The List

The List: Ditching the Dollar

Your guide to the latest international currency schemes.


What? A global supercurrency to supplant the dollar

The details: Last month, the governor of China's central bank, Zhou Xiaochuan, sent shock waves through the political and financial worlds by suggesting the world's largest foreign holder of U.S. dollars supported the creation of a new global reserve currency.

In an essay published in both Chinese and English, Zhou, without ever mentioning the greenback, articulated concerns about the inherent vulnerabilities and systemic risks in the existing international monetary system. The world needs a reserve currency disconnected from individual nations and... able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies, the essay went on to state.

Zhou recommended building on an existing asset and exchange system, a kind of synthetic currency that the International Monetary Fund (IMF) created in 1969. In the special drawing rights (SDR) program, the 185 IMF member states fund a pool of money that the IMF distributes in shares, or SDRs. This currency could be used for government finance, trade transactions, pricing commodities, and international accounting. G-20 leaders expanded the SDR pool by $250 billion at their recent meeting.

The suggestion comes as the Chinese government attempts to push the renminbi, whose principal unit is the yuan, as a reserve currency in Asia. In past months, China has completed currency swaps with Argentina, Belarus, Indonesia, Malaysia, and South Korea, among others; these allow China's trading partners to buy Chinese goods with the renminbi, rather than the dollar. Soon, some economists predict, the renminbi may become the de facto pan-Asian reserve currency and a much bigger global player.

China Photos/Getty Images 


What? A global supercurrency similar to the Chinese proposal

The details: Speaking in Moscow last month, Russian President Dmitry Medvedev put his support for supplanting the dollar in stark terms: Many of our partners maintain the point of view that everything is fine in this area, that all that is needed is a slight strengthening of major worldwide currencies, including the dollar. We hold another point of view. He strongly reiterated this idea at the G-20 conference.

Medvedev seconded China's support for expanding the IMF's special drawing rights program. He said the ruble, renminbi, and gold should join the dollar, euro, and pound -- the primary reserve currencies for the past 50 years -- in a multicurrency basket pricing the SDR.

The inclusion of gold bullion in the currency basket caused a press kerfuffle; numerous articles described Medvedev and Arkady Dvorkovich, the Russian government's chief economic advisor, as supporting a gold standard. In fairness, John Maynard Keynes and Franklin D. Roosevelt themselves recommended basing global reserve values on the price of gold and other commodities.



What? The sucre, a South American bloc currency

The details: At a regional summit last November, Venezuelan President Hugo Chvez called for the creation of an EU-type monetary zone and adoption of the sucre, a regional currency, to reduce dependence on the dollar. Chvez addressed leaders from the Bolivarian Alternative for the Americas (ALBA) trade bloc, which includes Venezuela, along with Bolivia, Cuba, Dominica, Honduras, and Nicaragua.

The proposal came with a heaping dose of criticism for the United States and other G-20 countries, which Chvez accused of purposely suppressing developing economies. He also recommended that South American countries abandon the IMF, an imperialist hand to dominate us.

We're not going to wait here with our arms crossed for the World Bank or the International Monetary Fund to come and solve the problems that this great threat [the United States] unleashed on the world, he said. The hegemony of the dollar must end, he added.

ALBA members seem to be in favor, agreeing in principle to developing the sucre within two or three years.



What? A common currency for Central Asia

The details: Iranian President Mahmoud Ahmadinejad suggested in March that the Economic Cooperation Organization (ECO) trade bloc -- Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan -- take up a common currency when it debuts its planned free trade zone in 2015. The process of obtaining one single currency in the trade and exchanges among members, and in the next stages with other countries and neighbors, should be designed, he said.

After the collapse of the closed socialist economy, the capitalist economy is also on the verge of collapse, Ahmadinejad said, railing against the hegemony of the dollar in foreign trade.

Were the ECO bloc to take up a common currency, it would rival the euro in its scope; the countries together have about 420 million people. Representatives from Kazakhstan and Turkmenistan seemed to support the general idea, and the topic will be taken up again at the ECO's next convention, in 2010.



What? The acmetal, a global currency

The details: In March, Kazakh President Nursultan Nazarbayev, speaking from the capital city of Astana, called for the creation of a world currency called the acmetal, a word coined from acme and capital.

There is no other choice available to us, if we really intend to utilize effectively this unique opportunity of overcoming the shortcomings of the Old World and building up a New one, the strongman opined in a pre-translated report. It went on to state, It so happened that the whole of our world has somehow unexpectedly and imperceptibly got into the tunnel of global crisis from where nobody is able to see where is the 'exit'.

The Kazakh leader described how the G-8 or G-20 countries could band together to create a transitional currency, the transital, before full global adoption of the acmetal. He also described a putative new world order brought on by the currency scheme: acmetalism.

Proposing new currencies is something of a hobby for Nazarbayev, who has advocated a Central Asian regional currency plan since 2003. He has called for the adoption of the altyn or yevraz in the Eurasian Economic Community (EEC), which includes Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. Moscow takes these suggestions as a slight, though. It has proposed that the EEC states band together and adopt the Russian ruble.


