A Chinese Becomes Deputy Head of the IMF

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by Michael Liebig

The International Monetary Fund (IMF) is certainly one of the most influential international institutions. It does matter a lot when the head of the IMF addresses the debt crisis in the United States by demanding that “bold fiscal action” be taken “immediately” to avert “an adverse fiscal shock” with international ramifications.

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China’s Initiative for a New World Monetary System

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Just before the beginning of the G-20 Financial Summit in London, China has launched an initative which aims at replacing the US dollar as the global reserve currency. According to the plan, the IMF’s “Special Drawing Rights” will become the reserve currency of the world monetary system in the near tearm, in the longer-term a supranational, “commodity-based” currency, derived from John Maynard Keynes “Bancor” concept, will assume that role. Russia’s proposals for a new financial architecture point in a similiar direction. Preliminary reactions from politicians and economists in Europe and Latin America have been cautious, but open-minded, while President Obama sees “no need” for a new world reserve currency. No doubt, China has kicked off a discussion which won’t go away.

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