more new bills.
Money Morning says if the US no longer controls the world´s main currency, it suggests the loss of the position as the world´s most important country.
“If there´s a lesson from today,” says Chris Turner at ING Capital Markets, “it´s that the dollar is on thin ice and any loose talk will be quickly punished.”
At the moment the IMF runs on Special Drawing Rights, which are a basket of the world’s major currencies. “The IMF would be groomed as the planet’s central bank”, says The Telegraph’s Ambrose Evans-Pritchard, “and the SDRs would gradually become an accepted means of payment –call it the globo.”
Any basket of currencies used to back the ‘globo’, alerts Money Morning, would include a far smaller number of dollars than central banks currently hold in their reserves. That would mean a big plunge for the dollar and serious upheaval for the global financial system.