Thread by @ChinaFinance40

History shows that the reserve #currency issuer must strike a balance between sufficient international liquidity and stable money value，said CF40 member Guo Kai, mp.weixin.qq.com/s/kCLviAhMXdx4… 1/8

After the #dollar was decoupled from gold, the stability of the international monetary system has been more dependent on the #Fed’s monetary policy, which is inherently unstable, the #internationalfinancialcrisis that erupted in 2008 profoundly reflected the shortcoming. 2/8

After the crisis, the long-term implementation of easy monetary policy and its exit in developed economies has intensified the financial market volatility and the disorderly fluctuation risk of cross-border capital in emerging markets and #developingeconomies. 3/8

In the short run, the international community can fill the gaps by establishing financial safety nets at various levels and improving the monitoring and management of capital flows. 4/8

However, in the long run, only by promoting the establishment of a diversified international reserve currency system can the institutional factors of the defects be fundamentally eliminated. 5/8

If the reserve currency structure is diverse enough and complementary, the elasticity of substitution between the reserve currencies will increase significantly, which is conducive to the stability of the international monetary system. 6/8

#Eichengreen (2011) pointed out that the enormous size of the world economy means there will be more than one liquidity market that can reduce transaction costs. 7/8

Technological changes will also bring more competition to the industry that was originally considered as natural monopoly. The future world will be a world in which international currencies coexist. 8/8