Thursday, June 10, 2010

Saving Global Capitalism - IMF and the SDR as a Supra-National Currency

I want to make a prediction.

The global capitalist economy will be saved by the creation of a
supra-national currency housed in the IMF and will in some way be
designed along the lines of the SDR.

Though, I am pretty sure it is not a novel prediction and that there
are others out there that have and will make the same prediction. The
future of money will move towards the SDR (Special Drawing Rights
which allow nations to increase their foreign exchange reserves
without money being borrowed or lent. This facility is provided
through the IMF). What this means is that new money will be created
through the fund replacing the dollar as the anchor currency and
relieving the pressure on almost all states with regards to their
sovereign debt. This will almost certainly be the only way to satisfy
the "markets" (I hate to use the term markets in this way but I do
not want to get into that discussion). Because the SDR will be backed
by the global economy, and not one particular economy, it will return
a certain amount of security and confidence to the global markets.

I can not say exactly how it will look. You can read more about the
SDR on Wikipedia and several other blogs and websites. What I can
predict is that several countries will gain a bigger say in the role
of the IMF - such as China, India, Brazil and most interestingly
South Africa. We have already seen these countries demanding a bigger
say on the IMF over the past 10 years.

This creation of a supra-national currency will change the role of
individual sovereign states and may usher in a completely different
political climate ending a certain mercantilist type of economic
thinking. This is because no one nation will control money and the
global economy. The longer term impact is of course hard to predict
and I am sure that this will raise the heckles of many of the
conspiracy theorists - those that believe in the New World Order or
other such ideas. However, I believe it is the only way we will
ultimately save our global economy from a massive and devastating
collapse that would match or exceed the Great Depression.

The importance of this is hard to over-state. As the work of Karl
Polanyi showed in his book, The Great Transformation, the last time
our global economy collapsed it lead to fascism and global war. We
all want to avoid this possibility especially in a nuclear world.

What it will raise, this shift, is a discussion of money and how we
understand its creation and purpose (by this I mean what type of
political-economy do we want). There are many discussions going on
around the world dealing with the question of the creation of money.
Some of the most interesting look at creating a range of currencies
that serve a range of purposes and a range of spatial communities.
Bernard Lietear is one of the pioneers in this thinking - raising the
importance of building a system of multiple currencies that act from
the local community to the global community. There are deeper
questions of the impact of debt, scarcity and the like. That is all
for another discussion - some of which I have already dealt with in
other blog posts.

In the end saving the global capitalist economy will rest on the
creation of this global supra-national currency.

1 comment:

King of the Paupers said...

Jct: The only perfect supra-National curreny is Time. The UNILETS Millennium Declaration for a time-based currency has yet to be implemented. But it's on the way.