CFR Economist Recommends Abandoning National Currencies – with exceptions!

I strongly recommend that anyone interested in the subject of money should take the time to read this article by Benn Steil. One may be dubious about his intentions, but this is one economist who knows what he’s talking about within the frame of central banking and political currencies.
By Benn Steil, From Foreign Affairs , May/June 2007


Summary: Global financial instability has sparked a surge in “monetary nationalism” — the idea that countries must make and control their own currencies. But globalization and monetary nationalism are a dangerous combination, a cause of financial crises and geopolitical tension. The world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn.
Steil also gave an interesting presentation on related subjects at this month’s New York Hard Assets Investment Conference. Read and hear it here.
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One response to “CFR Economist Recommends Abandoning National Currencies – with exceptions!

  1. Yes, I believe he knows what he is talking about, and it seems to me his is a desperate attempt to save the global finance system as it appears to be falling apart:

    Quote:

    “But growth today depends more and more on investment decisions funded and funneled through the global financial system. (Borrowing in low-cost yen to finance investments in Europe while hedging against the yen’s rise on a U.S. futures exchange is no longer exotic.) Thus, unrestricted and efficient access to this global system — rather than the ability of governments to manipulate parochial monetary policies — has become essential for future economic development.”

    While talking up the dollar as THE international currency, he scolds the US finance authorities for their lack of appreciation of the support the US monetary system is getting from its trading partners, mainly China:

    “But the dollar’s privileged status as today’s global money is not heaven-bestowed. The dollar is ultimately just another money supported only by faith that others will willingly accept it in the future in return for the same sort of valuable things it bought in the past. This puts a great burden on the institutions of the U.S. government to validate that faith. And those institutions, unfortunately, are failing to shoulder that burden. Reckless U.S. fiscal policy is undermining the dollar’s position even as the currency’s role as a global money is expanding.”

    His recommendation seems tailored to prepare the way for an imminent introduction of the Amero:

    “Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area.”

    “Most of the world’s smaller and poorer countries would clearly be best off unilaterally adopting the dollar or the euro, which would enable their safe and rapid integration into global financial markets. Latin American countries should dollarize; eastern European countries and Turkey, euroize.”

    I would certainly agree that “one may be dubious about his intention” 😉

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