UN pushes for new global reserve system

A UN panel of expert economists has pressed for a new global currency reserve system to replace the unstable, dollar-based scheme.

"A new Global Reserve System -- what may be viewed as a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity," the panel said on Thursday. 

As part of several recommendations to tackle the global financial crisis, the panel also noted that a recovery would require all developed countries, in the short term, to take 'strong, coordinated and effective actions to stimulate their economies'. 

The commission, led by prominent US economist Joseph Stiglitz -- a frequent critic of globalization and uncontrolled free markets, is primarily aimed at finding solutions for developing countries. 

Stiglitz, the 2001 Nobel economics laureate, told a press conference on Thursday that there is 'a growing consensus that there are problems with the dollar reserve system'. 

He noted that such a system was 'relatively volatile, deflationary, unstable and (had) inequity associated with it'. 

This week, China's central bank chief Zhou Xiaochuan suggested the dollar could be replaced as a reserve currency by an International Monetary Fund (IMF) basket comprising dollars, euros, sterling and yen, saying that such a system would not be easily influenced by individual countries.