Shall we call it the UNO?

Shall we call it the UNO?

When various analysts began warning of a dollar crisis some years ago, very few people bothered to contemplate whether the reserve currency system we have lived with for so long might change.

Then China began to voice its concerns about the Fed's stranglehold on global money.This time the global economic circumstances did support the notion that there's some fragility in the existing system, but even so...China's not really a player, and Beijing has its own axe to grind, right? Most people still believe that once we're past this cycle, it'll be business as usual.

But now the United Nations is also proposing, albeit very diplomatically, that maybe we should at least think about the situation.

"The report from the United Nations conference on Trade and Development, issued on Monday, said the world economy would be better off with a system where governments intervene when necessary to either defend or depress their own currencies.

 

"A viable solution to the exchange-rate problem would be a system of managed flexible exchange rates targeting a rate that is consistent with a sustainable current-account position, which is preferable to any 'corner solution.' But since the exchange rate is a variable that involves more than one currency, there is a much better chance of achieving a stable pattern of exchange rates in a multilaterally agreed framework for exchange-rate management," said the U.N. body."

A new global currency to take the dollar's place is just one of the possibilities the panel has considered. Let me be the first to propose a name: the UNO.

The full report from the UNCTAD (not free, unfortunately) is likely to cause considerable anger among the less liberal members of the political/economic spectrum in the U.S., especially when they see comments like this:

"The experience with this crisis proves that free financial markets do not lead to optimal social and macroeconomic outcomes, and suggests that the relationship between the State and market forces needs to be fundamentally reviewed."

Michael Moore would agree, and it's clear that an increasing number of people are jumping on that bandwagon.

Meanwhile, it's also worth keeping an eye on China's attempts to mitigate its exposure to the dollar. As gold tops $1,000 an ounce once again, some see Beijing's hand at work.