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What SDRs can do for the economy
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TEXT OF INTERVIEW
Steve Chiotakis: The White House says President Barack Obama is expecting today’s employment report for March to show additional “severe job cuts” here in the U.S. That report expected in just a few hours.
Of course, reversing the global economic fallout was the theme of the Group of 20 leaders who met in London this week. Nations pledged tougher regulations on everything from banks to hedge funds and to pump more money into the International Monetary Fund. One way they’ll do that is with what some say could become a new global currency called Special Drawing Rights, or SDRs.
Our man in London, Stephen Beard joins us to explain. OK Stephen, what are these SDRs?
Stephen Beard: Well this is the IMF’s “sort of” currency. SDR’s Special Drawing Right. It’s value is based on a basket of national currencies, so the value of the SDR doesn’t flucutuate as wildly as individual currencies like the dollar, the yuen or the euro. So it’s more stable and more to the point — it’s a currency which the IMF can control.
Chiotakis: So Stephen, the SDR is playing a bigger role now as a result of yesterday’s decision, right? To create more of these.
Beard: That’s right. I mean, we learned the IMF are going to be allowed to create an extra $250 billion worth of SDRs. This has been described as printing money. All IMF member countries will get an allocation of these SDRs, so the effect of this decision yesterday will be to increase the global money supply and considerably enhance the role of hte SDR in the international monetary system.
Chiotakis: But how do we get from that to a global currency?
Beard: Well it is quite a leap, and clearly will take a great deal of time. But I mean, there are some interesting developments here. Russia has been pressing for SDRs to be turned into a full reserve currency to be held by central banks alongside their golden dollar holdings. They didn’t get it on the agenda yesterday, but it’s sometihng that the Chinese are apparently also interested in, and the Chinese have reportedly agreed to pump a lot of cash into the IMF on the understanding that the next boss of the IMF won’t be a European or an American. So we’re beginning to see the IMF, this entity which has always been viewed as a kind of American construct, we’re beginning to see the emergence perhaps of a global entity, controlling perhaps a global currency one day, the SDR.
Chiotakis: OK. Stephen Beard, our European correspondent, joining us from London. Stephen, thank you.
Beard: OK, Steve.
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