This is the Cato Daily Podcast for Wednesday, April 22nd, 2009.

I'm Caleb Brown.

The search for a new reserve currency in the face of a faltering dollar may be driven

by a lack of clarity and some wishful thinking, especially

with a possible replacement, special drawing rights are susceptible to the same problems

as the dollar.

That's according to Swami Ayer, a research fellow at the Cato Institute's

Center for Global Liberty and Prosperity.

There are some developing countries which simply sees special drawing rights as a way of getting free extra money at a time and some of them are under great financial strain.

But over and above that,

that look, I have two trillion dollars worth of Forex reserves.

Two-thirds of these are in dollar securities.

And when I look at Obama printing notes like mad I wonder

whether or not the dollar is going to collapse and because of the fear that the

dollar might collapse it would mean the value of China's foreign exchange

reserves collapse is too so there is a side it would mean the value of China's foreign exchange reserves collapses too.

So there is this idea that what about creating some new international currency

so that I can diversify the holding of my foreign exchange reserves.

And this is a problem faced obviously, not just by China, but by lots of other people.

For this reason, there is this new interest in going back to this old idea of trying to create an international

currency as a form of reserve diversification.

SDRs are simply claims on the currencies of a group of countries.

...