Antony Lewis, director of digital assets at enterprise blockchain technology company R3, breaks down a recent speech entitled “The Growing Challenges for Monetary Policy in the Current International Monetary and Financial System” by Mark Carney, Governor of the Bank of England, presented at the Jackson Hole Symposium.
Last week’s conference convened central bankers from around the world and Carney took the opportunity to pitch a bold idea: launching a central bank digital asset that is similar to Facebook’s controversial stablecoin – Libra.
“There are three big ideas. First, there’s a large and growing imbalance between the increase in dominance of the US dollar versus the decreasing importance of the US economy.
Second, the existing international monetary and financial system is becoming unfit for purpose. And finally, he proposes the idea of a new global digital currency, essentially a central bank-led Libra…
The advantages are currency diversification and a wider range of low-risk, safe assets. Reduce spillover effects from one country to the next, decoupling the tight connection between trade and financial cycles. And reduced investment volatility for emerging market economies, hopefully leading to fewer crises.”
When looking at the numbers, the US share of world trade at roughly 10% is disproportionate to the amount of international trade invoices settled in dollars – 50%.
Lewis adds that because of the current financial structure, with companies and countries tethered to the dollar, the US’s problems have become the world’s problems.
“And a full two-thirds of emerging market external debt, central bank FX reserves and securities issuance globally are dollar-denominated…
The dollar has become too big for its boots.”
You can check out Mark Carney’s full speech here.