Nothing Lasts Forever; World Bank Ex-Chief Economist Calls For End To Dollar As Reserve Currency

Tyler Durden's picture

In the past we have discussed at length the inevitable demise of the USD as the world's reserve currency noting that nothing lasts forever. However, when former World Bank chief economist Justin Yifu Lin warns that "the dominance of the greenback is the root cause of global financial and economic crises," we suspect the world will begin to listen (especially the Chinese. Lin, now - notably - an adviser to the Chinese government, concludes that internationalizing the Chinese currency is not the answer (preferring a basket approach) but ominously concludes, "the solution to this is to replace the national currency with a global currency," as it will create more stable global financial system.

 

The infamous chart that shows nothing lasts forever...

Nothing lasts forever... (especially in light of China's earlier comments [21])

 

Via China Daily,

The World Bank's former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

"The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency."

 

Lin, now a professor at Peking University and a leading adviser to the Chinese government, said expanding the basket of major reserve currencies — the dollar, the euro, the Japanese yen and pound sterling — will not address the consequences of a financial crisis. Internationalizing the Chinese currency is not the answer, either, he said.

 

...

 

"China can only play a supporting role in realizing the plans," Lin said. "The urgent thing is for the US and Europe to endorse these plans. And I think the G20 is an ideal platform to discuss the ideas," he said, referring to the group of finance ministers and central bank governors from 20 major economies.

 

The concept of a global "super currency" tied to a basket of currencies has been periodically discussed by world leaders as well as endorsed by 2001 Nobel Memorial Prize-winner Joseph Stiglitz. A super currency could also be tied to a single currency, but the interconnectedness of world financial markets and concerns about the volatility that can occur as a result of the system being tied to one currency have made this idea less popular.

 

...

Arguments in favor of a global currency resurfaced during October's US budget impasse, which forced the government to shut down (as we noted here).

"It is perhaps a good time for the befuddled world to start considering building a de-Americanized world," a Xinhua News Agency commentary said on Oct 14. The piece argued that creating a new international reserve currency to replace reliance on the greenback, would prevent government gridlock in Washington from affecting the rest of the world.

 

In March 2009, China's central bank governor, Zhou Xiaochuan, called for the creation of a new "super-sovereign reserve currency" to replace the dollar. In a paper published on the People's Bank of China's website, Zhou said an international reserve currency "disconnected from individual nations" and "able to remain stable in the long run" would benefit the global financial system more than current reliance on the dollar.

Of course, as we are seeing now, it's not just the Chinese that are concerned...

On that note, David Bloom, global head of FX research at HSBC, said US monetary policy change "will bring fluctuations for emerging countries' currencies and lead to financial instability".

 

Chen Wenling, chief economist at the China Center for International Economic Exchanges, a government think-tank, said, "A supranational currency may be a new direction for development of the global financial system. It also requires different countries to cooperate in coordinating macroeconomic policies."

 

Bloom and Chen both said China needs to play a more important role in global financial governance. But Bloom said it is difficult for international financial organizations to reach a consistent conclusion on how to improve the foreign exchange system.

 

He said the renminbi is predicted to be stronger this year, even against an appreciating US dollar, and internationalization of China's currency will accelerate when the government decides to further open the capital market.

Of course implementation will be painful...

Pierre Defraigne, executive director of the Madariaga College of Europe Foundation in Brussels, said of Lin's infrastructure proposal, "It is excellent, but the problem is how to implement these plans to link those countries that need such infrastructural construction and those with enough foreign reserves, by using an effective global mechanism."

As we noted previously, the muddle-through is over and there is no painless solution left...

Michal Krol, a researcher at the Brussels-based European Center for International Political Economy, said ...

 

"I don't think that the largest economies and their currencies are at this moment ready for the introduction of a supranational currency," Krol said. "Neither the EU nor China have financial markets and monetary systems yet that are sound, solid, predictable and well functioning to be the cornerstone for a global system. But, indeed, it is time to formulate the fundamentals for global monetary governance."
 

