Posted by Jim Lindgren:
A New World Currency to Replace the Dollar.
http://volokh.com/archives/archive_2009_03_22-2009_03_28.shtml#1237910537
[1]China and [2]Russia are proposing a new world reserve currency to
replace the dollar. It would be in essence a basket of all major
currencies.
This is an old idea, but its [3]recent reintroduction is thought to
reflect unease with the US-triggered recession and the US�s
potentially inflationary response to that recession.
China�s central bank on Monday proposed replacing the US dollar as
the international reserve currency with a new global system
controlled by the International Monetary Fund.
In an essay posted on the People�s Bank of China�s website, Zhou
Xiaochuan, the central bank�s governor, said the goal would be to
create a reserve currency �that is disconnected from individual
nations and is able to remain stable in the long run, thus removing
the inherent deficiencies caused by using credit-based national
currencies�.
�This is a clear sign that China, as the largest holder of US
dollar financial assets, is concerned about the potential
inflationary risk of the US Federal Reserve printing money,� said
Qu Hongbin, chief China economist for HSBC. . . .
�The outbreak of the [current] crisis and its spillover to the
entire world reflected the inherent vulnerabilities and systemic
risks in the existing international monetary system,� Mr Zhou
wrote.
At first glance, it would seem that such a new currency would be very
bad for the US, its dollar, and its staggering recent increases in
debt.
Whether replacing the dollar as the reserve currency would be bad for
the rest of the world is hard to say. Despite President Obama's being
a strong internationalist, I doubt that he will be significantly more
positive about the prospect of a new world currency than Geithner and
Bernanke are -- and both of them are negative on the idea.
This possibility is yet one more reason why the US Treasury should be
issuing [4]lots of 30, 50, and [5]100-year bonds while interest rates
are still low. And then we need to stop the Federal Reserve from
buying them!
References
1. http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html
2. http://www.themoscowtimes.com/article/600/42/375364.htm
3. http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html
4. http://volokh.com/posts/1228979110.shtml
5.
http://www.bloomberg.com/apps/news?pid=20601087&sid=azGBEQQJhY24&refer=home
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