Here is a link to a good article by Craig Wilson that provides a pretty in depth history of the IMF and the SDR. I have added a link to this article to our page of information on the SDR because it goes into its history in a fair amount of detail.
-----------------------------------------------------------------------------------------------
"Since the creation of the international monetary system, the divide over financial and monetary policy has always been present. With the evolutionary rise in power of a new world money, everything has changed.
Understanding the history, construction and evolution of this new world money system will allow you to better position yourself for the future.
The U.S dollar has been the world’s reserve currency for decades since World War II. The dollar has been synonymous with strength, stability and general confidence in the United States Government.
That is all in question now.
Studying the real history of the special drawing rights (SDR), what some have coined as new world money, will allow you to understand exactly why the evolution of the international currency matters even more today."
-------------------------------------------------------------------------------------------------------
Added note: For readers who want to dig even deeper into some interesting SDR history, I found this book online that looks at past efforts to replace the US dollar with the SDR that failed and explains why they failed. The parts I read online are fascinating with former IMF representatives offering a historical perspective on the events discussed. On pages 53-54 of the link just above, former IMF Rudolf Rhomberg says that agreements to replace the US dollar with the SDR almost came about a couple of times in the 1970's but were dropped when world events changed the situation before the agreements could be implemented. Here is a brief quote:
"Again, in 1979-80, substitution of SDRs for US dollar reserves was close to being agreed, with the objective of permitting diversification of reserves without putting further pressure on the already weakened dollar. However, a sudden rise in the dollar early in 1980 reduced the urgency with which substitution had been sought and, since there were other unresolved problems as well, halted this reform plan practically on the eve of its expected adoption."
I doubt many people were aware that "the substitution of SDRs for US dollar reserves was close to being agreed" in 1979-80 and was only halted when the US dollar surged in early 1980 (note:Paul Volcker raised interest rates). So when we see this idea discussed as being possible in the future, you can see there is precedent for the idea from the past.
I found it particularly interesting that one of the points of contention between IMF members was that some (developing nations) wanted to use the allocation of newly issued SDRs not only to replace the US dollar, but also as a redistribution process where nations more in need would get a larger allocation of the SDRs issued. (see pages 51-53 in the link above). This illustrates the kind of disputes we have mentioned here that make it very hard to get international agreement on things like this. Here is the introductory paragraph on page 51 where this topic is introduced:
"When the SDR was created, as a supplement to existing reserve assets, the purpose of SDR allocation was generally seen to be purely monetary. Those who held this view resisted attempts to combine other purposes, often of a redistributive kind, with monetary augmentation." (my added note: I am advised that the US and Europe were among those who "resisted attempts to combine other purposes" such as targeting additional SDR allocations to developing countries)
I also got some interesting feedback from some of my best sources here about this book which suggest it is something worthwhile to read if you are interested in a deeper dive into SDR history. In fact, one even ordered the book to read for additional perspective on SDR history.
No comments:
Post a Comment