World leaders of the 20 most
powerful and emerging nations met in London on April 2, 2009 to decide the course of
action to tackle the worst economic crisis in two generations. The whole
world, particularly the economists, business leaders, and finally the political
leaders, looked for some positives; the most important step was to
announce a $1.2 tn investment to be made by the G20 nations to rev up the
world economy—a step that was also the most publicized one. While this
positive hype came like a tonic for a sick person, it was necessary, as this
author pointed out in his address to the international conference in end
January, as negative reporting by the media, both print and electronic, was
one of the many reasons for the snowballing of the subprime crisis.
World leaders at the G20 meeting agreed to create new
international money worth $250 bn. The IMF will oversee the new money called
SDRs (Special Drawing Rights). Many believe and particularly China
hopes that SDRs will some day replace the US dollar as the main world
reserve currency. There are many economists who are
skeptical and doubtful whether SDRs can do so or whether
it will remain as a derivative of US dollar. But
China, being the second largest economy and a
nation-state least affected by the economic
meltdown, has a vested interest in making the SDR the world currency and there
are valid reason for the same. They have a huge reserve in
US dollar, and any substantial depreciation of the
currency will affect the country the most.
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