Dollar Crisis and One World Currency

[Fox McCloud]

Dollar crisis looms, China ponders reform-Mundell

By Jason Webb,
VALENCIA, Spain, June 3 (Reuters) - A major dollar crisis could come within five years and China is discussing reforms to the global monetary system to protect its $1.6 trillion reserves pile, says Nobel Prize-winning economist Robert Mundell.
Mundell, who has regular contacts with Beijing officials, said they are considering proposing ways to to fix major currencies including the dollar and the euro, in a system similar to the one which operated under the Bretton Woods agreement from the end of World War Two until the 1970s.
"There's no doubt about it that inside the Chinese government there's a lot of discussion going on. I'm not sure how they're doing it but I know they're going to get an input from me," Mundell told Reuters in an interview.
Without reform, the global monetary system is headed for a dollar crisis within years, Mundell believes.
However, he thinks the United States will avoid a technical recession during the current downturn and that the weak dollar will help it to make a recovery around autumn of this year.
But its growing liabilities accumulated by its current account deficit means that it will eventually pay a high price if the current monetary set-up continues, he said.
"I see the problem coming maybe in the next recession," he said.
"There could be a real dollar crisis in five years."
CHINESE CONCERNS
China is worried about its pile of about $1.6 trillion in foreign reserves, built up during years of U.S. trade deficits, which loses value as the greenback depreciates.
"What you need to have is an International Monetary Fund that's going to take some of these excess dollars, put them into a substitution account inside the IMF or some other institution and then use that and create what is a new international currency," said Mundell.
"This kind of proposal would be very acceptable inside China. The Chinese are thinking in terms of this," he said.
Mundell, awarded the Nobel Prize for Economics in 1999 for his work on exchange rates and optimum currency areas, travels regularly to China, where he has advised senior government officials.
For years, China has come under pressure from U.S. and European authorities to allow its currency, the yuan, to appreciate, in order to make Western goods more competitive. But Beijing has resisted.
"They don't have many pre-conceptions. They don't have a belief obviously that floating is a good idea, whereas the European Central Bank and the Americans think that floating is the best of all possible worlds," Mundell said.
Fixing exchange rates would favour the euro zone, which is now battling with a euro at around record highs against the dollar, said Mundell, who has often been referred to as one of the intellectual fathers of the single European currency.
"I think the risk now is that the high euro is going to build in pressure which is going to involve deflationary pressure in the asset markets, housing and so on, and that's going to cause a problem, a nagging problem, that's going to go on for a long time as long as the euro is as high as this," he said.
"The swings in the dollar-euro exchange rate are big problems, and the problem is exacerbated by the fact that the Americans get the benefit of these swings and Europe gets the wrong end of the stick."
But Western policy makers, particularly in the United States which receives an economic stimulus from a weak dollar, would be reluctant to accept monetary change, Mundell said.
"The U.S. Bush administration isn't much interested in it, they're quite happy with the dollar the way it's working, and the Europeans are really behind the zone on this. Nobody in Europe is thinking about international monetary reform and Europe would be a major beneficiary of it."
"Bernanke and Trichet are very much behind the curve on this," he said, referring to Federal Reserve chief Ben Bernanke and ECB head Jean-Claude Trichet. (Reporting by Jason Webb; editing by Keith Weir)

source: http://www.guardian.co.uk/business/feedarticle/7558682


I bolded the scary part.

I really wasn't expecting someone to propose something like this...definitely not good.

edit: http://en.wikipedia.org/wiki/Robert_Mundell

it looks like this guy helped lay the ground-work for the Euro, so this definitely is not good news--very scary. It doesn't look like he's any friend of the gold-standard either.

 

[JRegs85]

The next move is going to be a "global lender of last resort" in order to attempt to avoid international banking and currency crises.

 

[MorrisonBonpasse]

