BEIJING, March 26 -- U.S.
President Barack Obama may have dismissed the need to replace the greenback with
a global currency, but economists said yesterday that he should take more steps
to restore confidence in the dollar, especially in the near term.
Obama said at a White House press conference on
Tuesday evening (yesterday morning, Beijing time) that confidence in the U.S.
economy and the dollar was "extraordinarily strong", and that he did not believe
there was a need for a global currency.
U.S. President Barack Obama delivers a
speech during his second prime time news conference at the White House in
Washington, March 24, 2009. (Xinhua/Zhang Yan) Photo Gallery>>>
Obama's comments came after China's central bank
governor Zhou Xiaochuan wrote in an article that it
was necessary to create a "super-sovereign reserve currency" to overhaul the
existing international monetary system of using the currency of one nation as
the global reserve currency.
Zhou suggested that the International Monetary Fund's
(IMF) Special Drawing Rights (SDRs), a currency basket comprising the dollar,
the euro, the pound and the yen, had the potential to serve as a super-sovereign
reserve currency. The SDRs have been used as a unit of account among IMF members
and other international organizations since introduction in 1969.
Even before Zhou's remarks, a UN panel of financial
experts had suggested that the world ditch the dollar in favor of a shared
basket of currencies, Reuters reported. That was followed by Russia saying it
would pitch for a new reserve currency at the G20 summit to be held in London on
April 2.
"Despite all the talk of 'confidence', investors are
still deeply concerned about their holdings of the U.S. dollar and Treasuries,
not only in China, but around the world," said Erh-Cheng Hwa, chief economist of
the Bank of Communications and a former IMF economist. "Zhou's proposal, along
with others', could add more pressure on the U.S. government to take real
responsibility to clear up the mess it has created."
Fan Gang, a renowned economist and member of the central
bank's monetary policy committee, said China has long suffered under the dollar
reserve system and that one of the problems is some of the international money
has been used without discipline.
"Naturally, in countries like China, we think about
changes and the way out," Fan said Wednesday in discussions with economists at
an investment forum in Hong Kong.
He called for a globalized reserve currency system in
a globalized world, or "a truly international or global currency managed
globally and independent of, and delinked from, any country to prevent moral
hazard."
Competitions should be encouraged among the different
reserve currency systems so as to create a discipline on the countries printing
the reserve currencies, he said.
Fan's call echoed voices by Nobel laureate Joseph
Stiglitz.
Stiglitz said the U.S. dollar is not ideal as a
reserve currency. It is not stable and had earlier prompted some of the
economies to increase their foreign reserves, ultimately leading to the
unsustainable lending by poorer countries to richer ones.
Stiglitz called for an alternative global reserve
system by coordinating the existing efforts for regional reserve currencies or
money swap agreements.
The U.S. currency and Treasuries dominate the
holdings of central bank reserves around the world. It is estimated that 70
percent of China's $1.95 trillion in foreign exchange reserves is invested in
U.S. dollar-denominated assets; and a depreciation of the greenback would hurt
the central bank's balance sheet.
The U.S. has run up budget and external deficits over
the years to fuel its consumption spree, thanks to the dollar's status as the
reserve currency. But this has also weakened the currency during the process.
Some analysts estimate that the Obama
administration's massive bailout plan, with an even higher budget deficit, is
likely to further weaken the dollar and give rise to global inflation.
Hwa said the proposals by Zhou and others could help
bring about a perfect storm that would reshape the international monetary system
in the long run. But it could take years to persuade private companies to use
SDRs for international trade and commodity pricing; and opposition from the U.S.
is a major obstacle.
"The existing international monetary system is
out-of-date," said Wang Jianye, chief economist of the Export-Import Bank of
China and former IMF economist. "It does not reflect the profound changes in the
world econom and hence is no longer workable."
Wang said the essence of Zhou's article was to "find
appropriate mechanisms" to ensure that the U.S. takes into account the global
effect of its monetary policy in the short term and help move toward a new
global monetary system conducive to sustainable growth in the long run.
BEIJING, March 26 -- The following is an article written
by Zhou Xiaochuan, governor of China's central bank, on international monetary
system. Full story
HONG KONG, March 25 (Xinhua) -- The current global
financial crisis exposed the weakness of the current U.S. dollar-standard global
reserve system, and an alternative global reserve system should be more
diversified and competitive, economists said on Wednesday.
Fan Gang, a renowned economist and member of the
central bank's monetary policy committee, said China has long suffered under the
dollar reserve system and that one of the problems is some of the international
money has been used without discipline. Full story
BEIJING, March 24 (Xinhua) -- Zhou Xiaochuan,
governor of China's central bank, has proposed to create a super-sovereign
reserve currency as part of reform in the international monetary system.
The desirable goal of the international monetary
system is to "create an international 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," he
said. Full story
WASHINGTON, March 24 (Xinhua) -- Seeking to rally
more support for his efforts to tackle the crisis, U.S. President Barack Obama
assured Americans on Tuesday that there were "signs of progress" toward
recovery, while pleaded for more time and patience.
U.S. President Barack Obama delivers a
speech during his second prime time news conference at the White House in
Washington, March 24, 2009. (Xinhua/Zhang Yan) Photo
Gallery>>>
"We will recover from this recession," Obama said at
a prime-time news conference, the second he has held since taking office in
January. "But it will take time, it will take patience." Full story
