BOE's Mark Carney: is USD dominance drawing to a close?
During the US Federal Reserve’s annual economic symposium, Bank of England Governor Mark Carney commented that a new, digital currency has the potential to threaten the USD’s global dominance.
Could the days of USD dominance be drawing to a close?
If Mark Carney – Governor of the Bank of England – is correct, the answer to that question might be a yes.
Indeed, it was during the US Federal Reserve’s annual economic symposium, held in Jackson Hole, Wyoming; that Governor Carney suggested that a digital, global currency could indeed threaten USD dominance in the future.
What is Governor Carney proposing?
Though no specifics were mentioned, Mr Carney has suggested that the USD could see its dominance curtailed with the creation of a new digital currency
Concerned over the disproportionate dominance of the US dollar, Mr Carney has pointed out that:
‘By reducing the influence of the US on the global financial cycle, [a new digital currency] would help reduce the volatility of capital flows to emerging market economies.’
Though a rather radical suggestion, Carney thinks that if history is any guide, the emergence of such a currency may be an inevitability. Here the Governor noted:
‘The deficiencies of the international monetary and financial system have become increasingly potent. Even a passing acquaintance with monetary history suggests that this centre won’t hold.’
Libra: a model currency for the future?
Libra – the Facebook-backed, blockchain-based digital currency seems to be significant point of inspiration for Carney’s theoretical global currency.
Here, the Bank of England Governor noted that it is one of the most high profile examples of a digital currency to date. Moreover, although Libra has no official release date, Carney points out that it nonetheless represents:
‘A new payments infrastructure based on an international stablecoin fully backed by reserve assets in a basket of currencies including the US dollar, the euro, and sterling.’
Though potentially of great technological significance, Libra has faced heavy scrutiny since it was announced, with many governments and central banks worried about the regulatory and privacy issues arising from an unregulated digital currency.
Of course, such pitfalls have not eluded Mr Carney, who points to the operational and privacy concerns that Libra and by extension something like Libra – would create.
If nothing else, the idea of a new, global digital currency is an interesting thought experience.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get commission from just 0.08% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices