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The Global Currencies Conundrum

Edited By John Ryan

This book discusses the emergence of a multi-polar currency system. With the US Dollar’s hegemony as global reserve currency in question, it examines the role of the Federal Reserve in its decline, the emergence of the Euro in a multi-polar currency system and the Chinese influence in this most important policy arena. China’s concerns about its US Dollar reserves are being amplified by the low returns of some of its investments in the United States. Today’s reserve currency system effectively results in China lending to the US at very low interest rates.
China needs to diversify out of the Dollar and it is this monetary policy that will fundamentally change the global currency scenario. China has been supportive of the Euro since its creation and is also lending support to the IMF’s special drawing rights. At the same time, Chinese policy targets the internationalisation of the Renminbi and with that the creation of a multi-polar monetary order.
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This book discusses the emergence of a multi-polar currency system.

The first chapter examines the implications of the creation of the Euro and its role as a global currency in today’s multi-polar system of reserve currencies. In ‘Currency Wars’ Between the US and China: Has Europe Enough Monetary Power to Act as a Broker?, Professor Otero-Iglesias discusses the role of the single currency not only as a reserve currency in a multi-polar system, but also as a real contender against the US Dollar’s hegemony. Professor Otero-Iglesias discerns where the Eurozone stands within the current framework of increased ‘currency wars’ between the US and China, and whether it is able and willing to change the current International Monetary System to a more coordinated and managed exchange rate regime, as repeatedly stated. Professor Otero-Iglesias argues that the Eurozone has made certain progress in preference-shaping and agenda-setting, but not in decision-making which is still cumbersome. France, for instance, has certainly made some efforts, with the support of China, to start the debate on the transformation of the current Flexible-Dollar-Standard. However, by not being politically united, the Eurozone precludes any possibility to force the US to enter into a compromise and relinquish the ‘exorbitant privilege’ that the centrality of the Dollar offers them.

The second chapter examines The Role of the Euro as a Global Currency after the 2008 crisis. Professor Rinaldi investigates to what extent the 2008 crisis and its follow up has undermined the Euro’s emerging...

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