The world must end the risky dependence on the US dollar: Carney de la BoE

JACKSON HOLE, Wyo. (Reuters) – Bank of England governor Mark Carney on Friday denounced the "destabilizing" role of the US dollar in the global economy and said central banks may have to unite to create their own currency. Reserve.

The dollar's dominance of the global financial system increased the risks of trapping liquidity with extremely low interest rates and low growth, Carney told the world's central banks in Jackson Hole, Wyoming, United States.

"As the global economy is reorganizing, the US dollar remains as important as when Bretton Woods collapsed," Carney said, citing the end of the dollar 's attachment to the US dollar. gold in the early 1970s.

The share of global activity in emerging economies has increased from about 45% before the financial crisis a decade ago to 60% to 60%, said Carney.

But the dollar was still used in at least half of the international trade bills – five times more than the US share of global goods imports – fueling demand for US assets and exposing many countries to adverse spillovers. fluctuations in the US economy.

Carney – who was seen as the future president of the International Monetary Fund but failed to gain the support of European governments – said the problems in the financial system encouraged protectionist and populist policies.

Earlier Friday, US President Donald Trump had said he was ordering US companies to consider ways to shut down their operations in China, the latest escalation of growing trade tensions between Washington and Beijing.

Carney warned that very low interest rates in the past had coincided with wars, financial crises and abrupt changes in the banking system.

As a first step in reorganizing the global financial system, countries could triple the IMF's resources to $ 3 trillion, which would be a better alternative for countries that protect themselves by accumulating huge piles of debt denominated in debt. dollars.

"While such concerted efforts can improve the functioning of the current system, a multipolar global economy ultimately requires a new International Financial and Monetary Management System (IMFS) to realize its full potential," said Carney.

The Chinese yuan was the most likely candidate to become a reserve currency equal to the dollar, but it still had a long way to go before it was ready.

The best solution would be a diversified multipolar financial system, something that could be provided by technology, said Carney.

Facebook (FB.O) Libra was the most prominent digital currency so far, but it faced a host of fundamental problems that it had not yet addressed.

"As a result, the question of whether such a new synthetic hegemonic currency (SHC) would be better provided by the public sector, perhaps through a network of digital currencies from the central bank," Carney said. .

Such a system could mitigate the "dominant influence" of the US dollar on world trade.

"Even a passing acquaintance with the monetary history suggests that this center will not hold," said Carney. "We must recognize the short, medium and long-term challenges this system creates for institutional frameworks and the conduct of monetary policy around the world."