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lordbyroniv's picture

NWO coming at us all !!!

 

:(

 

"I looked, and there before me was a pale horse! Its rider was named Death, and Hades was following close behind him. They were given power over a fourth of the earth to kill by sword, famine and plague, and by the wild beasts of the ear" - Revelation 6:8 

zaphod's picture

The US losing reserve currency status is a hidden blessing. 

Being the reserve currency has allowed both the people and the government to live beyond their means for a couple generations, and with that societal decay. 

Forcing the country to produce again and the government to scale back (which it would have to no matter how hard they push taxes) is not a bad thing. 

ArkansasAngie's picture

Seriously.

This is true.  We simply cannot press each other's pants forever 

They say 49% of the population get some sort of govt money.  Include corporate handouts and us stand alone working stiffs just can't carry the load.

I'd rather play golf.

knukles's picture

I'd rather play golf, too.

Especially when it's either the IMF or Das New Worldie Order Bankie suggesting anything.
These are the guys, remember, who've never ever been right about anything.

Maybe oughta hire Paul Krugman?

fonestar's picture

fonestar doesn't care what these economedians call for.  The point is that the markets get to choose what is the world's currency and not the IMF or World Bank.  

knukles's picture

Markets are Rigged, No?

J S Bach's picture

Here we go...

The International Usurers' Ultimate Wet Dream... a Global Currency - in which THEY are in charge.  Brace yourselves everyone... and FIGHT this one to the death.  If they succeed, we and all of our progeny are doomed to eternal slavery. 

LawsofPhysics's picture

The good news is rounds have gotten a lot cheaper.  Hey, we all need to be optimistic.

cifo's picture

USD won't go away without a fight.

FL_Conservative's picture

We all agree that USD are fit to wipe one's ass with, but how is any other fiat currency a better candidate for reserve status?  If you have 2 leaky tires, what difference does it make if you use one over the other?

wintermute's picture

 

"but how is any other fiat currency a better candidate for reserve status?"

No other fiat needed. Just BITCOIN!

PhilofOz's picture

These bankster bastards are going to convince the sheeple that their international fiat currency is going to be better and safer than that of any individual country, or even group of coutries. Of course it will become the biggest ponzi scam the world has ever had, and that's saying something after what we've already got. Enslavement for all! Come on NSA agents that read all these posts... haven't we been able to convince any of you who the real enemy to society really is?! You've got friends, family, kids that are all going to be robbed blind by these thieves in the years to come! Where is your conscience?! 

SDShack's picture

Conscience? Sociopaths have no conscience. Haven't you learned this yet?

mmanvil74's picture

We already have a new world reserve currency.  For now, it's called Bitcoin.  It may go by a different name in the future, Litecoin, Namecoin, ANYcoin but the USDcoin.  Most likely, there will be hundreds or thousdands of coins and tokens with different values determined by the market and seemlessly transferable on market exchanges.  

Decentralized crypto currencies are the world's savior from the propoganda of a centralized new world order and Biblical Revalations - both false fear based prophecies designed to stifle our courage and squelch our hope.  Fear not, the people have already won.

fonestar's picture

USD is going TKO from Satoshi.

Unknown User's picture

I would have thought that people gotten used to slavery by now to the money masters.  As long as slaves believe that the impressive paper they print is money, we are doomed - period.

Pickleton's picture

"in which THEY are in charge"

and just so happen to be immune from them pesky national laws.

Cacete de Ouro's picture

This Justin Yifu Lin has obviously been wined and dined by the Rockefellers and is a good little internationalist pawn

mccvilb's picture

The only undisputed world currency has always been gold. Everything else has proven to be capable of being counterfeited, diluted or manipulated into extinction. In order to establish a unilateral world fiat currency all precious metals and minerals would have to be confiscated and controlled. Conversely, for a true commodity-based world currency to succeed, I think we all know the trading of paper derivatives and naked shorting would have to cease and also what Bill Shakespeare recommended.

resurger's picture

I hope you wont say we make Bitcoins the reserve currency fone?

fonestar's picture

Of course we should make Bitcoin the world's reserve currency!  fonestar will be rich as shit, and I guess it will be good for humanity and freedom and stuff too....

