190 THE BiG DROP
are also four different scenarios for the future of the interna-
tional monetary system.■ The Kumbaya Solution
One is the world of multiple reserve currencies where the dollar
is still used. In the last ten years, the dollar has gone from 70
percent of global reserves to sixty percent. Imagine that continu-
ing below fifty, down to forty-five. Maybe the Euro increases to
thirty-five percent of global reserves and the roles of the Swiss
Franc and the Japanese Yen as global reserve currencies increase
as well. I call this the “kumbaya solution” — where all of these
currencies get along.
I think that’s extremely unstable because the system would
not be anchored to anything. Instead of one central bank, like
the Fed, behaving badly, we’d have five or six central banks
behaving badly.■ A New Gold Standard
The second scenario is a gold standard. There’s not a central
bank in the world that wants a gold standard, but they may be
forced to do it to restore confidence. That’s a possibility. If they
go back to a gold standard, they have to get the price right and
there is a calculation.
It is arranged depending on how much gold backing you
want depending on if you’re talking about M0, M1 or M2 and
which countries are involved.■ Special Drawing Rights
The third scenario is a world of SDRs. I believe this is the most
likely outcome.