To Establish a Supra-sovereign International Currency: The Reform of International Monetary System PDF
Preview To Establish a Supra-sovereign International Currency: The Reform of International Monetary System
Chong Li To Establish a Supra-sovereign International Currency The Reform of International Monetary System To Establish a Supra-sovereign International Currency Chong Li To Establish a Supra-sovereign International Currency The Reform of International Monetary System ChongLi SchoolofEconomicsandBusiness Administration BeijingNormalUniversity Beijing,China ChineseFundfortheHumanitiesandSocialSciences ISBN978-981-16-4336-1 ISBN978-981-16-4337-8 (eBook) https://doi.org/10.1007/978-981-16-4337-8 JointlypublishedwithBeijingNormalUniversityPress(Group)Co.,LTD TheprinteditionisnotforsaleinChina(Mainland). TranslationfromtheChineseSimplifiedlanguageedition:超主权国际货币的构建——国际货币制度 的改革byChongLi,©BeijingNormalUniversityPress2014.PublishedbyBeijingNormalUniversity Press.AllRightsReserved. ©BeijingNormalUniversityPress(Group)Co.,LTD2022 Thisworkissubjecttocopyright.AllrightsarereservedbythePublishers,whetherthewholeorpartofthe materialisconcerned,specificallytherightsofreprinting,reuseofillustrations,recitation,broadcasting, reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformationstorageand retrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodologynowknown orhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. 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The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Preface Internationalmonetarysystemconsistsofthreemainparts:thefirstismoneystan- dard, the second is exchange rate system, the third one is adjustable mechanism forinternationalbalanceofpayments,whereasmoneystandardiscoreandfounda- tional,whichdeterminesthetypeofexchangeratesystemandadjustablemechanism ofbalanceofpayments.Theresearchpurposeofthisbookistoadvancethereformof existinginternationalmonetarysystemthroughestablishmentofanewinternational currencystandardthatisasupra-sovereigncurrency. Internationalmonetarysystemprovidesinternationaleconomicactivitiesrulesfor thehumansociety.Ithassignificantinfluencesnotonlyoninternationaleconomic activities of various countries but on their domestic economic activities as well. Sincethedisintegrationofgoldstandardin1930s,studiesoninternationalmonetary systemhaveremainastheimportantresearchthemesforcountries’economicsfields. Improvements of international monetary system to facilitate worldwide economic developments have been interests to all. Thus, our research project has valuable theoreticsalcontributions. Since the collapse of Bretton Woods System, current international monetary systemofJamaicaSystemhascomeintobeing.UnderJamaicaSystem,sovereign currency US dollar has acted as the main international currency. This has caused vulnerability of money standard, instability of exchange rate system and frequent occurrencesofcurrencycrises.Callsforinternationalmonetarysystemreformshave increased under these circumstances. Various programs such as improved interna- tionalgoldstandardsystem,expansionofSpecialDrawingRights,aswellasestab- lishment single world currency surface under such situations. Thus, our research projecthassignificantpracticalcontributions. Thisthesiscontainseightchapters.Chapter1“ChangesoftheInternationalMone- tarySystem”provideshistoricalbackgroundforourresearchprojectbyconducting analysesofevolutionsofinternationalmonetarysysteminhistory.Chapter2“The Problems of Current International Monetary System” proves the necessity and urgency of our research project by focusing on the defects of Jamaica System. Chapter 3 “Analysis of Programs of International Monetary Standard Reform” v vi Preface provides theoretical foundations for our research project by analyses and compar- isons on various reform programs put forward by current economics field and Central Banks. Chapter 4 “A New Program About Supra-sovereign International Currency” explains specific method for establishment of supra-sovereign inter- national currency which is originated from current reform programs but differs quite significantly. Chapter 5 “Effects to Establish the Supra-sovereign Interna- tional Currency” describes feasibility and significance of establishment of supra- sovereign international currency by analyzing possible effects of supra-sovereign internationalcurrency.Chapter6“SimulatedOperationofSupra-sovereignInterna- tionalCurrency”appliesecometricsanalysestoprovethefeasibilityandsignificance ofestablishmentofsupra-sovereigninternationalcurrency.Chapter7“PathtoEstab- lishSupra-sovereignInternationalCurrency”emphaseson“howto”toelaboratethe practicalsteps.Chapter8“AccelerationofInternationalizationofChinaDollar”gives completeanalysesoninternationalizationofRMB,whichpromotesmoreimportant roleofRMBinestablishmentofsupra-sovereigninternationalcurrency. Chapter 4 is the core of our research project. It proposes new scheme for establishmentofsupra-sovereigninternationalcurrency. Research studies of our project are conducted by Prof. Chong Li of School of Economics and Business Administration from Beijing Normal University and the teamofhisdoctoralandpost-graduatestudents.ProfessorChongLideterminesthe researchdirection,researchmethodsaswellasresearchstructure.Heputsforwardthe