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G20 and SDR in Action

Established in 1999 as response to the financial crises as the primary forum for economic coordination, G20 is meeting on the 18th and 19th of February 2011 in Paris, under the French presidency

South Africa, Germany, Saudi Arabia, Argentina, Australia, Brazil, Canada, China, South Korea, the United States, France, India, Indonesia, Italy, Japan, Mexico, the United Kingdom, Russia, Turkey, and the European Union belonging to G20, the priorities of the French presidency are: 

1) Reforming the international monetary system (IMS) – due to the vast changes in global economy, one aspect being the emerging states. Connected with issuance by the IMF a report on 7 January 2011 on a possible replacement for the dollar as the world’s reserve currency: “Enhancing International Monetary Stability—A Role for the SDR?“, where SDR is defined as (1) a compositive reserve asset created in 1969 and defined in the Fund’s Articles; (2) a potential new class of reserve assets: tradable SDRdenominated securities issued by the Fund or an investment vehicle backed by a subset of the Fund’s membership; and (3) a unit of account, which could be used to price internationally traded assets (e.g., sovereign bonds) and goods (e.g., commodities), to peg currencies, and to report balance payments data. That would mean the economy with single currency and stronger world bank. 

See also: “{The] Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System” from 21 September 2009, about global economic governance reforms incl. Global Economic Coordination Council (GECC), creation of International Debt Restructuring Court (and international mediation service), economic globalization, the Keynesian idea of a global currency (and its revision by Keynes) and the problems with the earlier Bretton Woods system, about countries’ potential agreement to hold certain fraction of their reserves in the global currency. The global currency could be allocated to States on the basis of some formula (“quota”) based on their weight in the world economy (GDP) or their needs. 

See also: Melissa Murphy, Wen Jin Yuan (2006), Is China Ready to Challenge the Dollar? Internationalization of the Renminbi and Its Implications for the United States. 

The “Economic Collapse” writes that the SDR is a hybrid, and that SDRs are: “part U.S. dollar, part euro, part yen and part British pound,” and explains how each SDR breaks down at present: U.S. Dollar: 41.9%; Euro: 37.4%; Yen: 9.4%; and British Pound: 11.3%. 

2) Strengthening financial regulation; 

3) Combating commodity price volatility; 

4) Supporting employment and strengthening the social dimension of globalization – coherent strategies are waited from international organizations; 

5) Improving global governance – modernization of international organizations with the aim to guarantee more effective regulation of globalization; strenghtening synergy between the G20 and the United Nations; 

6) Acting for development – development funding through innovative financing

PS.: Do you know how many G20 countries belong as members to the UN Security Council (an why is it important)? – See http://www.g20-g8.com/g8-g20/g20/english/what-is-the-g20-/test-your-knowledge/test-your-knowledge.73.html



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