China won't press for new global currency, but is willing to talk about it.


Machjo
#1
China won't press for new global currency at G8

Interesting. I remember reading that Putin had proposed such an idea awhile back too.
 
petros
#2
Interestng... So what is being said here is "kiss the US Dollar goodbye" we're looking for a new standard but China has far too much US dollars owed and lent.

So which currency becomes the bill of choice?
 
Machjo
#3
Quote: Originally Posted by petros View Post

Interestng... So what is being said here is "kiss the US Dollar goodbye" we're looking for a new standard but China has far too much US dollars owed and lent.

So which currency becomes the bill of choice?

I remmber just a few months ago Putin suggesting that either we create a new world currency or, if resistance it too great, then the BRIC nations (Brazil, Russia, India and China) along with some fo their friends could create a common currency to share amongst themselves.

I know that Canada and the US has suggested a common North American currency on occasion, but more as a non-committal brainstorm. This, however, is different in that Putin has suggested bringing it up as a formal and official point of discussion. Sure it's preliminary, but the simple fact that ie's even been suggested is quite something. I know a number of NGOs have suggested a common world currency too, but some developed countries have been among the most vocal opponents of it with less developed nations remaining silent on the issue until now.

The impression I'm getting from the BRIC is that they're starting to think that if they can't share a common world currency with the wealthier nations, then what's stopping them from crating their own! Now from my understanding, the US does not want to get into this, but with the EU already sharing a common currency, a few African countries having a shared currency too, and now this, the pressures on. Before long, the US, and Canada, might not have much choice but to start to look at sharing a currncy too to remain afloat. We might not like it, but it seems the developing world is becoming increasingly vocal about having one whether we participate or not. Now the ball is in our court: are we going to stand back and watch while developing countries start to discuss sharing a common currency among themselves, or are we going to join them?
 
Machjo
#4
Summit talks likely to turn to dollar

And here's a bit on the state of China's US dollar holdings.
 
Machjo
#5
BRIC building road to global economic recovery -- china.org.cn

And this from the official Chinese government news agency:

China.org.cn - China news, weather, business, travel, language courses, archives and more

Also, though this is not news and has been the case for awhile, if you look at the top of the page, it's quite clear that China is trying to reach out well beyond just the English-speaking world, as can also be witnessed in its equivalent of CBC radio:

CRI Online
 
Machjo
#6
It would appear that the creation of the euro prooved that a shared currency can in fact succeed.
 
petros
#7
Have you heard about the 2 Japanese trying to dump $134B of US Bonds in Italy and Switzerland? They are trying to say they are counterfeit but if it were Jap Govt it would crash the US dollar. Very little in the US press on the incident for some odd reason considering it would be the biggest counterfeit bust of all time.
 
petros
#8
Japanese pair arrested in Italy with US bonds worth $134 billion - Times Online
 
china
#9
petros
Quote:

So which currency becomes the bill of choice?

Yeap , George Washington or Chairman Mao .
 
dumpthemonarchy
#10
China the new cool guy on the block. Not number one, but looking more on the way up than on the way down. And not needlessly invading countries. Will things change if the US gets its economy on track? I wonder.

Before there was no discussion about a new world currency, it was absurd, now it just casually comes up every few weeks. The Chinese said they won't bring the topic up, but they will discuss it if someone else does. So cool. Green no longer is the only colour of money.
 
Machjo
#11
Quote: Originally Posted by china View Post

petros


Yeap , George Washington or Chairman Mao .

...or the conception of the globo?
 
Machjo
#12
Quote: Originally Posted by dumpthemonarchy View Post

China the new cool guy on the block. Not number one, but looking more on the way up than on the way down. And not needlessly invading countries. Will things change if the US gets its economy on track? I wonder.

Before there was no discussion about a new world currency, it was absurd, now it just casually comes up every few weeks. The Chinese said they won't bring the topic up, but they will discuss it if someone else does. So cool. Green no longer is the only colour of money.

