Exorbitant Privilege, by Barry Eichengreen

1342 Words3 Pages

I. Introduction
Today, the need to manage the world’s dependency on the dollar is an issue that has been recognized and frequently addressed on academic and political platforms globally.1 Ever since the global crisis of 2008, the worst financial crisis witnessed since the 1930s, there has and continues to be a considerable amount of debate amongst not just leading economists but also leading nations across the world, to look towards finding alternatives to the dollar. In the wake of the recent government shutdown, China too, called for a “de-Americanized” new world order.2
In his essay, titled ‘Reform the international monetary system’, Zhou Xiaochuan, the governor of the People’s Bank of China suggested replacing the dollar with the IMF’s Special Drawing Rights, or SDRs, as the world’s new super-sovereign reserve currency (Xiaochuan 2009). Economist Barry Eichengreen, in his book Exorbitant Privilege, however, suggests that the implementation of China’s SDR proposal will remain an unrealized dream. This is because, as Eichengreen points out, China has other plans - “namely establishing the renminbi as an international currency” (Eichengreen 143). This prediction is indeed a current reality, as the Chinese, for the past two to three years, have been actively trying to internationalize their currency. In Exorbitant Privilege, Barry Eichengreen reaffirms this notion and claims that although the future of the Chinese renminbi as a global reserve currency looks possible, China still has a long way to go.
Thus, there is a light at the end of the tunnel, but the light is still far and the journey to the end of the tunnel hasn’t even halfway been realized.
II. The Renminbi As a Future Global Currency
“The challenge (of the Chines...

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...e International Monetary System. Oxford University Press, 2011. Print.
2. Eichengreen, Barry. "The Renminbi as an International Currency." Berkeley.edu. University of California, Berkeley, n.d. Web. 18 Nov 2013. .
3. “Prof Barry Eichengreen on the Prospects for Renminbi Internationalization”. Asian Development Bank. http://www.youtube.com/watch?v=r2BoMhzDfaU. Nov 18th 2013.
4. Schuman, Michael. "Is the Chinese yuan becoming a rival to the dollar?." TIME. (Feb 15, 2011): n. page. Web. 18 Nov. 2013. .
5. Xiaochuan, Zhou. "Reform the international monetary system." Bank for International Settlements. Bank for International Settlements, 23 Mar 2009. Web. 18 Nov 2013. .

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