World Bank Ex-Chief Economist Calls For End To Dollar As Reserve Currency

In the past we have discussed at length the inevitable demise of the USD as the world’s reserve currency noting that nothing lasts forever. [10] However, when former World Bank chief economist Justin Yifu Lin warns that “the dominance of the greenback is the root cause of global financial and economic crises,” we suspect the world will begin to listen (especially the Chinese. Lin, now – notably – an adviser to the Chinese government, concludes that internationalizing the Chinese currency is not the answer (preferring a basket approach) but ominously concludes, “the solution to this is to replace the national currency with a global currency,” as it will create more stable global financial system.

The infamous chart that shows nothing lasts forever…

Nothing lasts forever… (especially in light of China’s earlier comments [11] [21])

Via China Daily,

The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.”

Lin, now a professor at Peking University and a leading adviser to the Chinese government, said expanding the basket of major reserve currencies — the dollar, the euro, the Japanese yen and pound sterling — will not address the consequences of a financial crisis. Internationalizing the Chinese currency is not the answer, either, he said.

China can only play a supporting role in realizing the plans,” Lin said. “The urgent thing is for the US and Europe to endorse these plans. And I think the G20 is an ideal platform to discuss the ideas,” he said, referring to the group of finance ministers and central bank governors from 20 major economies.

The concept of a global “super currency” tied to a basket of currencies has been periodically discussed by world leaders as well as endorsed by 2001 Nobel Memorial Prize-winner Joseph Stiglitz. A super currency could also be tied to a single currency, but the interconnectedness of world financial markets and concerns about the volatility that can occur as a result of the system being tied to one currency have made this idea less popular.

Arguments in favor of a global currency resurfaced during October’s US budget impasse, which forced the government to shut down (as we noted here). [11]

 “It is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” a Xinhua News Agency commentary said on Oct 14. The piece argued that creating a new international reserve currency to replace reliance on the greenback, would prevent government gridlock in Washington from affecting the rest of the world.

In March 2009, China’s central bank governor, Zhou Xiaochuan, called for the creation of a new “super-sovereign reserve currency” to replace the dollar. In a paper published on the People’s Bank of China’s website, Zhou said an international reserve currency “disconnected from individual nations” and “able to remain stable in the long run” would benefit the global financial system more than current reliance on the dollar.

Of course, as we are seeing now, it’s not just the Chinese that are concerned…

 On that note, David Bloom, global head of FX research at HSBC, said US monetary policy change “will bring fluctuations for emerging countries’ currencies and lead to financial instability”.

Chen Wenling, chief economist at the China Center for International Economic Exchanges, a government think-tank, said, “A supranational currency may be a new direction for development of the global financial system. It also requires different countries to cooperate in coordinating macroeconomic policies.”

Bloom and Chen both said China needs to play a more important role in global financial governance. But Bloom said it is difficult for international financial organizations to reach a consistent conclusion on how to improve the foreign exchange system.

He said the renminbi is predicted to be stronger this year, even against an appreciating US dollar, and internationalization of China’s currency will accelerate when the government decides to further open the capital market.

Of course implementation will be painful…

 Pierre Defraigne, executive director of the Madariaga College of Europe Foundation in Brussels, said of Lin’s infrastructure proposal, “It is excellent, but the problem is how to implement these plans to link those countries that need such infrastructural construction and those with enough foreign reserves, by using an effective global mechanism.”

As we noted previously, the muddle-through is over and there is no painless solution left…

Michal Krol, a researcher at the Brussels-based European Center for International Political Economy, said …

I don’t think that the largest economies and their currencies are at this moment ready for the introduction of a supranational currency,” Krol said. “Neither the EU nor China have financial markets and monetary systems yet that are sound, solid, predictable and well functioning to be the cornerstone for a global system. But, indeed, it is time to formulate the fundamentals for global monetary governance.”

http://www.zerohedge.com/print/484329

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We've been closely watching the Crypto Currency Market if you can call it that, with all the fake data, fraud, and related problems.  One thing stands out - it's not so different than FX, commodities, futures, or stocks.  Market dyn...

