To Establish a Supra-sovereign International Currency: The Reform of International Monetary System

251 Pages·2022·2.634 MB·English

by  Chong Li

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
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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.
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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