Curt Here....
Russia was the first major member of the G20 to publicly advocate for a new global reserve currency and now China appears ready to discuss this possibility also at the upcoming G20 summit. I found it rather interesting and not all that surprising that Russia would be the first to push for this idea do to the fact that Russia's economic situation over the last few months has gone from bad to worst.
China on the other hand, alarms me. Mainly due to the fact that China has been a big buyer of the United States debt over the years. If China suddenly decides to quit buying our debt, especially at the alarming rate in which we are creating it today, than the US dollar is done. If this new reserve currency replaces the dollar as the major world currency than things are going to get crazy here in US and fast. For China to even be considering this idea, should be an alarm bell for all of us as the push for a one world currency continues.
Mark your calenders for April 2nd as the G20 economic summit kicks off in London.
Stay Tuned
Curt
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BEIJING, March 23 (RIA Novosti) - China is ready to discuss Russia's proposal of a new global reserve currency as an alternative to the U.S. dollar at the G20 summit in London, a vice governor of the country's Central Bank said on Monday.
Russia earlier submitted a proposal to the G20 summit which could see the IMF examining possibilities for creating a supra-national reserve currency, and also forcing national banks and international financial institutions to diversify their foreign currency reserves.
"We believe it is necessary to consider the IMF's role in this process and also define the possibility and the need to adopt measures allowing for Special Drawing Rights (SDRs) to become an internationally recognized super-reserve currency," Russia's proposal read.
Hu Xiaolian said that China, which holds about $2 trillion in foreign exchange reserves, was prepared to debate the issue as "the dollar's dominance and U.S. economic woes could entail considerable currency fluctuations and affect the world financial situation."
At the same time, she said that discussion into a new global currency could be started but considering the dollar's status as the current primary currency, "we should focus more on enhancing control over the existing system."
The G20 summit, involving advanced and emerging economies and international financial institutions, will be held in London on April 2, aimed at finding ways to overcome the ongoing global financial crisis.
During the G20 summit, Chinese President Hu Jintao will meet Russian President Dmitry Medvedev and U.S. President Barack Obama, Chinese Deputy Foreign Minister He Yafei said.
Yafei also said that Jintao will address the summit outlining measures to stabilize the global financial markets, reform the international financial system and harmonize macroeconomic regulation standards.
http://en.rian.ru/world/20090323/120689432.html
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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”.
Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.
“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.
Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.
“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.
China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.
To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.
Today, the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organisations.
China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions.
Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.
Mr Zhou said the proposal would require “extraordinary political vision and courage” and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.
http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html?nclick_check=1
Curt
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