But let's not forget that China is going through many growing pains too at the moment. I think the whole world is hurting from this crisis, but the developing countries have just discovered a new strategy to make their rise less painful... co-operation. I don't think it will take long for the developed countries to realise that this same strategy could make their decline easier too, until both groups of nations eventually reach equilibrium.
 
petros
#13
Quote: Originally Posted by china View Post

petros


Yeap , George Washington or Chairman Mao .

I'd rather have a fist full of RMB.
 
dumpthemonarchy
#14
Quote: Originally Posted by Machjo View Post

But let's not forget that China is going through many growing pains too at the moment. I think the whole world is hurting from this crisis, but the developing countries have just discovered a new strategy to make their rise less painful... co-operation. I don't think it will take long for the developed countries to realise that this same strategy could make their decline easier too, until both groups of nations eventually reach equilibrium.

The BRICs are rising despite the USA falling. They can improve while the USA declines, which says a bit about the changing world we are in. They have endless problems, but they charge on.
 
Machjo
#15
Quote: Originally Posted by dumpthemonarchy View Post

The BRICs are rising despite the USA falling. They can improve while the USA declines, which says a bit about the changing world we are in. They have endless problems, but they charge on.

I think one reason they are growing is in fact their greater willingness to consult with one another, compared to the US' go-it-alone attitude.

Before anyone gets too excited about this though, let's not forget that the euro had been officially discussed over a decade before its implementation. Seeing that now we're talking about something on a global scale, and that, though NGOs had officially proposed this decades ago, this is the first time any government has officially expressed support for it. So if the euro took well over a decade to go from the drawing board to reality on not even one continent (and a few overseas territories, granted), a world currency will likely take even longer to implement. So if they've only started to discuss it recently, then we're not going to see its implementation for well over a decade at least, if not much longer (at least European countries have more cultural similarities than countries from all over the world). This is but the conception of the officialization of the discussion of the idea at an inter-governmental level. It's got a long way to go before its its birth pangs are felt.
 
dumpthemonarchy
#16
Quote: Originally Posted by Machjo View Post

I think one reason they are growing is in fact their greater willingness to consult with one another, compared to the US' go-it-alone attitude.

Before anyone gets too excited about this though, let's not forget that the euro had been officially discussed over a decade before its implementation. Seeing that now we're talking about something on a global scale, and that, though NGOs had officially proposed this decades ago, this is the first time any government has officially expressed support for it. So if the euro took well over a decade to go from the drawing board to reality on not even one continent (and a few overseas territories, granted), a world currency will likely take even longer to implement. So if they've only started to discuss it recently, then we're not going to see its implementation for well over a decade at least, if not much longer (at least European countries have more cultural similarities than countries from all over the world). This is but the conception of the officialization of the discussion of the idea at an inter-governmental level. It's got a long way to go before its its birth pangs are felt.

The Euro took time to implement and they had votes over it. China and voting don't seem to go together very well, being a dictatorship still. Real elections for any reason aren't something China nor Russia want any time soon. India and Brazil might be a different story on this issue though. Public participation and voting has to be part of the deal here.
 
Machjo
#17
Quote: Originally Posted by dumpthemonarchy View Post

The Euro took time to implement and they had votes over it. China and voting don't seem to go together very well, being a dictatorship still. Real elections for any reason aren't something China nor Russia want any time soon. India and Brazil might be a different story on this issue though. Public participation and voting has to be part of the deal here.

Russia is reasonably democratic already. As for China not being democratic, it's got a ways to go yet, but is moving in the right direction, slowly but surely. You do have a point though that tht will likely be a major point of contention before they could ever agree on a common currency. If we consider the various conditions placed on European nations to join the Euro, surely similar conditions will likely be imposed on any kind of world currency, and I'm sure such countries as India will be very insistent that the Bank responsible for printing it be under some kind of either direct or indirect democratic control. This will likely slow down the process even more, possibly by yet another decade or more. So we're likely looking at a minimum of thirty years at least before any such currency is implemented, and even then there's no guarantee that it would be a world currency (let's not forget North Korea), but more liley a transcontinental currency including many developing countries.

