Since the early 1970s policymakers have raised the idea of substituting SDRs for dollars. SDRs, created by the IMF in the late 1960s, are a weighted combination of major currencies and are issued by the IMF. George Shultz, Nixon’s highly respected Secretary of the Treasury, offered such a plan in 1972 shortly after Nixon broke the link between the dollar and gold, the result of the U.S. having printed too many dollars and lacking the gold to back them all up.
In the more than four decades of floating currencies since then, there have periodically been calls for SDRs to replace dollars and – especially in the double-digit inflation of the late 1970s – calls to reinstate a gold standard that would have backed SDR’s. The IMF has occasionally issued SDRs, but even at the worst moment of the recent crisis, the amount issued hardly qualified as more than a token gesture.
As they’re currently constituted, SDRs don’t come close to a potential game saver. (For an excellent history of SDRs, I highly recommend a recent account by Mr. Middelkoop, founder of the Commodity Discovery Fund.) As of now, SDRs are weighted among the dollar, euro, yen, and pound. The two ostensible advantages – that they’re issued by the IMF and that it’s a melded currency – amount to nothing. If you put four bad actors together, you don’t get Citizen Kane or the Godfather, you get a junky film. And even if it’s distributed by some high-minded non-profit studio as a public service to entertain the public, it won’t accomplish anything if no one wants to come out to watch a bunch of junk.