Christian Ghymers
Towards a regional approach for rebuilding the International Monetary System
Robert Triffin International - Centro Studi sul Federalismo, May 2024
Abstract
This paper focuses on the risks and opportunities implied by the present fragmentation of the world economy for proposing a practical way to reform the asymmetric International Monetary System (IMS) by seizing the opportunities provided by the current trend towards regional monetary arrangements. This new regionalism is at a crossing-road: either it leads to the use of monetary competition to move from a hegemonic key currency to a multi-key-currency system, which does not solve the Triffin Dilemma and would make worse the fragmentation in geopolitical blocks in a zero-sum game due to the amplification of financial destabilization, or it provides a real opportunity to channel the legitimate emerging forces towards a geopolitical rebalancing to develop a positive-sum game. This option consists of using the multiplication of regional monetary arrangements as a game-changer for eradicating the defects of the present IMS and making it an efficient public good, ensuring soft re-balancing and global stability. This favourable option could be feasible as the endogenous momentum of cooperation created by regional monetary arrangements could make the need for a multilateral tool for managing global liquidity more evident. De-dollarization makes no sense without a multilateral LOLR with a new safe asset that is not a national debt. Efficient Regional arrangements require joint monitoring of national policies, which should develop mutual trust among national policy-makers, helping to break the «prisoner dilemma» which blocks cooperation. Regional integration would be spurred as long as economic cooperation and governance are improved. The resulting convergence of interests among national policy-makers will ease the perception of the joint need and individual incentives for making possible multilateral management of global liquidity. This global management would be perceived as a world public good which does not require any loss of sovereignty. National sovereignties exclude, by definition, the imposition of a sufficiently strong international coordination of macroeconomic policies. Therefore, the only practicable way compatible with sovereignty is to set up a multilateral LOLR issuing or withdrawing multilateral safe assets according to pure technical macroeconomic criteria. These multilateral safe assets, being not any-more a national debt, will eradicate the Triffin Dilemma and constitute the tool for ensuring a better global financial stability benefiting all. A multiplication of regional monetary arrangements will ease the building of inter-regional dialogue and improve trust, making it possible to reach consensual views to organize an orderly and consensual de-dollarization, which will be a win-win game for all, including the US economy.
