According to Bloomberg News, Bank of England Governor Mark Carney proposed a radical proposal to overhaul the global financial system, which would eventually replace the dollar as a reserve currency with a Libra-like virtual currency.
Bank of England Governor Mark Carney 丨 Image Source: 虫虫创意
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Now that Carney has left the position of the Bank of England governor for a few months, he has put forward his own vision of the international economy. The threat of trade wars and currency wars is damaging economic growth and subverting multilateral cooperation, while central banks are trapped in a world of low interest rates, making it difficult to revive inflation.
“Increased economic policy uncertainty, rising protectionism, and fears that further negative shocks cannot be fully offset due to limited policy space, and these factors are exacerbating the anti-inflationary tendencies of the global economy.”
He said, "So what must be done?"
At the annual meeting of the US Federal Reserve Board (Fed) in Jackson Hole, Wyoming, Carney told other policy makers and academics that central banks must respond to the current situation in the short term. . But he also warned that "blind acceptance of the status quo is wrong" and ultimately requires dramatic measures.
His most striking view is that the status of the dollar as a global reserve currency must end, and some form of global digital currency – similar to Facebook's proposed Libra – would be a better choice . This would be better than letting the dollar's reserve status be replaced by another country's currency.
A few hours earlier, US President Donald Trump once again used Twitter to criticize the Fed’s policy and said on Twitter that he would respond to China’s retaliatory tariffs on US goods, thereby disrupting financial markets.
"In the long run, we need to change the rules of the game. When the change comes, we should not replace another currency hegemony with one currency hegemony."
Libera plans to become a global digital currency that may not be under the direct control of the central bank. So far, the plan has been condemned by decision makers in most countries. French Finance Minister Bruno Le Maire called "Libra impossible" and Maxine Waters, chairman of the US House Financial Services Committee, promised a positive response from Congress.
Carney is more sympathetic to Libra, but he said in his speech that the public sector would provide a new "synthetic hegemonic currency (SHC)" through the central bank's digital currency network.
“Even if the initial version of the idea is not perfect, the concept is interesting. SHC can suppress the strong impact of the dollar on global trade.”
Carney’s main concern is that globalization has exacerbated spillovers, and financial integration means that crises can spread quickly. This has led to a greater impact of US monetary policy on other countries than ever before.
Multi-polar systems will reduce these spillover effects and help minimize capital fluctuations into emerging markets. The governor of the Bank of England declared that the “mainstream view” on monetary policy and the international financial system “is increasingly out of date”.
“Even if we know a little about the history of money, it shows that this center will not be established. Let us end the malicious neglect of the international monetary and financial system and establish a system commensurate with the emerging diversified and multipolar global economy. ""