In 2009, surveying the wreckage after helping rescue the US from the GFC, Zhou Xiaochuan, PBOC Governor said,
The world needs an international reserve currency that is disconnected from individual nations and able to remain stable in the long run, removing the inherent deficiencies caused by using credit-based national currencies.
Zhou proposed SDRs, Special Drawing Rights, a synthetic reserve currency dynamically revalued against a basket of trading currencies and commodities: broad-based, deep, stable, and impossible to manipulate. Nobelists Fred Bergsten, Robert Mundell, and Joseph Stieglitz approved: “The creation of a global currency would restore a needed coherence to the international monetary system, give the IMF a function that would help it to promote stability and be a catalyst for international harmony“.
Here’s what happened since then:
2012: Beijing began valuing the yuan against a currency/commodity basket
2014: The IMF issued the first SDR loan
2016: The World Bank issued the first SDR bond
2017: Standard Chartered Bank issued the first commercial SDR notes.
2019: All central banks began stating currency reserves in SDRs
Mar. 14, 2022: In two weeks, China, Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan will reveal a new, independent, international monetary and financial system. It will be based on a new international currency, calculated from an index of national currencies of the participating countries and international commodity prices. [Sputnik News]. Russia and China will also reveal Unfriendly Nation Lists.
Once Eurasia, Africa, ASEAN, the Middle East, and Latin America committed, can afford not to join the world’s biggest, fastest growing, stablest, frictionless market. Most Global 500 corporations call it home because it’s the biggest, fastest growing market on earth.
Godfree Roberts wrote Why China Leads the World: Talent at the Top, Data in the Middle, Democracy at the Bottom, and publishes the newsletter, Here Comes China.