JACKSON HOLE, August 24 (WNM) - For the first time, the global central banks are openly discussing a reform of the global monetary system and the introduction of a "synthetic world currency" instead of the dollar.
At this year's meeting of central bankers in Jackson Hole, Mark Carney, the head of the Bank of England, proposed to usher in the end of the era of the dollar as the world's reserve currency.
In the long run, according to the Financial Times, the solution to the current dollar imbalances is to actively create a multipolar world economy. This would make more sense than waiting for China's renminbi to challenge the dollar, Carney is quoted to have said.
To this end, Carney suggests more consideration of creating a global electronic currency that could function as a “synthetic hegemonic currency . . . provided . . . perhaps through a network of central bank digital currencies”.
This could “dampen the domineering influence of the US dollar on global trade” he said, meaning that the US shocks would not have the same impact globally as they do now.
“The deficiencies of the international monetary and financial system have become increasingly potent,” Mr Carney said. “Even a passing acquaintance with monetary history suggests that this centre won’t hold.”
Carney's statements were taken up by many differently positioned groups and classified according to their respective interests. Thus critics regard the current US hegemony, which can be enforced with military force and financial repression on the basis of the dollar, as reprehensible and want to end it. Bitcoin fans can imagine a crypto currency taking the place of the dollar. Gold investors hope that the new currency will be gold-backed. Trump opponents hope that a weakening of the dollar will weaken Trump. Trump fans hope that a weakening of the dollar exchange rate could boost US exports.
Critics of Carney say the BoE chief is only in office for a few months and has therefore made a rather speculative statement. However, these critics fail to recognize that Carney, as a former Goldman Sachs banker, is still well connected with the acting investment bankers in the US administration and would hardly launch such an idea if US Treasury Secretary Steven Mnuchin did not participate in such considerations.
In fact, according to Bloomberg, Jackson Hole is primarily concerned with the problem of the global dollar debt. This is now so high that it is no longer possible to think of controlled inflation in individual emerging markets.
A global currency reform, on the other hand, could reshuffle the cards: it would de facto be a global rescheduling of debt - a measure that creditors may not like, but which experts have for years seen as the only way out of the global debt crisis.
The concrete implementation could contain various elements. In fact, the sheer debate should accelerate the continuing flight into material assets, because money in its classic form could one day lose its significance and thus its value worldwide.