Long Baixuan: The reconstruction of the international monetary and financial system is an irreversible historical trend

At the end of August, Bank of England Governor Mark Carney gave a speech at the Fed's academic conference entitled "The Challenge of the Growing Monetary Policy in the Current International Monetary and Financial System." Carney said that the dollar-based global currency order is not sustainable. The “synthetic hegemonic currency”, which is a network of multinational central banks’ digital currencies and provided by the public sector, may be the best alternative.

As the outgoing governor of the Bank of England, Carney is one of the most influential policy makers in the world, and his bold speech naturally inspired the world. Steve Baker, a member of the UK Treasury's selection committee (currently looking for the next governor of the Bank of England), recently asked Carney and his senior colleagues about the sustainability of the global monetary system.

Mr. Baker asked if it is possible to avoid a long-term fundamental structural change in the monetary system. Carney said that because of the structural defects of the international monetary and financial system (referring to the US dollar) and the rise of China, this change will occur, but the time may occur in a decade. This unsustainable trend (the dollar-based global monetary system) will continue to be longer than we think, and the change may happen faster than we expected. Carney suggested that we should be ahead of change, or should we help manage this change to affect the rebalancing of the system?

The chief economist of the Bank of England, who attended the conference, said that since the collapse of the Bretton Woods system, the global economic tension has become more acute, as many economies have become more dollarized, at least from their debt. There is no doubt that Carney’s synthetic hegemonic currency is a solution to the problem and believes that it is time to show ambition on these major issues. Another senior colleague added that when other countries and regions in the world did not perform well, the asymmetric contraction of the United States was one of the key sources of economic tension in the world, more than the recent trade war.

Mr. Baker asked what kind of institutions have the leadership needed to drive the transformation of the global monetary system in the current environment. The chief economist humorously stated that you know the names of some international institutions, including an acronym for thriller (meaning the IMF in the Tom Cruise movie), and Carney on behalf of the Bank of England will change the monetary system at the most The idea is that London, the UK is one of the world's largest financial centers, and the Bank of England has and will continue to contribute to the transformation of the monetary system. Member Baker responded. I believe that the Bank of England is such an institution. The IMF will also be, and ask if the IMF should be led by politicians or an expert leader who understands this matter (the change of the global monetary system).

Now let's take a look at the attitude of the world's major central banks to Libra and the central bank's digital currency.

The central bank's disagreement with Libra is mainly about monetary sovereignty and whether the private sector should be allowed to control the currency.

The German and French finance ministers recently issued a joint statement reaffirming the importance of monetary sovereignty and opposing the Libra that Facebook plans to issue in Europe. European Central Bank executives also said that money is a public good and should not be controlled by a private company like Facebook, especially considering its poor record of infringing on user privacy data.

The attitude of the US Congress to Libra is to actively discuss and promote regulation, there is no substantive limit. The Fed has always been a "connivance" attitude towards Libra. The author has always stressed that Libra is an assistant to the globalization of the dollar, and believes that its white paper has been fully communicated with the Fed before the release of the white paper to obtain the approval of Wall Street. The Libra Association also recently stated that it "firmly maintains" the timetable for its launch by the end of 2020, because the Association knows that only Wall Street is the master of Libra's fate. We rarely see the Fed’s report on the central bank’s digital currency. If the Fed is understood as a private institution and Libra is seen as the “central currency” of the central bank that controls and represents the interests of the dollar, it is easy to understand the behavior of the Fed.

From the percentage of global settlement currency, the US dollar, the euro and the British pound are about 40%, 30% and 5% respectively; from the percentage of the global reserve currency, the three are 60%, 20% and 5% respectively. Therefore, from the perspective of the global currency competition, only the euro is the real opponent of the dollar, and the renminbi is recognized as the biggest opponent in the future.

The suppression of the euro by the United States actually began on the first day of the birth of the euro, including the Kosovo War of 1999 and the subsequent war against Iraq. EU countries are also trying to get rid of their dependence on the dollar system. For example, the EU plans to use the euro instead of the US dollar to settle Iranian oil and establish a European settlement system independent of the US dollar.

The EU clearly recognizes that Libra is an assistant to the globalization of the US dollar, allowing its operation in the euro zone to help the dollar to combat the currency sovereignty of the euro. Therefore, the euro zone's leading country, Germany and France, clearly said "no" to Libra. The euro is in fact the first truly super-sovereign currency. The European Central Bank also has long-term and active research in the field of digital currency. The new president, Lagarde, also expressed a friendly and cautious optimism about the digital currency. Therefore, the author expects Europe. The central bank will accelerate the launch of its central bank digital currency.

Chinese officials have made it clear that Libra will weaken the currency sovereignty of the renminbi and hinder the internationalization of the renminbi. China has accelerated its central bank digital currency DC/EP plan.

We may wish to make a bold guess. From the perspective of the IMF, the best pattern of the future international monetary and financial system is the three-pole system formed in the United States and Europe, and a basket of digital currency consists of a number of central banks. The IMF issues a “synthetic hegemonic currency”. , ie eSDR. Although the IMF proposed SDR in 1969, it has not been effectively applied. The birth of Libra rekindled the value of a package of monetary schemes, coupled with the development of the central bank's digital currency, providing the best historical opportunity for the IMF to regenerate SDR. But the IMF needs a suitable leader to drive this mission.

In the future multi-polar international monetary and financial system, the United Kingdom is very aware that its strength is not enough to form one of them. Therefore, it is in the best interests of the three countries to adhere to one of them (the United States). This explains why the Bank of England has conducted long-term research but currently has no plans to launch its own central bank digital currency, and has given a green light to Libra, which represents the dollar's interest (allowing it to operate and requiring compliance with the highest standards of regulation). The British government is also working hard to coordinate with EU senior officials and actively nominating Mark Carney as the next president of the IMF.

The unspoken rules between the United States and Europe are held by the Americans as World Bank presidents and Europeans as IMF presidents. Mark Carney is a Canadian and has of course obtained a British passport. He has served as Governor of the Bank of Canada, Governor of the Bank of England and the second President of the Financial Stability Board. He is recognized for his outstanding professional competence and international coordination. Its dual background, excellent professional ability and international coordination ability in Europe and the United States, if he is the next president of the IMF, will help to coordinate the relationship between the US dollar and the euro in the current complex situation and actually promote the IMF to restructure the multi-polar reserve currency system.

According to reports, Mark Carney is currently the No. 1 candidate for the next president of the IMF. Considering that Mark Carney publicly proposed the "synthesis of hegemonic currency" at the Fed academic conference, and the previous British parliamentarians' expectations for the IMF's leadership in leading the change of the global monetary system, I cautiously expect that the IMF board has already confirmed Mark. Kani is the president's choice and will be announced. Mark Carney's recent public speech can be seen as a warm-up for the new mission of the IMF.

To sum up, the current reconstruction of the international monetary and financial system is an irreversible historical trend. In the future, a new three-polar international currency order will be formed in the US and Europe. The new order will emphasize international coordination rather than unilateral win-win. This is not only a historical opportunity for legal currency practitioners (for example, if Mark Carney can make a history of eSDR), it is also a historical opportunity for all those interested in the cause of civil digital currency, you may be able to achieve with Mark. The same historical achievements of Nie!