newschemeofestablishmentofsupra-sovereigninternationalcurrency.Thespecific tasksarecarriedoutasfollows:ResearchworkforChap.1isdonebypost-graduate studentLiShiGang.ResearchworksforChaps.2and5areconductedbydoctoral studentQuYi.WhiledoctoralstudentWangLiRongbearstheburdenfordataon Chap.3.ResearchworkforChap.6iscarriedoutbydoctoralstudentHaoYuBiao. ProfessorChongLiprovidesthoroughresearchesforcorecontentsofthisbookin Chaps.4,7and8.Afterthecompletionsofresearchworksforeachchapter,Prof. ChongLimakesimportantmodificationsandvalidations.Hemadesubstantialand substantivemodificationsonChap.1,Sects.3.2and5.2. Themajorcontributionofthisthesisistheproposalofnewschemeofestablish- mentofsupra-sovereigninternationalcurrency.Thisisanentirenewreformprogram differs significantly from any past or current reform programs in international economicresearchfieldsfromallovertheworld.Thisisanoriginalresearchachieve- ment.AccreditationexpertsfromNationalLibraryofSocialScienceAchievements have given professional advices and suggestions to this thesis.My thesis has been enriched and supplemented by these valuable advices and suggestions. I want to expressmythankfulnessheretotheseaccreditationexperts!Internationalmonetary systemreformisasophisticatedresearchfield.Lotsofdetailsarehardtocoverand ponderon.Imperfectionsofmythesisarewelcomecriticismandcorrections. Beijing,China ChongLi December2013 Contents 1 ChangesoftheInternationalMonetarySystem ................... 1 1 FixedExchangeRateSystemBasedonGoldStandard ............. 1 1.1 The Establishment of Fixed Exchange Rate Based onGoldStandard ....................................... 1 1.2 The Characteristics of Fixed Exchange Rate System BasedonGoldStandard .................................. 3 1.3 TheCollapseoftheFixedExchangeRateSystemBased onGoldStandard ....................................... 6 1.4 ReflectionsontheFixedExchangeRateSystemBased onGoldStandard ....................................... 7 2 AdjustablePeggingSystemBasedonGoldExchangeStandard ..... 8 2.1 TheEstablishmentofBrettonWoodsSystem ................ 8 2.2 TheIssueswiththeBrettonWoodsSystem .................. 9 2.3 TheCollapseoftheBrettonWoodsSystem ................. 12 2.4 ReflectionontheBrettonWoodsSystem .................... 15 3 FloatingExchangeRateSystemBasedonSovereignCurrency Standard .................................................... 17 3.1 TheFormationandCharacteristicsoftheJamaicaSystem ..... 17 3.2 Comparisons ofJamaicaSystemandBrettonWoods System ................................................ 20 3.3 OperationsoftheJamaicaSystem ......................... 22 4 Summary ................................................... 23 2 TheProblemsofCurrentInternationalMonetarySystem .......... 25 1 TheBenefitDistributionPatternofJamaicaSystem ............... 25 1.1 InternationalSeigniorageIncomeGainedbyDeveloped Countries .............................................. 25 1.2 DepreciationofUSDCauseLossestoOtherCountries AroundtheWorld ....................................... 34 1.3 TheDecision-MakingPowerofInternationalMonetary AffairsisControlledbyUnitedStates ...................... 39 vii viii Contents 2 InherentDefectsofJamaicaSystem ............................ 42 2.1 Imbalance of American Rights and Responsibilities LeadstoConflictsofInterest .............................. 42 2.2 ImbalanceofEconomicDevelopmentLeadstotheStatus DeclineofUSD ......................................... 44 2.3 Exchange Rate Fluctuations Affect International EconomicDevelopments ................................. 47 3 JamaicaSystemandOccurrencesofFinancialCrisis .............. 49 3.1 TheFrequentOccurrencesofFinancialCrisis ............... 49 3.2 Reasons of the Outbreak of Financial Crises intheInternationalMonetarySystem ...................... 50 4 Summary ................................................... 52 3 AnalysisofProgramsofInternationalMonetaryStandard Reform ........................................................ 53 1 MajorProgramsofInternationalMonetaryStandardReform ....... 53 1.1 TheCallsforInternationalMonetaryStandardReform ....... 53 1.2 DirectionsofInternationalMonetaryStandardReform ....... 55 1.3 TheReformProgramsonInternationalMonetaryStandard .... 58 2 ComparisonsandThoughtsontheProgramsofInternational CurrencyStandardReform .................................... 70 2.1 ComparisonsBetweenKeynesPlanandWhitePlan .......... 70 2.2 AnalysesAboutModifiedGoldStandard ................... 74 2.3 AnalysesontheReformPlanofSpecialDrawingRights ...... 78 2.4 AnalysesonEstablishingtheSingleWorldCurrency ......... 83 3 PracticeoftheSupra-sovereignRegionalCurrency ................ 86 3.1 EmergenceandDevelopmentofEuro ...................... 86 3.2 EuropeanSystemofCentralBanks ........................ 88 3.3 OperationMechanismoftheEurozone ..................... 91 4 Summary ................................................... 95 4 ANewProgramAboutSupra-sovereignInternationalCurrency .... 97 1 TheEstablishmentofWorldCentralBank ....................... 97 1.1 BasicCharacteristicsofWorldCentralBank ................ 97 2 TheOperationofSupra-sovereignInternationalCurrency .......... 98 2.1 AssetCoverageofSupra-sovereignInternationalCurrency .... 