CIAO DATE: 12/2009
September 2009
Peterson Institute for International Economics
In a recent Cato Institute paper, Swaminathan S. Anklesaria Aiyar (2009) asserts that the International Monetary Fund’s special drawing rights (SDRs) cannot rival the US dollar, as suggested by the Chinese central bank governor (Zhou Xiaochuan 2009). “The SDR is not a currency and never can be,” Swami declares confidently in the first paragraph of his paper. He presents two arguments, which are presumably supposed to be proofs of this proposition. In the next paragraph, he tells us: "…its value is defined as the value of a weighted basket of four currencies…. Its value fluctuates with the value of its constituent currencies. This should make it clear that the SDR is not a currency in its own right. Rather, it is a derivative of four national currencies. A derivative is not a currency."
Resource link: Why SDRs Could Rival the Dollar [PDF] - 150K