WOCU White Paper - 'Retooling global development: A matter of TrUSt'
by Silvano Stagni
Towards the end of June 2010 the UN published a paper called ‘Retooling Global Development’, this white paper aims to continue the ‘conversation’ initiated by that document and bring it one step forward. According to the UN the ‘retooled global development model’ moves away from the US Dollar as a reference currency, they’d rather promote the use of a unit that derives its value from a basket of currency, their suggestion: the SDR.
This white paper is not an attack on the SDR nor on the US Dollar. This paper aims to show how the WOCU provides a better solution than, and to move away from, the concept of reference currency or ‘refuge’ currency (currently the US Dollar being the most widely used one for that purpose).
Rich and poor countries need to move away from relying on a ‘third party tool’ for their international trade. The demand for the commodities extracted in their territory and therefore their balance of payment (and in some cases their creditworthiness) may sometimes depend on the fortune of something they cannot control.
The UN makes a valid point on the need to ‘retool global development’ let’s take a look at three key components of the toolkit required to achieve the goal. The following chapters aim to make quantitative and qualitative arguments for TrUSt, i.e. Transparency, Usability and Stability.
In the following pages, we shall show that the WOCU is more worthy of TrUSt than the SDR. Both derive their value from a basket of currencies, but here the similarity ends.