98 2.2 Valuing Method of Supra-sovereign International Currency ............................................... 101 2.3 IssueandCirculationofSupra-sovereignInternational Currency ............................................... 109 3 OperationalWayofNewInternationalMonetarySystem ........... 116 3.1 CharacteristicsofNewInternationalMonetarySystem ........ 116 3.2 Regulatory Mechanism of International Balance ofPayment ............................................. 120 Contents ix 3.3 Creation and Regulatory Method of “World Dollar” DepositMoney ......................................... 122 3.4 OperationModeof“WorldDollar”TradingandLoan Market ................................................. 124 4 Summary ................................................... 127 5 EffectstoEstablishtheSupra-sovereignInternationalCurrency .... 129 1 BenefitAdjustmentEffectofSupra-sovereignInternational Currency .................................................... 129 1.1 RedistributionofInternationalSeigniorageRevenue .......... 129 1.2 AdjustmentsofShort-termandLong-termInterests .......... 130 2 InternationalTradeEffectofSupra-sovereignInternational Currency .................................................... 131 2.1 Effect of Supra-sovereign International Currency onInternationalTrade ................................... 131 2.2 Effect of Supra-sovereign International Currency onInternationalTradeAdjustmentMechanism .............. 133 3 InternationalFinancialEffectofSupra-sovereignInternational Currency .................................................... 134 3.1 Effect of Supra-sovereign International Currency onInternationalFinance .................................. 134 3.2 Impact of Supra-sovereign International Currency onGovernmentalFinancialActivities ...................... 135 4 Summary ................................................... 137 6 Simulated Operation of Supra-sovereign International Currency ...................................................... 139 1 SimulatedOperationofValuingMethodofSupra-sovereign InternationalCurrency ........................................ 139 1.1 TheValuingRulesof“WorldDollar” ...................... 139 1.2 TheValueof“WorldDollar”andItsChanges ............... 140 1.3 TheAnalysisoftheStabilityof“WorldDollar”Value ........ 142 2 SimulationAnalysisontheExchangeRateofSupra-sovereign InternationalSystem .......................................... 157 2.1 Exchange Rate Between “World Dollar” and Other Currencies ............................................. 157 2.2 StabilityAnalysisofExchangeRateSystemwith“World Dollar” ................................................ 159 3 The Simulation Test to the Operation Performance oftheSupra-sovereignInternationalCurrency .................... 167 3.1 Cost Saving in International Economic Activities and“WorldDollar” ...................................... 167 3.2 The Stability of “World Dollar” and International CommoditiesPrices ..................................... 174 4 Summary ................................................... 178 x Contents 7 PathtoEstablishSupra-sovereignInternationalCurrency ......... 179 1 FeasibilityonSelectionofTransitionalForms .................... 179 1.1 AnalysesonProgressofRegionalMonetaryCooperation ..... 179 1.2 RegionalExchangeRateSystemIsNotanInevitable TransitionalStage ....................................... 182 2 MeanstoAdvancetheEstablishmentofaSupra-sovereign InternationalCurrency ........................................ 185 2.1 ConsiderationofCountrieswithVestedInterests ............. 185 2.2 StrengtheningBilateralandMultilateralConsultations ........ 186 2.3 StrivingforGreaterRightsintheInternationalMonetary Fund .................................................. 188 2.4 CreatingModeratePressurestoReform .................... 188 3 Risks in Establishment of a Supra-sovereign International Currency .................................................... 190 3.1 Impact of Establishment of a Supra-sovereign InternationalCurrencyontheUSDollar .................... 190 3.2 ImpactofCatastrophicEventsontheSupra-sovereign InternationalCurrency ................................... 192 4 Summary ................................................... 193 8 AccelerationofInternationalizationofChinaDollar ............... 195 1 HistoricalOpportunitiesofInternationalizationofChinaDollar ..... 195 1.1 FoundationofandConditionsforInternationalization ofaSovereignCurrency .................................. 195 1.2 ACriticalTimefortheInternationalizationofChinaDollar ... 203 2 TheBasisfortheInternationalizationofChinaDollar ............. 208 2.1 CurrentSituationoftheInternationalizationofChina Dollar ................................................. 208 2.2 ProgressoftheInternationalizationofChinaDollar .......... 211 3 StepsfortheInternationalizationofChinaDollar ................. 214 3.1 RealizingCapitalandFinancialAccountConvertibility ofChinaDollar ......................................... 214 3.2 Establishing a Relatively Complete Exchange Rate FormationMechanismforChinaDollar .................... 222 4 Summary ................................................... 229 QuestionsandExplanations ........................................ 231 References ........................................................ 245
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