Earlier we suggested that today’s financial crisis seems to reveal of the emerging cracks in the present monetary and financial framework in as earlier discussed in Bretton Woods II: Bringing Back Gold To Our Financial Architecture?
Now the calls for such reform of the financial and monetary architecture appear to have reached the shores of China.
A leading broadsheet unofficially articulated on the abuses of the US by utilizing its “dollar hegemony” or its reserve currency status.
According to the Reuters (highlights mine), ``The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
``The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies…
``The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.
``Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.
"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.
And it’s not just about the strident unofficial op-ed commentary, and the growing recognition of the imbalances consequent to the US dollar standard, Asian and European leaders have jointly called for massive reforms in our global financial system.
According to this report from Bloomberg (emphasis mine), ``Asian and European Union leaders called for an overhaul of the global financial system, lending support to French President Nicolas Sarkozy as he presses the U.S. to join the initiative amid the credit crisis.
``The heads of more than 40 Asian and European governments ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement released at a two-day meeting in Beijing. Chinese President Hu Jintao, Japanese Prime Minister Taro Aso, German Chancellor Angela Merkel and Sarkozy are among the participants….
``Sarkozy is leading the 27-nation EU's push to respond by revamping a financial system established after World War II. Leaders from around the globe will meet Nov. 15 in Washington to assess the turmoil at the urging of the EU, which has floated ideas including more bank supervision, stricter regulation of hedge funds, new rules for credit-rating companies and changes at the International Monetary Fund.”
Growing clamors to reform the global monetary architecture seem to signify emerging power struggles over the hegemonic nature of the US, which essentially has been backstopped by its political and military power and most importantly its economic might, in the spectrum of today’s monetary standard.
While of course, we don’t see this as a direct challenge to the geopolitical or military might of the US, this could also be probably seen in the light of other nations desiring to increase their share of influence in the conduct of world monetary policy affairs.
Where we previously noted that today’s global banking shakedown could be a possible manifestation of signs of diminishing confidence with the present US dollar standard system, ``We don’t know if this is signifies as 1) a mere jolt to the system or 2) the start of the end of the Paper money system or 3) the critical mass that would spur a major shift in the present form of monetary standard.”
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