'World needs new reserve currency'

Nobel Prize winning economist Joseph Stiglitz

Source: Press TV
http://www.presstv.ir/detail/174296.html

A prominent American economist says the world needs a new global reserve currency to avert trade imbalances that are reflected in the US national debt.

In an interview with Bloomberg on Sunday, Nobel Prize winning economist Joseph Stiglitz said that a “global system” is needed to replace the dollar as a reserve currency and help avoid a weakening of US credit quality.

“By taking off the burden of any single country, we don't have to have trade deficits,” the Columbia University professor pointed out.

“Things would be much worse if it were not the case that Europe was having even more of a problem, but winning a negative beauty pageant is not the way to create a strong economy.”

“The likelihood of the US government failing to honor its financial obligations and in particular make due and full payments on US Treasury securities is extremely low,” according to the international Fitch Ratings agency.

Americans appear to be growing nervous, and that unease could take an economic toll.

Consumer sentiment fell in March to its lowest level since November 2009. With oil prices rising, Americans' confidence in the economic recovery has taken a sudden plunge.

The financial and psychological strains appear to be encouraging Americans to cut back. Already, one in every three consumers has cut spending due to rising prices.

G20 seeks indicator deal in Paris

Finance ministers and central bank heads meet in France to decide common indicators to measure nations' economic health.


Sarkozy, whose country heads the G20 this year, has told ministers to put national concerns aside [EPA]

Source: Al Jazeera
http://english.aljazeera.net/news/europe/2011/02/201121982516550310.html

Members of the G20 are striving to reach a deal on a set of indicators to measure the economic health of member states, in a bid to avoid another global financial crisis.

The G20 has been seeking to avoid another major financial crisis by increasing economic co-operation between member states, but in order to do so it is essential the countries agree on a set of economic metrics.

Finance ministers and central bankers from the 20 developed and developing countries are holding a second day of talks in Paris on Saturday to try to finalise the details of any agreement.

In welcoming remarks on Friday, Nicolas Sarkozy, the French president, warned participants that they would have to put national interests aside for the greater good of the group.

"The temptation to give priority to national interests is great. But let me tell you clearly - that would be the death of the G20," said Sarkozy.

A diplomatic source told the AFP news agency that no agreement emerged during a working dinner for finance ministers on Friday.

The source said that China remained reluctant to agree to certain indicators that were under consideration, and there was no united front among emerging economies on the issue.

However, speaking on Saturday, Wolfgang Schaeuble, the German finance minister, said there was a "good chance" of breaking the current deadlock on the indicators.

He also said that Germany would back French proposals to work on increasing transparency in commodity markets and for implementing a controversial financial transaction tax.

Four indicators

France says that it wants an agreement as soon as possible so that the International Monetary Fund can make policy recommendations in the second half of the year.

"We need a thermometer that works so we can examine the imbalances in all their aspects to make as useful a diagnosis as possible," said one negotiator.

A series of four indicators are under discussion. Two measure imbalances within countries: the public deficit and debt, plus the level of private savings.

The other two measure external imbalances: the current account balance or trade balance, or foreign currency reserves or real exchange rates.

Sarkozy, whose country holds the G20 presidency this year, has vowed to reform the world monetary system and commodities market.

He said that he aims to defend poorer countries from trade and currency turbulence.

Some member states, including France, have also also discussed the option of curbing the dollar's supremacy as the world reference currency.

The US delegation, however, has said that it wants to focus on the effect of volatility in capital flows between countries

US dollar 'unstable' reserve currency

French President Nicolas Sarkozy has visited his US counterpart Barack Obama, discussing several issues including the reduction of the influence of the US dollar.


As France is hosting G8 and the G20 this year, the Monday meeting was focused on reforming the world economy and preventing another global recession, particularly on the US dollar.

Sarkozy considered the current model which uses the US dollar as the primary reserve currency as "unstable" and stressed that it "makes part of the world dependent on American monetary policy."

However, Sarkozy assured Obama that France still considers the dollar as the number one global currency reserve.

Obama echoed Sarkozy's concern for serious monetary reforms, saying that he and his French counterpart are negotiating the exact reforms needed to be put before the world's industrialized and emerging nations at the upcoming G8 and G20 meetings.

Both leaders pledged to cooperate and coordinate what they called new ideas about reorganizing the world economy.

After meeting in private for two hours, the two leaders invited the press into the Oval Office for comments.

Obama said he and Sarkozy -- the most pro-American French President in years - were slated to hold talks on Afghanistan, Iran, Ivory Coast, Sudan, the Middle East and Lebanon.