IPA's picture

Bitcoin is backed by 82 other crypto curencies, i think i got that right.

On a side note does anyone have any guidance on dual citizenship? This MyRAss' shit is too much. I have herd Singapore, but i am too poor to live there. Could probably buy farm land in argentina and milk goats because i would consume all the product of i grew agave.... 

The Wisp's picture

just pick yourself a country and go wife shopping, learn the ropes and blend in like a local

johny2's picture

there is a piece of land in Argentina, 698000 ha for 13 million usd. Let me know if you are interested. Should be enough agave for half the continent

Advoc8tr's picture

Sinapore is a centrally planned and controlled dictorship ?   They may have low taxes but it is by decree to attract the big money.  Everyone lives in tiny little dog-boxes and you get jail time for dropping your gum on the road and death for smoking a scoob ... Fuck that.

I was looking at a beach front shack in Chile for $100,000 US yesterday .... place looks a bit third world though and every window had steel bars - not a good sign.   Thailand looks lush, cheap and has plenty of good looking women - you can have more than 1 wife there too I think ?

 

Suggestions ??

mccvilb's picture

More than one wife??? Yikes. Think past your Chaney for a minute, bro. 

Rafferty's picture

FWIW I have a friend who has spent a huge amount of time checking out such locations including many personal visits.  His choice?  Uruguay. 

MeelionDollerBogus's picture

I suggest one wife may be one too many. Think of the nagging & splitting income & now add more. Pass. Thailand I'm sure will be fine but a harem of girlfriends, not wives, would be fine.

q99x2's picture

Bitcoin will be good for contract lawyers too. I'm checking into being a lawyer. We have no use for them on q99x2 but I can see an opportunity when it shows itself.

Urban Redneck's picture

FDR and Nixon were real proponents of "democracy" in restructuring the global currency markets the last two times around, and the US is so much less fascist now then it was in 1944 or 1971. /sarc

It is actually precisely the IMF and BIS that will decide the next evolution the global fiat ponzi game, which is why there has been such a fight over quotas, allocations and bylaws going on the last few years.

Dewey Cheatum Howe's picture

Things like Bitcoin actually may spell the death knell for the IMF and BIS over the long term. You really don't need them when you have a global currency aka crypto-currency everyone is willing to use to facilitate commerce with between themselves. The ledger aka blockchain keeps track of all the transactions and the counterparties will know which wallets belong to each anyways so they have a record for legal issues of nonpayment, etc. on that is not easily cheatable. The settling of debts and deliveries portions doesn't change one bit. The global crypto-currency just fills the void as the middle man.

MeelionDollerBogus's picture

The ledger isn't needed - a proper currency should have no ledger for all transactions. It's also exposing what should be secret AND growing exponentially.

That's a negative, a real problem, not a benefit.

I could much more easily use GPG to sign for trades & verify attendance for physical meetings is of trusted parties so business happens in person.

Digital transactions are over-rated: it's the wrong way to do business. The SERVICE you pay for or the GOODS you pay for have to travel TO YOU or YOU TO THEM so there's no reason to make the money move so fast it can vanish before goods are delivered. The lack of security is appaling with bitcoin.

"The global crypto-currency just fills the void as the middle man"

That void should be CLOSED, not filled. Total concept inversion.

MeelionDollerBogus's picture

What, didn't call for the S D R - Satoshi Digital Reserve?

I'm shawked.

CANDYMAN CANDYMAN CANDYMAN

TruthInSunshine's picture

"Lin, now - notably - an adviser to the Chinese government..."