Yet the fact that the topic is officially on the table, that the Euro is already implemented, and that the idea of shared currencies has grown in Africa and central America too, albeit on more of a continental level, is bound to push discussion of the topic in North America too over time.
 
dumpthemonarchy
#18
Quote: Originally Posted by Machjo View Post

Russia is reasonably democratic already. As for China not being democratic, it's got a ways to go yet, but is moving in the right direction, slowly but surely. You do have a point though that tht will likely be a major point of contention before they could ever agree on a common currency. If we consider the various conditions placed on European nations to join the Euro, surely similar conditions will likely be imposed on any kind of world currency, and I'm sure such countries as India will be very insistent that the Bank responsible for printing it be under some kind of either direct or indirect democratic control. This will likely slow down the process even more, possibly by yet another decade or more. So we're likely looking at a minimum of thirty years at least before any such currency is implemented, and even then there's no guarantee that it would be a world currency (let's not forget North Korea), but more liley a transcontinental currency including many developing countries.

Yet the fact that the topic is officially on the table, that the Euro is already implemented, and that the idea of shared currencies has grown in Africa and central America too, albeit on more of a continental level, is bound to push discussion of the topic in North America too over time.

If, we are as they say, on Internet time, things may move along quicker than 3 decades. People want to do what is necessary to grow and make money. Regional currencies such as in Africa would help their stagnant economic growth and could implement a new currency in a few years. The success of the Euro is an example for countries to follow. What does Africa have to lose? Not much, but there are big political issues of course.

The Amero, bandied about as a North American currency lacks support, we don't need it in Canada, but the US and Mexico might if their economies continue to flounder.
 
dumpthemonarchy
#19
An article in The Globe and Mail newspaper discussing how France is joining the chorus of BRIC nations calling for a new reserve currency.

Calls grow to supplant dollar as global currency - The Globe and Mail

Calls grow to supplant dollar as global currency



A Pakistani currency dealer counts U.S. dollars at his shop in Karachi in this May, 2008, file photo.



France joins China, India and Russia in calling for a new reserve standard on the eve of the G8 summit


Karim Bardeesy


From Monday's Globe and Mail Last updated on Tuesday, Jul. 07, 2009 07:32AM EDT



The call to find an alternative to the U.S dollar as the global reserve currency is gaining momentum as France joined calls by China, India and Russia for a review of the world's currency practices.


French Finance Minister Christine Lagarde challenged the dollar's supremacy “in a world that has changed because of the crisis and the growing role of emerging countries.”


The questioning of the U.S. dollar as the key currency for central banks by a leader of a major European economy gives renewed life to the issue at this week's Group of Eight summit meeting in L'Aquila, Italy. The U.S. dollar has long served as the dominant medium of exchange, and tends to dominate the official money reserves that countries hold through their governments and at their central banks.


In the first quarter of 2009, 65 per cent of the world's allocated foreign exchange holdings were held in U.S. dollars, according to the International Monetary Fund. That's the highest in seven quarters.
The push for an alternative is being driven in large part by concern over the weakened state of the U.S. economy.


The country is forecasting fiscal deficits for the next decade.
That's leading large holders of U.S. debt such as China to worry that the U.S. dollar may not be as safe as it once was. In addition, the dollar has been volatile on international currency markets, and the U.S. is running ongoing trade deficits.


Diversification would likely take years, because unwinding large reserve positions of U.S. dollars too quickly would devalue them. And despite concerns about the greenback, it has maintained its international appeal, in part because investors need the value of their U.S. dollar holdings to stay high.


With the U.S. continuing to require willing lenders to fund deficits, the situation has become what top Barack Obama economic adviser Lawrence Summers once dubbed “a kind of balance of financial terror.”
That U.S. Treasury bills appreciated in the immediate wake of the financial crisis was proof of the dollar's strength, as “people fled to a stable place,” said Paul Wachtel, a professor at New York University.