Bitcoin and other cryptocurrencies flash-crashed Saturday night, one day after the US Commodity Future Trading Commission (CFTC) sent subpoenas four cryptocurrency exchanges in an ongoing probe into bitcoin manipulation that began in late July - following the launch of bitcoin futures on the CME, according to the Wall Street Journal
CME’s bitcoin futures derive their final value from prices at four bitcoin exchangesBitstamp, Coinbase, itBit and KrakenManipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.
In delay reaction, Bitcoin fell as much as $433 or 5.6% in Saturday night trading, with some noting that the flash crash happened shortly after a 90th ranked crypto exchange, Coinrail, had suffered a "cyber intrusion", and was likely the more relevant catalyst for the crypto price drop.
While major Cryptocurrencies were down from 4.5 - 5.5%, Bitcoin Cash dropped over 8.4%. 
The CTFC subpoenas were issued after several of the exchanges refused to voluntarily share trading data with the CME after being asked last December. Of note, the CFTC regulates the CTC. 
According to the WSJ, the CME, which launched bitcoin futures in December, asked the four exchanges to share reams of trading data after its first contract settled in January, people familiar with the matter said. But several of the exchanges declined to comply, arguing the request was intrusive. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the people added.
What is curious, is that if there was indeed manipulation since the launch of bitcoin futures, it was to the downside, as the price of cryptos peaked around the time the crypto futures were launched, and are down well over 50% in the 6 months since.
Coinbase in particular has been under the watch government regulators. On February 23, Coinbase sent an official notice to around 13,000 customers to notify them they were legally required to turn over their information to the IRS
The IRS had initially asked Coinbase in July 2017 to hand over even more detailed information on every one of its then over 500,000 users in an attempt catch those cheating on their taxes. However, another court order in Nov. 2017 reduced this number to around 14,000 “high-transacting” users, which the platform now reports as 13,000, in what Coinbase calls a “partial, but still significant, victory for Coinbase and its customers.”
Coinbase told the around 13,000 affected customers that the company would be providing their taxpayer ID, name, birth date, address, and historical transaction records from 2013-2015 to the IRS within 21 days. Coinbase’s letter to these customers encourages them “to seek legal advice from an attorney promptly” if they have any questions. Their website also states that concerns may also be addressed on Coinbase’s Taxes FAQ. The ongoing legal battle between Coinbase and the US government dates back to November, 2016, when the IRS filed a “John Doe summons” in the United States District Court for the Northern District of California.
On Feb. 13, personal finance service Credit Karma released data showing that only 0.04 percent of their customers had reported cryptocurrencies on their federal tax returns. 
And in April, former New York Attorney General, Eric "we could rarely have sex without him beating me" Schneiderman, launched a probe of 13 major cryptocurrency exchanges according to the Wall Street Journal - claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.
Former AG Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.
CFTC Commissioner: Crypto is a "modern miracle"
While the CFTC, IRS and New York Attorney General's office are all cracking down on cryptocurrency exchanges, it seems to all be part of the government's embrace of virtual currencies.  Last week CFTC Commissioner Rostin Benham called cryptocurrencies a "modern miracleat the Blockchain For Impact Summit held at the UN in New York last week. 
But virtual currencies may – will – become part of the economic practices of any country, anywhere.  Let me repeat that:  these currencies are not going away and they will proliferate to every economy and every part of the planet.  Some places, small economies, may become dependent on virtual assets for survival.  And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.
We are witnessing a technological revolution.  Perhaps we are witnessing a modern miracle. -Rostin Benham
Rostin hinted at the upcoming legal action against the exchanges during his speech:
Under the CEA and Commission regulations and related guidance, exchanges have the responsibility to ensure that their Bitcoin futures products and their cash-settlement process are not readily susceptible to manipulation and the entity has sufficient capital to protect itself.  The CFTC has the authority to ensure compliance. In addition, the CFTC has legal authority over virtual currency derivatives in support of anti-fraud and manipulation including enforcement authority in the underlying markets.

Meanwhile, the official Bitcoin website removed references to Coinbase, Blockchain.com and Bitpay, according to Crypto News - only one of which, Coinbase, was subpoenaed. 
http://Bitcoin.org  just removed/censored the 2 largest US Bitcoin companies (@BitPay Payment processing and @coinbase Bitcoin Exchange). It’s a good move: Bitcoin Core is obviously no longer Bitcoin, and should ideally be removed from both @BitPay and @coinbase too.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it went after Coinflip for operating a platform for trading bitcoin options without the proper authorization. Since the agency effectively asserted its dominance over the bitcoin market with that decision, this is the first time it has given its blessing to an bitcoin options trading platform. Expect a burst of institutional trading activity to follow - especially since they approved institutional options trading in July
This post sponsored by Total Cryptos @ www.totalcryptos.com  

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