The global monetary system: Injured reserve

Posted: July 15, 2014 in economy
Tags: , ,

LAST week the Financial Times reported on anger within the French political establishment over America’s abuse of its “exorbitant privilege” as issuer of the world’s global reserve currency. Because of the dollar’s overwhelming ubiquity in the global economy it is preferred for all sorts of transactions—including the ones in violation of American sanctions that were orchestrated by BNP Paribas, a French bank. As those transactions used dollars, they were ultimately cleared through New York. That, in turn, gave American officials the authority to punish BNP, which they used, socking the bank with a fine of almost $9 billion. The French seethed:We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don’t think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade.The very next day, the Financial Times ran another story, which also featured dispeptic French leaders. This time, the irritant was the dear euro:“[Europe] cannot be the only economic zone of the world that doesn’t consider its currency as a weapon . . . as a key asset to promote its economy,” [Airbus CEO Fabrice Brégier] told the Financial Times in an interview.Mr Brégier’s comments coincide with calls from the …

via Economic Crisis http://ift.tt/1ylcClo

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