IMF’s Lipsky-Reserves may be unable to meet needs

JACKSON HOLE, Wyo., Aug 28 (BestGrowthStock) – There is some
question about whether existing currency reserves can meet the
demands of nations gathering reserves, the International
Monetary Fund’s First Deputy Managing Director John Lipsky said
on Saturday.

“With concerns rising about sovereign balance sheets,
however, there may be limits regarding how far existing reserve
assets will meet the needs of reserve accumulators,” he said,
speaking at a Federal Reserve conference.

Lipsky said the U.S. dollar’s role in meeting demand for
reserves was not in question, but that there might be room for
a gradual move to provide alternatives.

“There is no doubt regarding the dollar’s dominant role for
years to come,” he said.

“But an evolutionary process toward increased (IMF Special
Drawing Rights) use could be feasible and worthwhile. More
frequent SDR allocations could expand the pool of such assets
available for external financing,” he added.

Some economists see the massive accumulation of currency
reserves by exporters like China as one of the causes of the
recent global financial crisis.

The reserves were often reinvested in U.S. dollar assets,
which helped keep U.S. interest rates low and, along with weak
lending oversight, fueled the U.S. housing bubble.

The IMF has called upon the its member nations to increase
the amount of capital it can deploy in times of crisis. The
Fund wants to dissuade countries like China from building big
currency war chests by convincing them that the IMF could come
to their aid in times of need.

(Reporting by Mark Felsenthal, Editing by Chizu Nomiyama)

IMF’s Lipsky-Reserves may be unable to meet needs