IMF Leader Dominique Strauss-Kahn Proposes New Reserve Currency

In recent years there has been much talk of replacing the US dollar as the world’s primary reserve currency. Last year China and Russia proposed replacing the greenback with a basket of currencies that would serve as a reserve currency. The proposals were not well received and the dollar remains, for better or worse, as a global reserve currency. A recent report in the venerable New York Times suggests that the idea of replacing the dollar is still with us. International Monetary Fund leader Dominique Strauss-Kahn floated the idea of an alternative reserve currency in a recent speech at IMF headquarters in Washington D.C. Strauss Kahn pointed out that an alternative reserve currency would limit dependence on the decisions of a dominant country. (The US) Very few economists believe that a change in reserve currencies will take place anytime soon and the US dollar’s status as a global reserve currency is secure for now.

Dollar to Remain as Reserve Currency

Mr. Strauss-Kahn said that in the future the IMF may be called upon to provide financial markets with a globally issued reserve currency but “that day has not yet come.” Harvard professor and former chief economist for the IMF said that the idea of an alternative reserve currency has been a “perennial big-think question” and “perennial big-think question.” Rogoff predicted the collapse of large banks at the beginning of the global recession with uncanny accuracy. Rogoff has also predicted that several EU nations will default on their sovereign debt as early as this year. The US Treasury responded to Strauss Kahn’s remarks by referring to its most recent semiannual foreign exchange report which says that “as long as the United States maintains sound macroeconomic policies and deep, liquid, and open financial markets, the dollar will continue to be the major reserve currency.”

IMF Willing to Help Greece

After the speech Mr. Strauss Kahn told reporters asking about the Greek debt crisis that the IMF would be “happy to help if asked” and said he believed that the European Union is capable of resolving the crisis. Strauss-Kahn who is a former French Strauss-Kahn stated, “The Europeans, especially the members of the euro zone, want to try to deal with the problems themselves. I perfectly respect this.” Recently the IMF has joined the European Union and the European Central Bank in sending experts to Greece. The ECB and the EU have demanded that the Athens government impose austerity measures before granting financial aid to Greece.