I’m lost here. According to this article, and a bunch of others like it, we need a new international currency to protect little countries (like NZ) and relatively undeveloped countries.
There are two ways of taking this:
- Using the US$ as a sole reserve currency is too risky, we need a basket of currencies.
- We need to fix some exchange rates.
The first justification is ridiculuos, as nations choose to use the US$ as a reserve currency – it isn’t forced upon them. If they want to instead hold reserves in a “basket of currencies” then they can.
The second justification is also something I disagree with. The exchange rate is a price, and a return to Breton woods style fixing of exchange rates merely implies that we aren’t letting the market express the appropriate price between countries. This would not matter if prices INSIDE a country were perfectly flexible – but since they aren’t fixed exchange rates lead to a misallocation of resources.
As a result, what is the point?