A (Private) World Currency for World Trade

by: Jacob Steelman

In the aftermath of the global financial crisis (from an Austrian perspective it is a market correction of the malinvestments caused by central banks and governments) a lot has been written about the cause of the crisis and how to prevent it from happening again. In September 2009 the BBC aired a documentary called “The Love of Money.” The series focused on the daily events that unfolded during the collapse of the global financial system including the fall of Lehman Brothers as if this resultant consequence of the crisis was itself the cause of the global financial crisis. From this it was ultimately concluded that the greed of the Wall Street bankers and the lack of regulation were to blame for the global financial crisis. The greed factor may have blinded many to keep going when the warning signs were starting to pop up. This is not as unusual as one may think. We experienced these same phenomena during the dot com boom of the late 1990s. An inevitability sets in to follow the boom to its end confident that you will be smarter than all the others engaged in the same endeavor. While the BBC series concluded, as have many of the books and articles written by establishment pundits, that the cause of the crisis was Wall Street greed and lack of regulation, nowhere in the series did anyone raise a question about the role of the world’s central banks in causing this collapse of the new world order’s financial system.

A year earlier (2008) in the midst of the imploding US and European financial systems and the resultant bankruptcies, nationalizations and bailouts the People’s Daily, China’s official newspaper, called for a new global currency to replace the US dollar. Writing in the People’s Daily edition of 17 September 2008 Professor Shi Jianxun of Shanghai’s Tongji University said that “[t]he world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.” As yet nothing has been done to address the concerns raised by Professor Jianxun.

Professor Jianxun was right to express concern about the financial leadership of the United States and the United States dollar. He should be more concerned after the comments of Ben Bernanke the other week before two US Congressional committees (and the IMF’s recent report on the US banking industry’s need for more capital infusion) because it is clear that Mr. Bernanke has no alternative solutions to the ones he and other central bankers have been using. What about the Chinese taking world monetary leadership and implementing a new alternative such as a renminbi backed by a gold standard?

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Reposted from LewRockwell.com