Milan (AsiaNews) – The “Age of the dollar” might be at an end. The G20 summit in London is likely to address the issue of whether to replace the US dollar as the world’s reserve currency or not. The current global financial crisis is forcing some rethink how the world economy might be reformed. A single international reserve currency might not be such a bad idea, according to Zhou Xiaochuan, China's central bank governor. Ending the supremacy of the greenback is not a new idea.
In a clear reference to the US dollar, Zhou said in article published on Tuesday that 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.”
Created almost 40 years ago as a "basket" of major currencies (US dollar, the euro, the Japanese yen, and the pound sterling), the Special Drawing Right of the International Monetary Fund has the potential to be a super-sovereign reserve currency, Zhou said, who hinted that the Chinese yuan might be added to the basket
As the main holder of US dollars China is afraid that US policy might simple devalued its holdings. In particular China's central bank governor seems irked by the ways the United States is reacting to the economic crisis, by printing money and issuing treasury bills, which is causing the US dollar to drop in value.
In Europe countries like France and Germany might pursue strategies aimed at undermining the dollar and strengthening the euro, landing a huge blow against the United States.
Russia, India, Brazil, South Korea and South Africa too have called for discussions on an international currency to revamp the international monetary system.
The problem many analysts have noted (see AsiaNews of 9 December 2008) is that an international reserve currency needs an international central bank to manage national reserves, which would mean more bureaucracy, conflict of interests, political wrangling and fights for supremacy. And who knows, perhaps a war.
Some analysts even think that a war might break out in North-East Asia (Korean Peninsula) and the Middle East (Iran).