Calls for reforming the global financial system appear easier than any attempt to do so. It has faced terrible consequences. In the wake of the recent crisis, investors have opted for commodities and other safe assets to park their hard earned wealth.
On 15 August 1971, as the US public finances were under pressure because of the cost of the war in Vietnam, Richard Nixon finally de-linked the US dollar with gold. Before that US Treasury was bound to exchange an ounce of gold with central banks. “First you allow a fiat currency to become a global reserve currency and force weaker countries to buy its securities or be bombed,” said Ahmed Sarosh, an economist living in Canada. The bombing of any alternative financial idea is not fiction. Citing the example of Iraq, Sarosh said, when Saddam Hussain decided to convert his oil dealings in Euros from Dollars, havoc was wreaked on his country and Iraq was turned into an “example”.
Another economist, Muhammad Saad Khan, was also of the same opinion regarding Libya. “Gaddafi was trying to form African union which would have based its trading in terms of gold,” he informed, adding that Gaddafi was also in talks with Russia, China and India to trade oil for gold. “Gaddafi’s plan to re-price his oil or any other commodity selling in the international market and accept something else as payment would certainly have sent shockwaves to the power centers today, who are responsible for controlling the world’s central banks,” Saad maintained.
Later on, the charges were proved to be unsubstantial and it seemed that they were made after his calls for reforming the global financial system and to further prevent him from ascending to French presidency, a position from which he could advocate the said change in a more aggressive manner. Even before this warning by DSK, in a radical report, the UN Conference on Trade and Development cautioned in September 2009 and said the system of currencies and capital rules of the world economy is not working properly, and was largely responsible for the financial and economic crises. Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability, said Detlef Kotte, one of the authors of the report. “The present setup, under which the dollar has this forced privilege as the world’s reserve currency, should be subjected to complete reassessment,” Saad opined, adding that it is pertinent to mention that Iran has been silently stockpiling on gold in recent years, in an attempt to reduce its dollar holdings and thus protect its reserves from being seized. Other significant buyers of gold include China, Russia and India,” Saad added.
According to IMF data the Gold reserves held by Libya are substantial, ranking in the global top 25. Libya holds more bullion as a proportion of gross domestic product than any country except Lebanon, according to the London-based World Gold Council using January data from the IMF. Sometime back, the ex-IMF chief Strauss Kahn also called for the reform of the International monetary system. On February 10, 2011 he warned that lack of action to reform the international monetary system could sow the seeds for next crisis, and called for renewed international cooperation for a better and stronger global recovery. He said that “reforms to the international monetary system could both bolster the recovery and strengthen the system’s ability to prevent future crises.” He emphasized three points: strengthening policy cooperation; reducing capital flow and exchange rate volatility; enhancing liquidity provision in times of extreme volatility. In May 2011, Strauss-Kahn was arrested in New York City and charged with the sexual assault of a housekeeper who entered his Sofitel hotel suite.
