The dollar shouldn’t be the reserve currency, but neither should the renminbi

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The dollar shouldn’t be the reserve currency, but neither should the renminbi

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The dollar shouldn’t be the reserve currency, but neither should the renminbi
22 September 2019

Authors: Matthew Harrison, HKIIF and Geng Xiao, PKU

With the renminbi used for only around 2 per cent of international transactions and reserve holdings, it’s still far from supplanting the US dollar as the currency of choice and its use lags far behind what China’s 16 per cent share of the global economy would suggest. The renminbi isn’t well placed to be a reserve currency. Rather, the International Monetary Fund’s (IMF) special drawing rights (SDR) would be the ideal candidate for global settlements.

It’s well known that China is not by itself in sharing dissatisfaction with the US dollar-dominated international monetary system (IMS). But replacing the dollar with another national currency is not the answer. We have high hopes for the SDR — presently just an IMF reserves-accounting convention. The IMS is in near-crisis and the SDR offers a way out.

The post-Bretton Woods non-system of free-floating currencies has accommodated trade and investment expansion at the cost of recurring instability and financial crisis. The IMS is recession-biased. Trade debtor countries such as Greece are forced to restructure when most painful to do so, while creditor countries such as Germany face no sanction. The IMS is also inequity-biased. Developing countries accumulate precautionary reserves while subsidising the world’s richest economy — the United States — and propagating trade imbalances. Dollar monetary policy is intended to serve US interests, not global needs. The IMF intervenes only once approached and has limited resources and authority. A revamp of the IMS is needed.

Proposals for revamping the IMS outside of renminbi internationalisation include enlarging the role of the IMF, resurrecting Keynes’ bancor or constraining private capital flows. These have obviously gained no traction.

But renminbi internationalisation would be of limited assistance. Even if the US dollar’s share were gradually replaced by the renminbi, little would change. The world would still be dependent on a national currency managed according to national needs, with the same destabilising effects.

Full article https://www.eastasiaforum.org/2019/09/2 ... -renminbi/
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SternAAlbifrons
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Re: The dollar shouldn’t be the reserve currency, but neither should the renminbi

Post by SternAAlbifrons »

"The post-Bretton Woods non-system of free-floating currencies has accommodated trade and investment expansion at the cost of recurring instability and financial crisis. The IMS is recession-biased. Trade debtor countries such as Greece are forced to restructure when most painful to do so, while creditor countries such as Germany face no sanction. The IMS is also inequity-biased. Developing countries accumulate precautionary reserves while subsidising the world’s richest economy — the United States — and propagating trade imbalances. Dollar monetary policy is intended to serve US interests, not global needs. The IMF intervenes only once approached and has limited resources and authority. A revamp of the IMS is needed."

Very interesting guy - Xiao Geng (^^ co-author)
He has some very interesting perspectives on the current Hong Kong situation and the China/USA trade war also.

President of the Hong Kong Institution for International Finance, is a professor and Director of the Research Institute of Maritime Silk-Road at Peking University HSBC Business School.
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Re: The dollar shouldn’t be the reserve currency, but neither should the renminbi

Post by frank lee bent »

The USD is overwhelmingly the only currency physically deployed globally.

In order to use another currency, there must be a physical presence in the global market.

This is one of the reasons for such a universal opposition by national central banks to cryptos, they undermine the status quo.
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Re: The dollar shouldn’t be the reserve currency, but neither should the renminbi

Post by whatwat »

If they allow cryptos then control would be lost.
The populous need control from their own stupidity.

Much that everyone wants “freedom” and despise the wealthy 1% that control the banks and media etc it’s been that way for millennia. It’s the way it is.
Don’t listen to Chinese whispers.
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Re: The dollar shouldn’t be the reserve currency, but neither should the renminbi

Post by Duncan »

whatwat wrote: Mon Sep 23, 2019 11:23 am If they allow cryptos then control would be lost.
The populous need control from their own stupidity.

Much that everyone wants “freedom” and despise the wealthy 1% that control the banks and media etc it’s been that way for millennia. It’s the way it is.

It’s the way it is.

And that's the way it will stay.
Cambodia,,,, Don't fall in love with her.
Like the spoilt child she is, she will not be happy till she destroys herself from within and breaks your heart.
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Re: The dollar shouldn’t be the reserve currency, but neither should the renminbi

Post by whatwat »

Duncan wrote: Mon Sep 23, 2019 11:42 am
whatwat wrote: Mon Sep 23, 2019 11:23 am If they allow cryptos then control would be lost.
The populous need control from their own stupidity.

Much that everyone wants “freedom” and despise the wealthy 1% that control the banks and media etc it’s been that way for millennia. It’s the way it is.

It’s the way it is.

And that's the way it will stay.
In our lifetime.
Maybe they’ll be a doomsday scenario like the countless apocalyptic movies that've been made.

The population will rise up and gain control. Then someone will have to lead them of course, unless everyone just does what they please (anarchy I think it’s called). Then they’ll be arguments over who should lead so they’ll have votes. But then the ones with all the guns and ‘money’ will win. Then they’ll be arguments in different “districts” who owns and controls what do they’ll be meetings and the powerful leaders will want more power and control.
Then in years to come some of the population will get pissed of with being told what to do by a select few with all the water, guns and currency and they’ll rise up....
Don’t listen to Chinese whispers.
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