Re: [Pen-l] doubling global stimulus through SDRs (secret message for Obama entourage)

[Gernot Koehler <gko15@xxxxxxxxxxx>]

Ann wrote [quote] The importance of a coordinated international stimulus is also stressed by Roubini in the R G E Monitor newsletter quoted below . . .[end quote]

Jim wrote [quote] are SDRs a substitute for the US$? would the expansion of their supply undermine the legitimacy of the US dollar as a _  world currency  _? could they turn into bancor? [end quote]

COMMENT
Suppose the president of the US empire were a socialist (and his ideological stand accepted and certified by the core members of pen-l), what could be proposed to him as regards the global dimension of the present crisis? My suggestion (i.e., issuing 1 trillion SDRs) is meant to indicate a direction of action and is not meant as a blueprint ready for signature by the imperial president. SDRs are presently issued by the IMF in rather small quantities. Another minus is that they come from the IMF.

However miserly and problematic current SDRs may be, they are fiat money created at the global level. That is important as a principle. That means that the world system has already an organization that performs a function that is normally performed by national central banks, namely, creating fiat money out of nothing. In true Anglo-Saxon fashion one could use that precedent and enlarge and refine it. An organization that can create small amounts of fiat money out of nothing could also create large amounts of fiat money out of nothing. Why not? And instead of rescuing the rich with those funds, it could disburse them to qualified recipients in poor countries. (Details to be worked out by an army of economists.)

I believe that most socialists are cold to the notion and discrete charme of global fiat money because it is not in the books of Old Whiskers. KM believed in the gold standard. Gold was the true international money in his view.

For a post-keynesian view on credit, including global-level, see, for example, Moore, B. (1988), Horizontalists and Verticalists: The Macroeconomics of Credit Money. Cambridge, USA: Cambridge University Press.

Gernot

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