Still, the risk of a move away from the greenback is not without precedent, said Shaun Osborne, chief currency strategist of TD Securities. “The U.S. is a bit complacent about this. Most U.S. officials appear confident there will be no quick switch away from the dollar. But we have seen before, with the decline of the pound, that these things can happen quickly, in the space of years.”


Recent comments may be as much about politics as economics.
Large developing countries are seeking a greater role at the International Monetary Fund. China controls only 3.66 per cent of the votes at the body, despite being the world's third-largest economy.


“A little bit of nationalism, a little bit of searching for someone to blame for the economic crisis,” Prof. Wachtel said. “Plus, it's a changing world: diversification of reserves might make sense.”


Canada and Japan both reaffirmed their support for the greenback this week.
“It's an issue that we have not addressed, other than to say that in the midst of what is still a significant global recession, it's important that we aim for stability,” Finance Minister Jim Flaherty said on Friday. “The stability has been based on the U.S. dollar as the global currency.”


Whether and how this will actually come up at the G8 summit remains unclear. Russia is a G8 member, and China and India are set to join the discussions on the second day of the three-day meeting, but all are playing down the prospect of formal talks just yet.


Chinese Vice-Foreign Minister He Yafei said yesterday: “You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government.”


The Chinese central bank, the world's largest external holder of U.S. debt, reiterated its call for a new international reserve currency in a policy review published last week. It has proposed an International Monetary Fund-created unit called Special Drawing Rights as an alternative reserve currency.
Regardless of what happens at the G8 summit, some analysts expect a diversification in large countries' currency practices.


Alternatives like the euro, yen, Chinese yuan, and Special Drawing Rights all have drawbacks, said Benjamin Cohen of the University of California-Santa Barbara. “A more fragmented currency system seems in the offing, with much competition and no money clearly dominant,” Prof. Cohen said.
With files from Bloomberg News and Reuters
 
Machjo
#20
All positive, and certainly shows a trend, not to mention that it's a historical event (even if not acknowledged as such now) in that it's the first time in history that a national leader (Putin) officially recommended the idea of a world currency.

But before we get too excited, there are a few points to ponder. As mentioned above, China is not a democracy yet (though granted it could move towards a stronger democracy, stronger economy , and a common currency all at the same time, but that would be quite the juggling act).

Beyond that, Even before the G8 summit begins, Putin had offered a plan A (world currency), and a plan B (currency diversification), suggesting that even he was not fully confident in the possibility of a world currency. Add to that that as the articles above indicate, China, though willing to discuss Russia's plan A, that is in fact China's plan B, with China's plan A being Russia's plan B. So it would seem that though the trend is positive, there is still a ways to go.

And now, Hu will likely not attend the G8 summit at all owing to to major ethnic tensions in Xinjiang. And make no mistake about it, they are major. I was there in 2001, and even then the ethnic tension was palpable, and even I had committed a few local faux-pas in relation to Han-Uighur relations and it was immediately made known to me loud and clear.

To put all this into perspective, the Canadian PM would not likely cancel such an important summit just because of a riot (he'd likely just appoint another MP, usually the Deputy PM) to keep watch while he's away. It would essentially require a naitonal emergency for him to cancel as important an event. So if Hu is cancelling the G8 summit over the riots in Xinjiang, then that's a clear indication that he's got something major going on there.

Again, the trend is obviously towards a world currency, but expect it to move forward as fast as refrigerated molasses.
 
Machjo
#21
Another point to make. Though Putin has expressed interest in a world currency, it's not clear what the rest of the Russian government thinks of it. No, I've not read any clear opposition from the Russian government, but no praise either. So it's possible the Russian government itself is only luke warm to the idea, such as is the Chinese government.
 

Similar Threads

0
A Global Currency?
by Scott Free | Oct 17th, 2008