International Economics Essay Example | Topics and Well Written Essays - 4000 words

International Economics - Essay ExampleAs a substitute, the United Nations supports the wiz-valued function of special drawing rights (SDRs), a creation of the International M iodintary Fund (IMF) a proposal back up by Russia (Bryanski, 2009). The SDR is the designated multinational reserve asset that is the unit of payment on IMF loans it has an advantage over the US dollar in that its valuation is calibrated against a basked of currencies, rather than on the up-to-dateness of a single country. Preferably, however, the UN recommends the establishment of a new reserve system that is not based on just one or even several currencies, but should instead serve the need for stable international liquidity.In response, several European officials expressed their disagreement, citing the market as the ultimate determinant of which currencies countries would hold in reserve. several(prenominal) have voiced the concern that political or administrative decisions cannot reformulate the worl ds currency system (Vayrynen, in Charbonneau, 2010), and in the entire post-war period the currency exchange system had been based on the U.S. dollar (Sundaram, in Charbonneau, 2010). EU officials fear that any intervention by an administrative body into the kit and caboodle of the market would just create additional problems and would make things even less predictable (Piebalgs, in Charbonneau, 2010). well-nigh simply reject the idea of an artificial currency as the SDR as the reserve currency of the international financial system, stating that it is a non-starter because it is created by political decision making (Al-Jasser, in Kessler, 2009).Based on this scenario, whatsoever sectors have voiced the possibility that the yuan (or renminbi), the currency of China, may in the span of a decennium gain the status of reserve currency and present itself as a suitable alternative to stand in the U.S. dollar. Supporters cite the relative stability of the Yuan during the recent financi al crisis, saying that it is a better carrier of value than the dollar. This