Tuesday, March 24, 2009
China's central bank governor Zhou Xiaochuan has suggested that a new currency should be created in order to reduce the dependence on dollar. As most of the world trade is done in the Dollar, Euro and Yen, there is growing concern that world has become a hostage to these currencies. Mr. Zhou argues that most nations concentrate their assets in those reserve currencies(Show below), which exaggerates the size of flows and makes financial systems overall more volatile.
Moving to a reserve currency that belongs to no individual nation would make it easier for all nations to manage their economies better, he argued, because it would give the reserve-currency nations more freedom to shift monetary policy and exchange rates. It could also be the basis for a more equitable way of financing the IMF, Mr. Zhou added. China is among several nations under pressure to pony up extra cash to help the IMF.
Mr. Zhou's proposal is surely going to spark a debate in the coming G20 summit in London.
You can read the full article at Wall Street Journal HERE