Riiiight. No bias in this call since it's not like China's not trying to prevent a literal collapse of its own economy at present, which is probably in the worst shape of any EM, and since it has a shadow debt that is GARGANTUAN and a financialized, synthesized credit crisis due to fast spoiling and massive bank loans at the the same time its one trick pony of an export based manufacturing economy is under massive stress.

Nope. No bias, let alone outright political propaganda by Glorious & Esteemed Party Member Lin!

engfizz's picture

Ideas stand on their own two feet; if his argument is sound and it is supported by facts,

then it is not important whether or not he is biased.

TruthInSunshine's picture

So what's the rebuttal to my explicit claims that China's economy & currency is in far deeper trouble, for a far wider array of issues, than the economy of the current issuer of the world's reserve currency?

Dapper Dan's picture

China is in very bad shape.

We have all seen the videos of empty cities, but where are all  of the millions of workers that built them, what are they doing now?

How long will they do what "we" don't know their doing?

This video should be watched again.

http://www.wimp.com/ghostcities/

TruthInSunshine's picture

There is credible evidence and data supporting the fact that China has expanded its monetary base by an amount greater than the U.S. And the E.U. COMBINED (as weighed in USD) in the last 5 years -

- and that amount is most likely significantly understated as no one (except PBoC members) knows the actual/true amount of provincial bank loans that are in the pipeline, spoiling, forming a massive shadow monetary black hole of liability.

I won't even touch on the demographic crisis nor the cost-push wage and input crisis that is threatening the Chinese manufacturing sector.

MeelionDollerBogus's picture

Golf. What a waste of useful land.

Tell you what: level the Federal Reserve & use that land in the short-term for a golf course. THAT will be an improvement rather than ruining land that COULD have been used for food gardens.

LawsofPhysics's picture

"I'd rather play golf." - who wouldn't, but in order to actually do anything you need consumable calories (consumable energy).  Maintaining such a course also requires many.  As does maintiaining a decent standard of living for 7+ billion (and growing) people.

Therein lays the rub motherfuckers. 

Landotfree's picture

zaphod,

I doubt anyone is going to call it a blessing when the liquidation process starts.   Billions of walking unfunded liabilities will have to go... the last place I would want to be is on a Continent with 4 billion other people... no thanks.

 

Sofa King Confused's picture

We already have a global currency..........its called gold.  Just stop fucking with the price and let it find its true value.

Henry Chinaski's picture

The US losing reserve currency status is a hidden blessing. 

Being the reserve currency has allowed both the people and the government to live beyond their means for a couple generations, and with that societal decay. 

Forcing the country to produce again and the government to scale back (which it would have to no matter how hard they push taxes) is not a bad thing.

So the US will "produce again" like Portugal, Spain, Netherl, France, Gr Britain?

knukles's picture

Produce anything?
The Children of the Self-Absorbed, New Age Sweet Love and Me Crowd?
Work?
Produce?

Who the fuck are these people kidding.

Having done business with people at Das Newe World Order Bank several times, I can tell you from down right first hand experience those fucking leeches Do Not Produce Anything Other Than Thousands of Pounds of Waste Paper, Breathe Air and Take Up Space Intended for Productive Folks of the Earth

They are wastes of the species.

Mike in GA's picture

"Forcing the country to produce again"?    Forcing people to produce is what led to the collapse of the Soviet Union ie;  "They pretend to pay us and we pretend to work".  Never has worked, never will, especially not in the formerly free USA. 

Losing reserve currency status and seeing only good is like agitating for revolution and seeing only glory. 

The "social decay" you mention will not be swept away or improved upon by the fallout of a currency regime change.  I think it will vastly worsen.  People accustomed to eating but not accustomed to manual labor will steal and murder for food rather than learn to garden.

 

Overfed's picture

I'm gonna plant a garden and start raising rabbits, ducks, and chickens.

Deo vindice's picture

I really hope that "planting a garden" is not how you expect to raise rabbits, ducks and chickens. ;-)