International money can save the world, thinks Soros

George Soros, a financial expert and a chairman of the Board at Soros Fund Management, made his proposal on how the crisis should be opposed by the states. He mentioned the system of Special Drawing Rights (SDR) to allow circumferential countries to cope with the downturn. Special Drawing Rights system was created in 1969 and it has been used by the IMF for international payments.

Soros noted that the current crisis revealed the error of the whole financial system as long as the downturn itself originated in the U.S. while the main weight falls on circumferential states. He says that the damage caused to those countries has not been fully realized yet. Circumferential countries are losing their capital, they can hardly refinance the credits while exports are suffering lack of floating assets. These states need an opportunity to obtain substantial short term investments in a short time as well as to gain access to long term financing.

Those money available at IMF ($200 billion) are absolutely not enough to help circumferential states. That is why Soros offers to create more money. He is sure that SDR won't have an adverse effect on the short term liquidity while it will be very useful for the circumferential countries to conduct business cycle policy if rich countries loan or donate their limits on SDR to poor states. If SDR takes a wide breadth and extends to $1 trillion then rich countries will be recompensed as long as their investments will stimulate world economy and support their export markets.

Among other measures that could be taken Soros also noted that leading countries have to provide guarantees within the frame of the coherent limits on long term state obligations of circumferential countries. Besides, he thinks that rich states can invest part of their currency reserves and independent funds into the long term state obligations of the less developed countries. Soros also said that with the regular surplus can make additional investment into the IMF's Short Term Liquidity facility.