World Bank and IMF Join Global Attack on the Dollar

In my emails to you over the past couple of weeks, I’ve shown you why Washington has no choice but to devalue the dollar — and how global leaders and even the United Nations have joined the attack on the greenback by demanding it be replaced as the world’s reserve currency.

Now, just this week, the International Monetary Fund and the World Bank have begun adding their voices to the international choir calling for a new global reserve currency:

Last week, World Bank President Robert Zoellick warned that the dollar’s status will be challenged and shouldn’t be taken for granted.

According to Turkish Deputy Prime Minister Ali Babacan, it’s likely that the role of special drawing rights (SDRs) based on a basket of currencies will be discussed as an alternative to the dollar during meetings of the World Bank and IMF in Istanbul next week.

Meanwhile, global governments, central banks, companies and investors continue to slash their dollar holdings. According to the IMF, in April through June of this year, the greenback’s share of global currency reserves fell to the lowest level in a decade. Holdings of euros, in contrast, rose to a new all-time record high.

All this adds weight and momentum to the devaluation of the dollar. It is DEFINITELY ON THE TABLE. Indeed, for the first time I can remember, the G-7 finance officials, meeting this weekend, are rumored to be breaking with tradition and choosing not to release a statement on the global economy and currencies.

I feel this is an extremely significant development: At last week’s G-20 meeting, the group officially anointed itself as being in charge of global economic affairs.

Plus, we now have the G-7 refusing to discuss the dollar, which is highly unusual. Many will say that, if the G-7 does indeed refuse to comment on the dollar at this weekend’s meeting, it’s merely a sign they’re beginning to turn the reigns over to the G-20 for currency matters.

Baloney! The G-7 WILL discuss the huge “global economic imbalances” in the world. And to me, that’s code talk for a currency devaluation on the agenda. Members of the G-7 ARE discussing it. They’re just NOT doing it in public.

It reminds me of the 1985 Plaza Accord, where James Baker committed the U.S. to a depreciating dollar, bulldozing over our creditors, and ultimately precipitating the ‘87 crash.

The difference: Back then the U.S. was in a position to lead the devaluation. Today, it’s not. Today, our creditors are going to bulldoze over us.

by Larry Edelson 10-04-09