Why Mark Carney Thinks The Dollar Can No Longer Be The World’s Reserve Currency

Saturday, August 24, 2019
By Paul Martin

by Tyler Durden
Sat, 08/24/2019

While Jerome Powell’s highly anticipated Jackson Hole speech was, in the words of Brean Capital’s Russ Certo “underwhelming and anti-climatic”, one couldn’t say the same for the shocking luncheon speech by Bank of England’s outgoing governor, Mark Carney, titled “The Growing Challenges for Monetary Policy in the current International Monetary and Financial System”, where he dedicated no less than 23 pages to a stunning – for a central banker – cause: to describe why the dollar’s “destabilizing” reserve status role in the world economy has to end, and why central banks need to join together to create their own replacement reserve currency, one potentially tied to Facebook’s new “stablecoin” Libra, although in reality any “Synthetic Hegemonic Currency” as Carney defined it would do.

But first, a quick tangent: the reason we say Carney’s speech was shocking is not for what it proposes – after all, we have long argued that a world in which the dollar’s reserve currency status would be stripped away by the establishment and granted to some alternative – whether gold, or a basket of currencies like the IMF’s SDR, or a cryptocurrency like bitcoin – is coming in posts such as:

“Game Changer” – Is Libra The Trojan Horse For An SDR-Backed Redesign Of The Global Financial System?
Did The IMF Reveal That Cryptocurrency Is The New World Order End-Game?
Bank Of England Boss: China’s Renminbi Will Rival The Dollar As Global Reserve Currency

The argument behind all these articles is simple and two-fold: i) in a fiat world, one can only devalue relative to some other currency, yet we have now reached a point where (as Pimco suggested two years ago when it said the Fed should buy gold to devalue the dollar against it) every currency needs to devalue relative to some hard index outside of the monetary system (Carney’s point is that with a dollar as reserve currency anchor, it is becoming virtually impossible to lower its value even though it’s critical to do that), which means that ii) the unprecedented credit expansion that began when the last peg to gold was broken in 1971 when Nixon ended the Bretton Woods international system, has gone too far, and establishment powers are now seeking a reason to reimpose a hard monetary link: call it a “gold standard” or, more aptly, a “crypto (or stablecoin) standard”

The Rest…HERE

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