CHINA LOOKING FOR NEW "WORLD CURRENCY"

The value of the USD will be greatly harmed in any event if these proposed reforms of the domestic or international monetary system proceed.

“We will not turn the corner on this global recession until the American financial sector crisis is fixed,” Harper told a business audience in Brampton, Ont. “Our stimulus plan will help us to sustain economic activity and make transitions but it cannot fix the problem of the global financial system.”

there seem to be many economists - american and other - who believe that the value of the U.S. dollar cannot be maintained against the other currencies of the world forever .

Global fix will take years, Dodge cautions

'Even if everything is done right,' former Bank of Canada governor says full recovery might not happen until 2011 or beyond
March 25, 2009

It will take years and a fundamental reordering of international trade and consumption patterns to fix the flaws that prompted the worldwide financial meltdown, former Bank of Canada governor David Dodge said yesterday.
While the actions currently being taken by governments around the world will help turn things around eventually, they will take time to have an impact, "even if everything is done right," Mr. Dodge said at an economic conference in Toronto.

While there should be a global rebound beginning in 2010, "it is likely to be considerably slower than in previous times, and it's going to be well into 2011, 2012 and 2013 before we see the level of output and the rates of growth return to something approaching capacity," he said.
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The key to fixing the economic world over the long term is to eliminate the huge trade imbalances that see countries in Asia exporting far more products than they consume, while the United States consumes more than it produces.

That fundamental problem will take many years to redress, Mr. Dodge said.

It will also require an enormous amount of political will in various countries to make it happen, he added. For instance, the United States would likely have to take measures such as raising consumption taxes, something that would be politically unpalatable, Mr. Dodge said.
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Another speaker at the conference, Nomura Research Institute's chief economist Richard Koo, noted that Japan's long recession that started in the early 1990s would have been much worse had it not been for the massive stimulus from the government.
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In his presentation, Mr. Dodge offered a prescription for repairing the damaged international financial system. Among his recommendations: All financial institutions should be forced to build up their reserves during good times, and executive compensation should be based on profit after reserves are taken into account.

He also recommended much greater standardization of derivative products, more transparency in credit rating systems, better oversight of mortgages, and stronger regulation of credit default swaps.

"We need to ask the question: shouldn't a world that is politically multi-polar correspond to a multi-monetary world economically?" he said in a news conference during a summit of world leaders in L'Aquila, Italy.

Sarkozy compared an overhaul of the global currency system to the enlargement of the Group of Eight structure to encompass fast-growing emerging economies, which were invited to join the Italian summit.

He said the supremacy of the dollar belongs to the post-Second World War era when America was the predominant world power both economically and politically.

"Even if it's a difficult topic, I hope that in the coming months we will talk about currencies and the international monetary system," he said. "There has to be a debate."