IMF Update SNB and IMF cohost meeting re Int'l Monetary System

[gnk]

Here is a portion of the opening remarks made today by Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank:

(emphasis mine)

II. The problem

Arguably, much of the debate surrounding the international monetary system boils down to the following question: how sustainable is an international monetary regime, in which one national currency serves as the international reserve asset? Over the past few decades, this question has been examined under different perspectives.

A first perspective was the so-called “Triffin dilemma”, discussed in the context of the Bretton Woods fixed exchange rate regime. This discussion highlighted that increasing indebtedness of the reserve-issuing country would in time undermine the very confidence that forms the basis for the reserve asset status.

A second perspective refers to the alleged “exorbitant privilege” of the reserve-issuing country. It highlights the asymmetry in the adjustment to shocks, as the reserve-issuing country has the privilege of not being under much pressure to adjust to current account deficits, at least over the short and medium term. It is worth noting that part of Keynes’ goal in setting up the IMF was to try to create symmetry between the need to adjust for both deficit and surplus countries.

More recently, the question appeared under the perspective of global imbalances. This discussion highlights that current account surplus countries can forego, at least temporarily, the required adjustment by accumulating international reserves instead. The sustainability of these imbalances, and the extent to which they have contributed to the recent global financial crisis, is still under discussion.

The question of the reserve asset has often been at the center of the debate. But as Mark Carney has recently argued, the adjustment mechanism may be more important than the choice of reserve assets.

I find it interesting that he referred directly to the issue of the Triffin Dilemma and the "exorbitant privilege" view. Obviously, the US Dollar reserve status is being questioned here - and quite openly. [edit - I am not sure what he is referring to when he mentions the "adjustment mechanism" - anyone care to comment?]

Gold has not been mentioned... but that would be foolish anyway, whether pro or con, as it would be disruptive to the world markets.

Anyway, speech in its entirety on the Swiss National Bank (SNB) website:

http://www.snb.ch/en/mmr/speeches/id/ref_20100511_pmh_1

http://www.snb.ch/en/mmr/speeches/id...1_pmh_1.en.pdf

Interested in others' thoughts on these developments. Especially as to the future of the US dollar standard and gold.

[don]

Re: IMF Update SNB and IMF cohost meeting re Int'l Monetary System

Obviously, the US Dollar reserve status is being questioned here - and quite openly.

AKA Sheep Bleating. The US has positioned itself well to enforce the dollar's reserve currency status. I suggest a look at a map should suffice. There's not a damn thing the Euros can do about it.

Serendipitous deployment? If you think so, I have a synthetic CDO I would like you to consider ;)

[gnk]

Re: IMF Update SNB and IMF cohost meeting re Int'l Monetary System

AKA Sheep Bleating. The US has positioned itself well to enforce the dollar's reserve currency status. I suggest a look at a map should suffice. There's not a damn thing the Euros can do about it.

Serendipitous deployment? If you think so, I have a synthetic CDO I would like you to consider ;)

How has the US positioned itself to enforce to reserve currency status? I need it spelled out for me.

In my opinion, there are two other forces involved. One is the international bankers - the Central Banks, the IMF, the BIS... there is definitely a trend for a world currency - the SDR.

The other force is the market - what it perceives as value. In this most recent crisis, it's interesting to see a flight to not only dollars, but gold as well. That's the real battle, IMHO.

The int'l bankers may want to start designing a new system, the US may engage in currency wars and manipulation to prop up the dollar, but the market's opinion can't be discounted. The market, and its choice of store of value, may be the most democratic thing to evolve out of this global financial crisis.

The votes for gold are increasing.