♠ Posted by Emmanuel in G-20 at 1/11/2011 12:06:00 AMAnd so France takes the helm of the G20. A few months ago, French President Nicolas Sarkozy--like his predecessor Charles de Gaulle of "exorbitant privilege" fame (see Barry Eichengreen's new book that uses this term for its title)--was calling for an international monetary system not so biased towards the US dollar. However, in his recent visit to the capital of subprimelandia, Washington DC, he had to soft-pedal this message somewhat:
French President Nicolas Sarkozy assured President Barack Obama on Monday he recognized the U.S. dollar's role as the world's "No. 1 currency," as the two leaders pledged to coordinate ideas for reforming the international economic system. Sarkozy, pushing France's goals as the new head of the Group of 20 powers, came to Washington with an agenda that included broaching the sensitive subject of blunting the dollar's longtime status as the top global reserve currency.Awww...ain't that sweet. Gotta love that back-slapping and euphemism:
But he was quick to try to defuse any tensions with his hosts over the growing international challenge to dollar dominance, which has been backed by emerging giants like China but has gained little traction in Washington. Treading cautiously, Sarkozy spoke to Obama about his proposals for reforming the international monetary system but did not press for any moves that would reduce the dollar's value, a U.S. official said after the leaders' joint statements.
"I've always been a great friend, a tremendous friend of the United States and I know how important a role the U.S. plays in the world, how important the U.S. dollar is as the world's No. 1 currency," Sarkozy told reporters as he sat beside Obama after White House talks.Let's just say that the hyperactive Sarkozy has his work cut out for him as he sets about his (many, self-imposed) tasks:
Sarkozy did not publicly repeat his call for starting to wean the world off decades of dollar-dependence, but talked more generally of the need for forge ahead with "new ideas for a new century" to promote economic stability. The U.S. official, who spoke on condition of anonymity, said both leaders agreed the dollar's role in the world should be determined by international markets and investors.
Sarkozy wants to use his run at the G20 helm in 2011 to start, if not finish, reforms of the monetary system at a time when many countries are tempted to let their currency drop to promote exports and growth after the worst downturn since World War Two, even if that can be at each other's expense.Perhaps in the same way that the Chinese would be more receptive to Singapore than the US about revaluing the yuan, the United States would be more receptive to France than China about loosening its asphyxiating embrace on the international monetary system. Part of rebalancing the world economy will result in alternative reserve and trade settlement instruments. Mutual accommodation is the name of the day.
Paris is also pressing for international efforts to impose greater transparency in commodity markets trading and pricing, and for tougher regulation of trading in commodity derivatives along the lines pursued for other investment derivatives in the wake of the financial markets crisis that preceded the economic downturn of 2008-2009...
Sarkozy is trying to rally the G20 to the idea of a more diversified monetary system after decades in which the U.S. dollar has served as the world's reserve currency and a major unit of international trade settlement.