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.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.