AI-Summary – News For Tomorrow
The rise of China and other Asian economies is challenging the US dollar’s dominance in global trade. Emerging nations are exploring alternative currencies like the rupee and yuan for trade, and some are reducing their holdings of US securities. This shift towards a multipolar global economy necessitates strategic changes. This includes diversifying trading partners to build a stronger economic safety net. The International Monetary Fund’s Special Drawing Rights (SDRs), allocated to member countries based on their IMF quota, are also being discussed as potential international trading reserves.
News summary provided by Gemini AI.
Indeed, the emergence of China as the manufacturing centre of the world has attracted the ire of President Trump as he seeks to rebalance the current trade deficit of the US; also attracting his ire is that Asian countries are also on the rise economically.
What is significant is the move by the emerging countries to replace the US dollar as the major reserve trading currency. We see India trading with some in rupees and China is buying oil from Russia in yuan. Also, India is reducing its stock of US securities.
Strategic changes necessary in T&T
Hence, there are strategic changes necessary in T&T’s economy as the world moves into this multipolar global economic system.
This, besides widening our trading vista, provides us with a wider economic safety net.
However, there is a discussion taking place on the use of SDRs (IMF special drawing rights) as international trading reserves. It is useful to quickly define what SDRs are and their current role as defined by the IMF.
When a member country joins the IMF, it pays to the IMF a financial quota, a sum of money that depends on the size of its economy.
These sums of money from the members make up the resources of the IMF, which can in turn be lent to members to satisfy various demands of the country. On joining (after the concept of the SDR was done in 1969) the country is awarded a number of SDRs based on the relative value of its quota payment.
Thus, a country includes its SDRs as part of its economic reserves, which it can cash in when economic circumstances warrant it.
The following is a quote from the paper “A Currency System for a Multi-Polar World” by Joseph E Gagnon (PIIE)
