BEIJING (Reuters) - The financial crisis has laid bare defects in the dollar-led global economy and the world should look to displace the U.S. currency, even if that will take many years, Chinese officials said in comments published on Monday.
The push for fundamental, if gradual, reform of the international financial system comes just before the Group of Eight summit in Italy, where China's willingness to question the dollar's role could fuel debate.
The Special Drawing Right (SDR), a unit of account used by the International Monetary Fund, presents a viable alternative to the dollar as a global reserve currency, said Li Ruogu, chairman of the Export-Import Bank of China, a major state-run bank.
"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted 'currency basket' that would replace the dollar at the heart of the monetary system," Li was cited as saying in Financial News, a newspaper published by the central bank.
I'm for it. The success of the euro suggests that transnational monetary experiments. (The euro hasn't overcome Eurosclerosis in Germany and France, but it has held together pretty well so far, and Ireland, Spain, and Greece have been thriving until last year. Overall it seems like a success.) I don't think it does the United States any good to have the world's reserve currency. It just encourages politicians to overspend, because Congress's ability, at the end of the day, to commandeer the Fed and print money to pay our debts persuades foreigners that the US won't default, and therefore gives the government unlimited access to foreign capital, which they waste, crowding out more productive private sector economic activity. And anyway, it does seem more fitting somehow for the provider of the world's reserve currency to have a worldwide mandate.