More here, but the following is a summary...
Reform of the financial system is on top of the agenda at the G20 summit China's central bank has called for a new global reserve currency run by the International Monetary Fund to replace the US dollar.
Central bank governor Zhou Xiaochuan did not explicitly mention the dollar, but said the crisis showed the dangers of relying on one currency.
With the world's largest currency reserves of $2tn, China is the biggest holder of dollar assets. Its leaders have often complained about the dollar's volatility.
China has long been uneasy about relying on the dollar for trade and to store its reserves and recently expressed concerns that Washington's efforts to rescue the US economy could erode the value of the currency.
His speech was, unusually, published in both Chinese and English, signalling it was intended for an international audience.
"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," said Mr Zhou in an essay on the People's Bank of China website.
Mr Zhou said the primacy of the US currency in the financial system had led to increasingly frequent crises since the collapse in the early 1970s of the system of fixed exchange rates.
On Tuesday, the dollar weakened against most major currencies following the announcement of a US plan to buy up toxic debt.
Mr Zhou said the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right (SDR), which was created as a unit of account by the IMF in 1969.
"The role of the SDR has not been put into full play, due to limitations on its allocation and the scope of its uses," he said.
"However, it serves as the light in the tunnel for the reform of the international monetary system." The essay comes before the G20 summit in London on 2 April, at which reform of the international financial system is top of the agenda.
"This confirms that China intends to play fully its role of global economic and political power at the next G20 summit," said Sebastien Barbe, an analyst at French financial service firm Calyon in Hong Kong.
Hey, that's a great idea: let's switch from a fiat currency to another fiat currency! Perhaps one that can be inflated at will by a "committee" which cannot be controlled like the one we have at Bruxelles.
Personally, since gold and silver seem to be sinonymous with "a barbarous past" I propose a currency backed by lead ingots, iron bars, conches, cattle... whatever cannot be created out of thin air.
Yes, it's time for the Dr Goebbels show!
I suspect it's more about control than about actually developing any lasting solution to the boom bust cycle. China knows it has a strong hand... in the same way that the US had a strong hand after the 2nd world war and the USD/Pound dual reserve standard was abandoned for one controlled entirely by the US, I imagine China is angling at using the current weakness of the Western nations to wrestle a bit more control over the world reserve currency of the future into the hands of the East (primarily their own hands no doubt).
None of the central banks around the world has any inclination to abandon fiat currencies, of course... prosperity and stability are of secondary concern to governing and maintaining control.
jimmy: I suspect it's more about control than about actually developing any lasting solution to the boom bust cycle. China knows it has a strong hand... in the same way that the US had a strong hand after the 2nd world war and the USD/Pound dual reserve standard was abandoned for one controlled entirely by the US, I imagine China is angling at using the current weakness of the Western nations to wrestle a bit more control over the world reserve currency of the future into the hands of the East (primarily their own hands no doubt). None of the central banks around the world has any inclination to abandon fiat currencies, of course... prosperity and stability are of secondary concern to governing and maintaining control.
Agree with that. China is currently being courted by international bodies like the World Bank to supply more money for their operations around the world. The Chinese are probably willing and obviously want to have more weight in the ruling bodies but Western countries aren't so keen on the idea that their time is over. Hey, Chinese are only supposed to have those factories we cannot keep around here because of enviromental and labour legislation, buy US bonds and be quiet, how dare they question the US-EU supremacy?
the SDR is 40% USD anyhow......
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