UN report calls for replacement of dollar as international standard

The dollar has proved to be an unreliable international currency and should be replaced by a more stable system, says a UN report. In a report released Tuesday, the United Nations Department of Economic and Social Affairs said, "The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency."

With the US economy in recession, the report said, the use of the dollar as international currency has come under increasing scrutiny.

Many Asian countries, the report notes, have built up massive dollar reserves, as a result of which the currencies of those countries have become undervalued decreasing their ability to import goods from abroad.

''The World Economic and Social Survey 2010'' report supports a proposal once advocated  by the International Monetary Fund – creation of a standardised international system for liquidity transfer.

Under the system, countries would no longer need to buy up foreign currencies, as China has long done with the US dollar. In its place, they would accumulate the right to claim foreign currencies, or special drawing rights, or SDRs, rather than the currencies themselves.

The special drawing rights would be backed by a basket of currencies, making for less susceptibility to volatility in any one currency. And given the value of a special drawing right is defined by the IMF, value changes of any once currency could be adjusted for.

The initiatives enjoy full support of Ban Ki-moon, UN secretary general and are meant to help sustain the international trade and financial systems, to allow participation from less-developed countries and help them integrate into the global economy.