The past year was full of events that inevitably split the global geopolitical space into two camps: those who still support using US currency as a universal financial tool, and those who are turning their back on the greenback.
Global tensions caused by economic sanctions and trade conflicts triggered by Washington have forced targeted countries to take a fresh look at alternative payment systems currently dominated by the US dollar.
So far, China, India, Turkey, Iran, and Russia have all taken steps towards eliminating their reliance on the greenback, and the reasons behind their decision.
But while those nations could be conceived by many as “enemies” that could be forgiven for daring to question the hegemon, we must admit we were a little surprised at just how frank Bank of England Governor Mark Carney was during a lengthy Q&A this morning…
One of the first questions asked was:
“Does he envisage one of the types of IMF SDRs to become a global currency in his lifetime? If so, will it be crypto/blockchain/gold ‘backed’?”
Carney’s response was oddly honest and open…
“The IMF’s SDRs are designed for a specific purpose – to supplement IMF member countries’ official reserves and so help them to address balance of payments problems. So they are not intended to become a widely accepted means of exchange – what most people understand ‘currency’ to mean.
OK, so definitely got the message – Don’t look over here at the SDRs…
What about other currencies?
“That said, I think it is likely that we will ultimately have reserve currencies other than the USD. The evolution of the global financial system is currently lagging behind that of the global economy, and there are asymmetric concentrations of financial assets in advanced economies relative to economic activity.