Last Call

In a statement that's sure to drive the Wingers insane, the UN is again calling for the greenback to be replaced as the de facto world currency for the second time in six months.

The United Nations Conference on Trade and Development said in a report published Monday that the U.S. dollar should be replaced as the world’s standard reserve currency, giving rise to a new global currency managed by an as-yet undetermined financial regulatory organization.

Heiner Flassbeck, director of the conference, told Bloomberg News that changes needed in the world’s financial systems rival the scope of the Bretton Woods or European Monetary System agreements.

The Bretton Woods agreement established in 1944 the International Monetary Fund and World Bank, following allied victory in World War II.

“[The] dominance of the dollar as the main means of international payments [has] played an important role in the build-up of the global imbalances in the run-up to the financial crisis,” the report says. “Another disadvantage of the current international reserve system is that it imposes a greater adjustment burden on deficit countries (except if it is a country issuing a reserve currency) than on surplus countries.”

The UN adds: “Such a multilateral system would tackle the problem of destabilizing capital flows at its source. It would remove a major incentive for speculation and ensure that monetary factors do not stand in the way of achieving a level playing field for international trade. It would also get rid of debt traps and counterproductive conditionality. The last point is perhaps the most important one: countries facing strong depreciation pressure would automatically receive the required assistance once a sustainable level of the exchange rate had been reached in the form of swap agreements or direct intervention by the counterparty.”

The move should not be surprising to observers of global economics, as a U.N. panel of currency experts came to the same conclusion in March, according to Reuters.

Frankly, the UN is simply being honest: having the dollar as the world reserve currency is one major reason why our financial crisis became a global systemic one. The rest of the world is tired of footing the bill for us, especially the Chinese. If everybody else decides to go with another world currency, then America is done for, we become a third world country overnight.

That date is coming closer, frankly. I think it's a question of when, not if. Between this and the Chinese complaining earlier today, gold has shot up above $1,000 an ounce and may hit much, much higher.

What recovery?