Ickyma posted about the decline of the dollar yesterday, and today comes a report that a UN official has also suggested a new reserve currency:

UN calls for new reserve currency

Speaking at the annual meetings of the International Monetary Fund and World Bank in Istanbul, UN undersecretary-general for economic and social affairs, Sha Zukang, said:

"Important progress in managing imbalances can be made by reducing the reserve currency country's 'privilege' to run external deficits in order to provide international liquidity," ... "It is timely to emphasise that such a system also creates a more equitable method of sharing the seigniorage derived from providing global liquidity."

But Luis Souza says talk of "Secret Discussions" is bunk:

A Change Coming to the World Monetary System?

There's nothing secret about the Khaleeji or about the currency swap agreements China is making with its closest trade partners. Even if the news really originated from Chinese officials, it should be taken more as pressure on the US than anything else. The only reason for these nations to work on their own is in case the US is unwilling to cooperate, which doesn't make much sense. Cooperating with the lender nations is the best way to avoid the dollar's collapse. The lender nations will possibly first de-peg their currencies from the dollar and peg them to the SDR (the IMF's Special Drawing Rights). This still leaves a lot of control for the US, given that the dollar still makes up more than 40% of the SDR. Afterwards the lender nations could slowly enter the SDR with small weights and then expand from there (the Khaleeji, the Real, the Ruble and the Yuan should be the first to enter the SDR).

Souza continues to what he sees as the deeper problem:

Going back to the SDR, kicking the problem upstairs can indeed deal with the dollar's expiration as world reserve currency. A new reserve currency system seems to be well on its way to development, similar in approach to the old Ecu. Such a development might make way for an orderly shift away from the dollar.

But as I wrote last time on this issue, there's more to this problem than simply finding a new reserve currency system. What Rickards seems not yet to be aware of is that the problems the US is facing today may soon become common to all other international players, even those adopting the SDR as reserve currency. What if there's no more growth, in physical terms?

If the flows of energy and matter to the economy fail to grow during an extended period of time, Central Banks will be caught between a rock and a hard place; they can either continue with present expansionist policies and be left powerless to the degradation of their currencies (and rise of precious metals) or they can limit the abstract currency supply and treat it essentially as a commodity currency. Whatever the option, in the long run, Central Banks will be dealing with limited supply currencies.

In the case of gold, Central Banks still have some options, like opening the Mints and mobilizing the dozens of tons of monetary jewelry worldwide into the bullion pool, thus effectively expanding supply (and even increasing velocity). But for the other precious metals this is not an option. Silver, for instance, may become a serious problem. Industrial usage depleted the world stock to the point that in weight terms, it is now down to less than a sixth of the world gold stock[1]; compounding that is the traditional lack of silver reserves at Central Banks. Silver is easy to falsify, having a density similar to that of lead, but in small bullion pieces it is still safe. With newer precious metals such as palladium or platinum the situation is similar. Platinum especially is even denser than gold and also impossible to falsify in practical terms.

The End of Growth may bring to an end a monetary system that existed during a brief period of time from a historical perspective--officially during the last four decades--in practice since WWII. It was fed by growth and in its turn fed growth itself, in a feedback loop that brought about the world of today--a world that tomorrow will be the past.