US dollar’s role not at risk from SDRs: Geithner
Testifying before a House of Representatives subcommittee, Geithner was dismissive when asked about the possibility the dollar could be supplanted by SDRs.
"There is no risk of the SDR playing that role. The SDR is not a currency; it is a unit of account and it can't provide the role that many people would aspire to it, and there is no risk of that happening," Geithner said.
SDRs, created by the IMF in 1968, were intended as a device for settling international accounts without having to rely on the dollar or gold. Their value reflects the price of the dollar, Japanese yen, British pound and the euro. They are not used in any regular commercial transactions.
The idea of giving SDRs a heightened role in the global monetary system has been floating around global councils for the past year. The 2007-2009 financial crisis raised concerns among some US creditors, including China, about the potential riskiness of US assets.
China suggested in March last year that some kind of global currency might replace the dollar as the world's premier reserve currency.
A year ago, Geithner briefly roiled currency markets when he said the United States would be "quite open" to a Chinese proposal for increasing the use of SDRs. Markets settled down when he predicted the dollar's reserve role would be unchanged.
On Wednesday, he left no such opening for the SDRs' potential.
"The dollar does play this unique role in the global financial system. I think that's likely to continue," Geithner said, adding that the United States had to pursue "responsible economic policies" to sustain confidence in the dollar.
Some analysts have argued for planning for a more multipolar financial system to reflect the rise of emerging-market economies like China and a diminution of the United States's global dominance.
C. Fred Bergsten, an influential economist at the Peterson Institute for International Economics in Washington, has argued that the dollar's preeminent role has become a burden for the United States.
Bergsten suggested that other countries resent the dominance of the dollar, which is used among other things for settling oil transactions throughout the world.
Emerging-market countries have expressed support for a greater role for SDRs or some other alternative to the dollar in hope that it might help them avoid the painful experience suffered by some during the financial crisis when credit markets froze and liquidity was hard to come by. Kazinform cites Arab News. See www.arabnews.com for full version.