The smackdowns of the U.S. dollar continue. This time Russian President Medvedev is pounding on the table.
Medvedev is basically echoing the rants that have come out of China about the supremacy of the dollar and proposes the same fantasy of some supra-national currency oriented around the IMF and its special drawing rights units. Until that day comes he suggested that coming out of the crisis banks should look at holding some reserves in regional currencies other than the dollar — he suggests the ruble.
Ah, yes, hold those rubles. Nothing like investing in the currency of a country that’s essentially a criminal enterprise.
But back to the larger point. If China, Russia and others don’t like the dollar and want to go about setting up a new regime then have at it, boys. All they have to do is come up with a credible alternative and I rather suspect that they will have no trouble at all lining up takers. There’s just one little problem.
If you recall, back in April the G-20 all met in London and agreed to move forward with major new commitments to the IMF. It was always a bit vague as to how much everyone was going to pony up but the figure of a trillion dollars in total was bandied about. This would make the IMF a much bigger player in the save the world game and presumably open the door for further strengthening its role as the purveyor of the supra-currency to come.
As usual, when the rubber meets the road reality is much less than what was advertised. In fact, though China and Russia have made noises about putting up some money, to date no one has seen the colour of their money. They keep moaning about reform of governance at the IMF — translation we want a bigger say– but you usually get into the game by anteing up first not after everyone else acquiesces to your demands.
At this rate it’s going to be a long time before the IMF is ready to take over as the new world reserve currency.