Universal Reserve Currency is Gaining Momentum – the US Tries to Nip it in the Bud

The US President Barack Obama and his top two economic officials have rejected the Chinese proposal to have a relook at a single international currency as an alternative to the US dollar. Zhou Xiaochuan, the governor of the People's Bank of China, suggested that reforms are needed to change the standard set after the World War II with a more viable single global reserve currency under the International Monetary Fund (IMF).

Obama argued that investors still regarded the US "the strongest economy in the world with the most stable political system". Similarly, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke have also completely disapproved the notion of having a global currency shift, and contended that the markets across the world have considerable confidence in the US dollar.

The visiting Prime Minister of Australia, Kevin Rudd has ruled out the possibility of usurping the US dollar with any other currency. However, Rudd said later that he would review any late Chinese edition on this issue with respectful interest. China is one of the largest trading partners of Australia in the world.

IMF First Deputy Managing Director John Lipsky stated that the debate on a single global currency was not new, but it emphasized a general concern about the strength of the global economic and financial system. Nevertheless, he acknowledged that it should be given a serious thought since the call had originated from the emerging economic quarter, and he added that it is possible to be considered as a long-term option.

China’s stance is understood to have emerged in line with the standpoint of new economic entities including Russia, India and Brazil. According to sources, the list is growing ahead of the next week’s G-20 Summit with South Korea and South Africa already rooting for such a debate.

The issue in recent times gained momentum while the Canadian economist Robert Mundell backed a similar proposal by Kazakh President Nursultan Nazarbayev. Mundell is the chief intellectual architect behind the creation of the Europe’s single currency system.

By Jose Roy