Special Drawing Rights, Part 2 (Pun intended) OR Do we Really Need the IMF's Permission?

I propose a new currency for International Trade (Only) to be used exclusively between participating nations.

It will be a Governmentally sponsored currency, and thus, free from the sway of Private interests.

It will be set up similarly to the Special Drawing rights of the IMF, but will not be Controlled by the IMF, or its member nations, and will exist Parallel yet separate from the XDR.

Only participating countries will need to contribute to the new NCDR (Non Connected Drawing Right), and thus, only Participating countries will accept them for payment.

The Plan:

Each participating Currency will need to ranked, along with all other currencies by "Weight" or value relative to all the other currencies, by an economic tribunal of participating international governments (currencies)

And its measure will be dependant upon its relative value.

For a country to begin using the NCDR, it will have to purchase for reserve (to hold in its own banks) a proportionate amount of currencies to contribute to the backing of the new NCDR.

For example:

The current basket contains the currencies of 5 countries:

Euro
Yuan
Yen
Ruble
Rial

These currencies compose the Value of the NCDR according to their relative value (with each country contributing 20% of the total value of the NCDR)

So... if the NCDR is worth, 1 USD per NCDR, then each country will contribute:

Euro: 0.15
Yuan: 1.36
Yen: 19.60
Ruble: 6.75
Riyal: 0.75

Per NCDR

Which would add up to approx 1 dollar US. (you could base it on anything you want really, the value of gold, the price of tea... it don't matter.)


If a new country wanted to join the league of NCDR, it would have to purchase (Or Trade) for reserve, currencies from each country in proportion to this formula, and all participating countries would have to add the new nations currencies to their own stockpile in proportion to how many NCDR's they would want to hold.

Thusly, the NCDR would only be accepted by all participating countries, and each new country that joined this league would boost the international holdings of not only its OWN currency, but also, the NCDR member countries as well.

The more countries that participate in this exchange, the more stable the currency IS, because it is backed by the purchasing power parity of the whole basket of currencies.

As one gains, or decreases in value, its proportional representation in the NCDR is added, or subtracted in proportion to the fluctuation of its value.

So, if a new country wants to join, lets say... India, the league would convene, and revalue their currency to reflect each nations participation at a Sixth instead of a fifth...

Euro: 0.12
Yuan: 1.13
Yen: 16.27
Ruble: 5.60
Riyal: 0.62
Rupee: 8.38

So, for India to have 100,000,000 NCDR it would have to purchase and keep in reserve:

Euro: 12,000,000
Yuan: 113,000,000
Yen: 1,627,000,000
Ruble: 560,000,000
Riyal: 62,000,000
Rupee: 838,000,000

Each other currency would then be less represented in the NCDR (and thus, the nations could sell off their excess reserve currencies (Maybe to India as they bought in), or purchase more of the other currencies to have a greater reserve of NCDR's)

And each other country would be required to purchase (or trade with the new country) India's currency to have equal stake in the NCDR.

(You could probably arrange a currency trade in contrast to the lowered position of the other currencies)

Obviously, there would have to be a minimum buy in for this league of new currency, dependent upon how much trade they do with member nations, and other such factors.


Obviously, the addition of any new currency will be done at at the very least, a quarterly time frame, with full participation from each new nation.

But each nation that begins to participate in this new League would have its economy strengthened, by the overall stability of ALL of the currencies that participate.

I think this would be overall better than a gold standard.

The currencies would be ranked quarterly, for overall value (purchasing power) and the percentage of each currency representing in the new NCDR would be adjusted accordingly.


-Redshift the Rave Rabbit