April 01, 2011

SDR are just a sort of “In Gods We Trust”

Sir, the Special Drawing Rights of the International Monetary Fund SDRs, although their issuance can provide liquidity, is not really a currency; it is a basket of currencies, a sort of “In Gods We Trust”. If that precise SDR basket became dominant in the market I shiver at the possible speculative frenzy that would happen if the market suddenly perceived the Executive Directors at the IMF were thinking of proposing a different currency composition of the SDR.

I say this because in a world with so many fundamental and real problems I cannot be absolutely 100 percent sure that Joseph Stiglitz “The best alternative to a new global currency”, April 1, is not the most delicate or subtle April fool’s joke ever written. If so... chapeau! If not... well then we would have to see whether the Central Banks of those currencies represented, would really want to relinquish part of their authority to the IMF.