The inevitable movement to a Single Global Currency

Nobel Laureate Robert Mundell is known as one of the fathers of the euro and has long been a proponent of a Single Global Currency. His proposal to use China's excess reserves as a basis for a new international currency is creative.
The Single Global Currency Association promotes the implementation of a Single Global Currency, with a Global Central bank, by the year 2024. With the successful use of the euro and other common currencies, more and more people and organizations and nations are seeing the advantages of monetary unions. Our website is at www.singleglobalcurrency.org.
The Association recently published the 2008 Edition of my book, The Single Global Currency - Common Cents for the World. A copy of the 2007 edition is available at the Munchen personal archive at http://mpra.ub.uni-muenchen.de/5879/. and on the Association's website.
The goal of 2024 is only 16 years away. If one looks at the world before the 2002 distribution of the euro to the people of the EMU, you would have seen in 1986 a Europe with a Soviet Union, an East Germany and a Berlin Wall. At that time, most Europeans would have scoffed at the idea of a new monetary union.
The benefits of a Single Global Currency include:
- Zero transaction costs to exchange currencies. Presently, $3.2 trillion is traded every trading day and all this trading and its associated costs, approximately $400 billion annually, can be eliminated.
- The end of currency fluctuations and currency speculation.
- The end of "Balance of Payments", "Current Account" and "global imbalances" problems for currency areas. There will, of course, still be trade and wealth inequalities, and more visibly; but they will not be compounded by the problem of foreign exchange transactions and reserve requirements. There would be no need for countries to maintain international reserves of other currencies.
- Zero manipulation by countries of their currencies, and thus no more need to cajole and jawbone any particular country or currency area about the value of its currency.
- Zero risk of national and regional currency crises such as occurred in the 1990's in Mexico, Argentina, Malaysia, South Korea and Russia.
- Minimal inflation, assuming that the future global central bank sets and achieves a low inflation rate, just as the European Central Bank has done. It's not clear that a zero inflation rate can be secured, as that would bring an economy perilously close to deflation and a deflation spiral, but certainly a low rate of inflation would be better for the world than the current rates.
- Worldwide asset values will increase by about $36 trillion due to the elimination of currency risk. Such an increase in asset values will cause annual worldwide GDP to increase by about $9 trillion.
- With no currrency risk, worldwide interest rates would be lower.
- With zero risk of currency failure and zero manipulation and minimal inflation, the Single Global Currency would satisfy the moral obligation that a stable currency should be considered as a fundamental human right, as is the right to own property. A Single Global Currency would be far more stable than the currencies presently used by billions of human beings
While all these benefits are expected upon the implementation of a Single Global Currency, considerable benefits will also come during the implementation processes which will see the reduction of national currencies as predicted and welcomed recently by Benn Steil in Foreign Affairs.
Of course, not all economists agree with the goal of a single global currency. For those who would label the single global currency utopian, we call their attention to the euro, which began as a plan only about 30 years ago. Who would have thought in the 1970's that Europe would not only adopt a common currency, but also that its member countries would discard their old currencies?
The single global currency might be an enlarged transformation of one of the current major currencies (dollar, euro, yen), perhaps with a new name such as "dey", "eartha", "geo","globo" or "worldo" or it might be a new currency with such a name. How we get to that point is, of course, a major challenge, but there are several possible routes. One is to continue the trend of creating and expanding regional monetary unions, and then combine those monetary unions into one. Another is for smaller countries to continue to "ize" their nations' legal tender, as in "dollarize" and "euroize", as has been done in El Salvador and Monaco. Compatible with all these and other routes is the need to convene an international monetary conference of nations, monetary unions and related organizations, and begin planning for the implementation of a single global currency.
Organizations such as the IMF and the Bank for International Settlements, and individual economists should begin to carefully research and write about the benefits claimed above for the Single Global Currency, and about the costs, too. When the vast benefits become better known, the people of the world will demand a Single Global Currency and ask why we have been burdened so long with the existing multicurrency system, which Robert Mundell describes as "absurd."

 

[Dr.3D]

A global currency will just allow the central bank to get away with robbing people on a mass scale. There will be no other currency to compare to the one so nobody will have any idea how much it is gaining or losing in relation to any other. They will try to tell everybody, the prices are going up while all the while they are devaluing the currency and taking as much as they want from the rightful owners of savings. Savings will be a thing of the past. In time, they will just scan your identification and issue you what they want you to have because in the socialist system, they will claim you don't need anything more than what they say you need.

Sounds like the ideal socialist idea for keeping the public (people) in their places. In the mean time, those running the show will have everything they want and nobody will know what they have because it will be a secret. Only those in power will have the luxuries of life. World travel or even local travel will be severely restricted.

Does this sound like the kind of world you want to live in?

 

[OptionsTrader]

One man's crisis is an elite's dream come true.

 

[Kludge]

The next move is going to be a "global lender of last resort" in order to attempt to avoid international banking and currency crises.

???

World Bank Group (International Monetary Fund)

 

[PatriotOne]

"The U.S. Bush administration isn't much interested in it, they're quite happy with the dollar the way it's working, and the Europeans are really behind the zone on this. Nobody in Europe is thinking about international monetary reform and Europe would be a major beneficiary of it."

Oh puhleeze! That part of the article is the most absurd statement. Our dollar is being run into the ground for exactly the reason to justify a One World Currency. Bush and Europe isn't interested....OMFG...I can not even believe he said that .