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Quantitative easing measures and monetary policy in the United States will kill the dollar quickly unless there are balances to it as a global currency, Zhu Min, executive vice president of the Bank of China told CNBC Wednesday.
The US is a global currency but it can never take the responsibility of the whole world economy, Zhu said.
"It's a classic Triffin Dilemma," he said. The Triffin Dilemma refers to the problem of balancing national and global interests when using a national currency as a global reserve currency.
"Either we ask the US to take the whole responsibility of the world economy with the dollar as global legal tender or else we need something else as an anchor and the IMF’s Special Drawing Rights could at least balance the dollar," Zhu said.
"But we are seeing a new player in the international arena — that's the Renminbi," he added.
"It will take a while before the Renminbi will be convertible and as such it will not play an important role as international tender, but an interesting thing is happening," he said. "The Renminbi is not convertible but its circulation is growing. More and more it will increasingly be used in trade settlements."
Meanwhile, Dr. Robert Mundell, Nobel Laureate and "Father of the Euro" has strongly endorsed the notion that the SDR should move toward reserve currency status and that the Renminbi should be included in the basket of currencies that currently comprises the SDR, wrote Dennis Gartman in The Gartman Letter.
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It "is time for a change" Mundell said. "The Chinese Yuan is now the third most important currency in the world … arguably more important than the Yen, depending on how your measure it, (thus) I believe that in 2010 the Yuan should be added to the SDR."
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