by Alan Wheatley and Simon Rabinovitch
November 18, 2009 (BusinessDay) — The imperative of greater global currency stability meant the world could no longer rely, as it had done since the end of the gold standard, on a currency issued by a single country, the head of the IMF said yesterday.

Dominique Strauss-Kahn, MD of the International Monetary Fund, restated his view that a new global currency might evolve out of the Special Drawing Right, the fund’s in-house unit of account.

“That probably has to be a basket,” Strauss-Kahn said of the eventual replacement for the dollar. “In a globalised world there is no domestic solution,” he said yesterday.

…Strauss-Kahn reiterated the message that has been a constant refrain during his visit to China — that Beijing needs a stronger yuan as part of a package of policies to help rebalance its economy by promoting domestic demand. “For us, because it just is consistent with the new economic policy in China, the sooner the better. How fast? It will take time. It is not something which will change in one step overnight,” Strauss-Kahn said…

“It is now time for China, having accumulated a lot of advantages from an undervalued currency, to look more forward to investment and long-term stability, and this long-term stability goes with getting rid of this distortion,” he said.

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A couple thoughts: As I’ve said in the past, the issue of a “global currency” is a non-starter. It is really a matter of reaching consensus on a global (universally acceptable and exchangeable) reserve asset. And any time the IMF’s Special Drawing Right (SDR) is put forward as an alternative in speeches like this, it is done merely as a politically-correct talking point — meant to advance the policy discussion without actually naming the de facto alternative (gold) in the process.

And as for the part about not being something that can change in a single step overnight, be advised that the process of transition has been underway step by step for decades, and now remains just a singular “giant (foot)step” away from inauguration.

R.