Kemal Derviş |
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means that, if a country does not accumulate reserves by running a current account surplus, reserves can be borrowed without gold acting as a constraint on their supply—at a price! It remains true, nonetheless, that if countries want to accumulate dollar reserves, the United States must supply them, either through a current account or capital account deficit, that is, it must run an overall balance of payments deficit.21 The accumulation of global imbalances over the last decade has led to renewed demand for a fundamental change in the international reserve system.22 If SDRs could be “created” regularly and allocated to countries as reserves, there would be less need for the creation of reserves through a U.S. balance of payments deficit, and the desire for reserves would not lead to global payments imbalances. It would also be possible to link the amount of SDRs created at a particular time to world economic conditions—create more if there are deflationary conditions, create less if there are inflationary pressures. If one accepts this reasoning, as well as the previous arguments for greater amounts of precautionary finance, it is natural to argue for a system where part of the quota increases could be financed by the creation of SDRs. Quotas of member countries would increase as they receive additional SDR allocations. In such a system, a greater share of IMF resources would take the form of SDRs and, indeed, there would be no need for the distinction between the General and SDR accounts.23 It is in fact this kind of system that was broadly envisioned when the SDRs were created in 1969. Let us look at how William McChesney by running a current account deficit then there would eventually be a crisis of confidence when the supply of dollars exceeded the supply of gold. However, if the United States stopped running a current account deficit then there would not be sufficient liquidity. See Triffin, Gold and the Dollar Crisis. 21. Note that supplying these dollar reserves by running a current account deficit increases the U.S. net debt position, whereas supplying these through the capital account does not. 22. See for example Stiglitz, “Commission of Experts”; Ocampo, “The Instability and Inequities of the Global Reserve System”; and Williamson, “Understanding Special Drawing Rights.” 23. When SDRs were created countries did not want the General and SDR accounts to commingle for fear that the SDR “experiment” would fail. Since currently each account has a cap on the obligations that members have to the Fund, combining them would provide more discretion in how members’ obligations are fulfilled (e.g. a given country could have more obligation to convert SDRs to hard currency and less to lend). For more detail see Polak, “Streamlining the Financial Structure,” and Ocampo, “Instability and Inequities.”