World Currency

On Monday of this week Zhou Xiaochuan, Governor of the People's Bank of China, spoke out for reform of the international monetary system:

The crisis again calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability.

In other words, the recent international finance debacles highlight the potential for one national currency (the US dollar) to drastically affect other national economies and called for an international standard rather than relying on national currencies.

On Wednesday of this week Timothy Geithner, US Treasury Secretary, called Zhou a "sensible man" and that "anything he says deserves consideration" - a signal markets took as an indicator that drove the dollar down on money markets, which prompted a follow-up statement later that morning:

I think the dollar remains the world's standard reserve currency, I think that's likely to continue for a long period of time.

Whether or not Geithner intended it, other nations came out to publicly opine on the value of the US dollar as a de facto international currency.

Gordon Brown, Prime Minister of Britain: I don’t think we’re going to have a long discussion on whether to create a global currency at this stage.

Kevin Rudd, Prime Minister of Australia: My view is very straightforward -the U.S. dollar remains the world's reserve currency.

However, on Thursday Dominique Strauss-Kahn, Managing Direcor of the IMF signaled China could be on to something:

I think the discussion about a new currency is absolutely legitimate... [discussions could] probably take place in the coming months.

Also on Thursday a UN panel headed by US economist Joseph Stiglitz, 2001 Nobel economics laureate, announced a new global currency is feasible, non-inflationary and could be easily implemented. This sequence of events assures the issue escalated up the agenda on the upcoming G20 economic summit on April 2.