The Dilemma Of RMB And US Dollar Under Multi Currency System

< p > this year is the 70th anniversary of Bretton Woods system.

The Bretton Woods system, once committed to the global economy, has collapsed for more than 40 years, but the new international monetary system framework has not yet been established.

The new currency war will still emerge, and the possibility is to increase rather than decrease.

< /p >

< p > the so-called "new normal" of the international monetary system means that it is impossible for us to return to the era of unit sovereignty.

Perhaps there will be fundamental changes in the market model.

< /p >

< p > at present, the global monetary system has in fact completed the two yuan currency reserve system.

IMF figures show that the US dollar accounted for 72.7% of the global central bank's foreign exchange reserves in June 2001.

As of the third quarter of 2013, the US dollar accounted for 61.44% of the foreign exchange reserves held by the Central Bank of the world, but the situation is still changing.

< /p >

< p > recently, Pan Gongsheng, deputy governor of the central bank, said that the diversification of reserve currency will be the result of market choice. The industry and academia are very confident that the renminbi will occupy a position in the future diversification of the international a href= "http://www.91se91.com/news/index_c.asp" and the monetary system < /a >.

< /p >

< p > in Pan Gongsheng's view, the diversification of reserve currency is a reform direction worth exploring. It is very difficult for the multi reserve currency system to fundamentally solve the inherent defects of reserve currency, and will inevitably face the "Terry Finn puzzle", and there may also be some new situations in the process of turning to a diversified monetary system.

< /p >

< p > this indicates that the attitude towards internationalization of RMB a href= http://www.91se91.com/news/index_c.asp has changed radically.

This stems from two variables of market and policy changes.

From the market perspective, Pan Gongsheng said that the diversification of reserve currency will be the result of market choice. In the past few years, the internationalization of RMB has been developing very fast in the past few years.

< /p >

In April, Standard Chartered Bank pointed out that at least 40 central banks had betting on China's currency, and more central banks are preparing to take the same measures.

This trend is emerging in emerging markets as well as developed countries. According to the report, these central banks are moving closer to other currencies. "Many central banks are joining the renminbi in their portfolios".

< /p >

< p > from the policy point of view, the amount of foreign exchange reserves has become a serious burden on China's economy.

Premier Li Keqiang said in his previous visit to Africa that the imbalance of foreign trade has damaged China's macro economy. China's huge foreign exchange reserves are actually a heavy burden on the country.

< /p >

The policy of this year has clearly pointed to the internationalization of RMB P.

However, the real dilemma and internationalization of RMB are facing several difficulties: 1, the double surplus of capital and trade items is not sustainable, and one of them is deficit to ensure balance of payments.

2, how can the international reserve currency solve the "Terry Finn problem"? That is, the reserve currency country should be a trade deficit country.

3, Mundell's three dollar paradox, how to make a choice? < /p >

"P" and "a href=" http://www.91se91.com/news/index_c.asp "RMB" /a "predicament correspond to the fact that the two deficits of the US economy and the US dollar are not sustainable.

< /p >

"P" dollar hegemony has always existed since the establishment of the Bretton Woods system, even after the collapse of the system.

People all over the world have criticized the US dollar hegemony and earned Seigniorage in the world, and caused exchange rate fluctuations and even crises in emerging market countries.

It can be summed up in the famous American Treasury Secretary Connally: the US dollar is ours and the trouble is yours.

< /p >

P can not deny that Americans have gained uncounted economic benefits from US dollar hegemony.

But there is always another side to it. This is what the Nobel laureate Freedman said: there is no such thing as a free lunch.

< /p >

< p > Americans have long begun to reflect on what the US dollar hegemony has brought to the United States. At least, the rethinking conclusions include: whether the international dominance of the US dollar is generally conducive to the US economy, the answer to this question is no longer clear.

< /p >

< p > a more typical view is that former president Sao lick pointed out in an article criticizing the monetary system that the international position of the US dollar brought two huge costs: first, other countries could lower the exchange rate of the local currency by hurting the US dollar to hurt the US's exports and employment; second, when the economic imbalance increased, there was no pressure to compel the United States to adjust its economic and fiscal policies, which constituted a moral hazard.

< /p >

< p > the policy and behavior of strongly advocating the US dollar have disappeared and replaced by weak dollar financial policy.

When the dollar can not be self depreciated, it will force other countries to appreciate their currencies.

< /p >

The US dollar hegemony and Seigniorage interest in the past decades have always been faced with the economic knowledge of "no free lunch in the world" in P.

Americans are beginning to understand that the cost of the dollar is too high.

Perhaps Americans also need to understand that they should welcome the internationalization of the renminbi rather than obstruct it, as well as the euro.

< /p >

The dilemma of the P dollar is that fiscal and trade deficits can not be maintained for a long time.

Because the existence of US dollar hegemony conceals this unsustainability, Americans mistake it for eternity.

Unfortunately, the financial crisis in 2008 finally forced Americans to reflect on it.

< /p >

P obviously accuses China of being unreasonable.

But this reflects the reverse dilemma between the US dollar and the renminbi. China's trade surplus has made up the US trade deficit by buying US Treasury bonds.

China not only provides cheap goods and funds to Americans, but also lowers the cost of capital in the US.

< /p >

On the other side of the question, what is the situation in China? This is the heavy burden that Premier Li Keqiang said of P.

Most importantly, China and the United States need to rebalance their economies.

Over the past 5 years, the United States has been undergoing a painful rebalancing.

And China must start its own rebalancing process.

< /p >