The List

The List: Globalized Motors

As sagging demand in the United States and Western Europe has pushed General Motors into bankruptcy, the auto behemoth has actually been expanding in emerging markets and building new factories.


Recent moves: In September 2008, GM launched the construction of a $250 million corporate campus in Shanghai. In two years, GM plans to introduce its new electric model, the Chevy Volt, to the Chinese market.

Signs of success? It's safe to say that if GM survives, it will have China to thank. For years, the company's Chinese division has been a lone bright spot in its mostly bleak portfolio. In 2008, GM's sales in China rose 6 percent (albeit, down from an incredible 18.5 percent the year before) to 1.1 million vehicles while worldwide sales fell 11 percent. All told, GM invests about $1 billion per year to expand production in the world's fastest-growing car market. It boasts 10 wholly and jointly owned subsidiaries with more than 20,000 employees and is the country's largest automaker.

Unfortunately, even the Chinese division has been losing a bit of luster lately with too many brands and its popular Buick models losing out to Japanese competitors. But GM did catch a break from Beijing's stimulus plan, which subsidizes van purchases by as much as $1,170. With van sales rising 30 percent in the two months after it was announced, this intervention has already proven more valuable to the company than the billions provided by U.S. taxpayers.

STR/AFP/Getty Images


Recent moves: In April 2008, GM announced a plan to build a $200 million engine plant in Joinville, Brazil. The plant is scheduled to be operational by the end of 2009 and will manufacture flex-fuel engines for the ethanol-dependent Brazilian car market.

Signs of success? GM has been doing business in Brazil since 1925, and its GM do Brasil subsidiary is its third largest in the world. GM's Brazilian sales jumped 18 percent to nearly half a million vehicles in 2007. Interestingly, GM's new chief executive, Fritz Henderson, made his reputation as president of GM do Brasil in the late 1980s and early 1990s, transforming it from a backwater into a $1 billion a year business that top executives called a model for GM's future. Brazil is understandably concerned about the future of GM -- the country's stock market fell 3 points after the company's restructuring plan was rejected by the U.S. government -- and announced new tax breaks for automakers this week.



Recent moves: GM opened a second plant in India in September 2008, bringing its production capacity there to 225,000 vehicles per year. It also announced plans to double the number of dealerships and service centers throughout the country.

Signs of success? GM India, a wholly owned subsidiary producing Chevrolet models, was established in 2004 and has enjoyed years of double-digit growth. Despite the global recession, GM India experienced 20 percent growth in sales in 2008. Although that figure is expected to fall this year, the subsidiary remains bullish about its future and is planning to launch a new minicar to compete with Tata's $2,000 Nano. As for the new plant, it represents is an effort by GM, along with Tata, Volkswagen, and others, to establish a presence in Pune, a fast-growing manufacturing hub two hours outside of Mumbai. Soon after the deal was inked, one Indian industrial official predicted that soon, Detroit will call itself the Pune of the U.S.

PAL PILLAI/AFP/Getty Images 


Recent moves: In November 2008, GM opened a $300 million plant on the outskirts of St. Petersburg that will produce 70,000 cars per year.

Signs of success? Just a few days after attacking U.S. foreign policy and vowing to station missiles on Europe's doorstep, Russian President Dmitry Medvedev was cutting a ribbon at the opening of GM's first Russian plant, praising it as an example of U.S.-Russian cooperation. GM's sales in Russia grew 73 percent between 2005 and 2007, giving the company an 11 percent market share of what was, before the crash, predicted to become Europe's largest car market by 2009. Unlike other emerging markets, where GM owes much of its success to compact cars and light trucks, GM has scored in Russia by selling SUVs and Hummers to the country's newly rich. The good times couldn't last forever, though. The Ministry of Industry and Trade predicts Russian car sales will fall 60 percent in 2009.



Recent moves: On March 26 of this year, UZ-Daewoo, a venture partly owned by GM through its Korean subsidiary Daewoo, announced a plan to open a new car plant in Tashkent, the capital of Uzbekistan, to produce 15,000 Chevrolets per year and create 1,200 jobs.

Signs of success? Along with local partner Uzavtosanoat, GM has been producing Chevrolet and Daewoo models in Uzbekistan for sale domestically and throughout Central Asia since 2007. It produced 200,000 vehicles in the country in 2008. Speaking in Uzbekistan at a ceremony for the creation of GM Uzbekistan, recently ousted chief executive Rick Wagoner described the region as one of the world's fastest-growing markets. To support its growth in Uzbekistan, GM established a powertrain partnership in 2008 with the goal of eventually building 360,000 engines per year for Uzbekistan and regional export. GM may be coming to regret its Uzbek gamble, however. Production at its factory in Astana fell 14 percent in the first two months of 2009 thanks to sagging demand from Russia.

U.S. Embassy, Uzbekistan