What happened
Chinese central bank head Zhou Xiaochuan advocated creating an IMF-administered “super-sovereign reserve currency” to replace the U.S. dollar as the de facto global currency. The proposal, backed by Russia, is expected to be a topic at the G-20 meeting in April. President Obama, Fed Chairman Ben Bernanke, and Treasury Secretary Timothy Geithner all rejected the “global currency” idea Tuesday. (Bloomberg)
What the commentators said
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China’s proposal to “end the dollar era” is not just “saber-rattling,” said the Financial Times in an editorial. China is overexposed to the dollar, holding $739 billion in U.S. Treasurys, and it would be hit hard by U.S. inflation—making China hostage to U.S. fiscal policy. Zhou’s call for an alternate currency in which China can park its cash "deserves a hearing.”
Making a change might not be all bad for the U.S., said Justin Fox in Time. Having the dollar as the world’s reserve currency lets the U.S. run up big deficits on the cheap—but being forced to live within our means is a better long-term economic strategy.
The dollar isn’t going anywhere, said Dale McFeatters in a Scripps newspapers editorial. It became the world’s currency through a “long evolutionary process” in which it replaced the British pound. China’s yuan may someday join the dollar, and to a lesser extent the euro and the Japanese yen, as a global reserve currency, but creating a super-sovereign currency “from scratch” faces too many obstacles.
