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There was a very interesting piece of news today out of Beijing.

China's Central bank governor Zhou Xiaochuan called on the International Monetary Fund to create a new "super-sovereign reserve currency."

In Zhou's words:

"The desirable goal of reforming the international monetary system ... is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies."

In English: Beijing is worried about all those dollars it's holding.

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” Mark Williams, a London-based economist at Capital Economics Ltd. told Bloomberg. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said.

Engaged or not, U.S. policymakers aren't buying it.

U.S. Treasury Secretary Timothy Geithner — who made diplomatic waves recently when he said China "manipulated" its yuan — told the House Financial Services Committee today that he rejected a global currency. Federal Reserve Chairman Ben Bernanke agreed.

So pay close attention to this debate.

We haven't heard the end of this, especially with all the political and economic jockeying ahead of the G20 leaders summit April 2 in London.

At his prime time press conference tonight, President Barack Obama had this to say on the issue:

"I don't believe there's a need for a global currency."

Who said international economics was dull?

 

http://www.globalpost.com/notebook/commerce/090324/the-dragon-and-the-dollar