- "Many uncertainties surround the developments in the International Monetary System:
• will the US trade deficit disappear or resurface? In the recent period, the renewed decline in the savings rate of US households - despite their wealth loss - has led to a fresh increase in the US external deficit;
• will the trade surpluses of many emerging countries disappear due to the rapid growth in these countries? If we put together the first two questions, will the "global disequilibria" persist, will they disappear, or will the US deficit perhaps be offset by surpluses in countries other than emerging countries (Europe, oil producers)? If the global deficits disappear, the generation of liquidity worldwide will be markedly reduced. If trade surpluses appear in other regions, what will be the consequences?
• will there be a transformation of the various currencies’ role as an international reserve currency? The euro is in trouble as a result of the sovereign debt crisis, the dollar due to the deterioration in the financial situation of households and the quality of the Federal Reserve’s balance sheet. Asia is becoming a more integrated economic and financial region; several emerging countries have solid economies; will there be a faster switch than expected to the currencies of certain emerging countries (Chinese RMB, Brazilian real)? However, the financial markets in these countries are insufficiently developed; could there be a return of the yen, the pound and the Swiss franc? Could there be an increased role for gold (end of "fiat money")?"
- "If there is an increase in the role of emerging-country currencies, the capital flows to these countries will cause them even greater problems than in the past."
Natixis Flash Economics 330 20100628
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