Obama: No need for a 'global currency'
David Edwards and Stephen C. Webster
Published: Tuesday March 24, 2009

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Australian PM voices support for the dollar, says new currency not on G20's agenda

During a live, prime-time press conference at which reporters focused almost exclusively on economic matters, President Barack Obama gave his first public opposition to Russia and China's proposal of a world currency to supplant the dollar.

Mere hours earlier, both Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner said that they would not allow the dollar to be stripped of the premier status, as suggested by the head of China's central bank.

"... The dollar is extraordinarily strong right now," said the president during his prime-time press conference. "The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world. So, you don't have to take my word for it.

"I think there is a great deal of confidence that ultimately, although we are going through a rough patch, that the prospects for a world economy are very, very strong."

Obama also linked his administration's popularity around the world to a growing "confidence" in America's "ability to assert global leadership."

Off mic a reporter asked, "What about a global currency?"

"No, I don't believe there's a need for a global currency," said Obama flatly.

"China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves," noted the Associated Press. "Premier Wen Jiabao publicly appealed to Washington this month to avoid any response to the crisis that might weaken the dollar and the value of Beijing's estimated $1 trillion in Treasuries and other U.S. government debt.

"For decades, the dollar has been the world's most widely used currency. Many governments hold a large portion of their reserves in dollars. Crude oil and many commodities are priced in dollars. Business deals around the world are done in dollars."

China, the top holder of US Treasury bonds with 739.6 billion dollars as of January, according to US figures, earlier expressed concern over its investment as the world's largest economy battles a deep recession.

At a congressional hearing on the financial crisis Tuesday, a US lawmaker asked the two financial chiefs: "Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested by China?"

Geithner immediately responded, "I would."

"And the chair?" the lawmaker asked, after turning to Fed chairman Bernanke.

"I would also," Bernanke said.

"Chinese attempts to diversify into other currencies lost them money and efforts to buy higher-yielding US assets ended badly," explained a Financial Times editorial. "It would be in China�s interests to have another safe reserve asset � but this does not mean that it would be against America�s. It would, of course, make it more difficult for the US to finance its deficits. But America should not want the world to be yoked so tightly to its willingness to generate demand. Such imbalances are at the root of this crisis."

"China has acted wisely in the recession, expanding demand with government spending," the Times concluded. "Beijing now wants to play an active role in reshaping the world monetary order. This outward-looking view should be welcomed. But China still has work to do at home."

"China's proposal would greatly expand the use of an obscure type of currency created by the International Monetary Fund in 1969 known as 'special drawing rights,' or SDRs. The SDR was originally pegged to the dollar but is now based on the value of four different currencies," reported AP.

"SDRs are mostly used for accounting purposes by the Washington-based IMF, which advises governments on economic policy and lends money to help countries having difficulties paying off their debts. But under China's proposal, the SDRs would have a much broader role and would be used for international trade, commodities pricing, and other functions."

Beijing's suggestion echoed sentiments voiced by Moscow earlier in March. It comes just as world powers are gearing up for the G20 financial summit in London, planned for April.

Australian Prime Minister Kevin Rudd joined the growing debate, offering his country's full support to the US dollar and insisted the topic of a new currency is not on the G20's agenda for this year's meeting.

"'The dollar's position on that score remains unchallenged,' he said in a report by the Sydney Morning Herald. "It's not on my agenda papers and if there's a late Chinese edition I'll review it with respectful interest."

"'To me it is a case of dream on - it isn't going to happen,' said Mervyn Lewis, a professor of finance at the University of South Australia," the paper reported.

"Professor Lewis said the comments reflected China's frustration that by buying US government bonds, it was having to pay for the US attempt to spend its way out of the financial crisis."

"I think the Prime Minister is incredibly, is A-plus on these issues," Geithner said during the congressional finance hearing on Thursday. "If we did what he advises, we'll all be in a better place."

This video is from MSNBC, broadcast Mar. 24, 2009.

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With wire reports.

Editor's note: This article was corrected because it originally misquoted President Obama's response to the currency question. It has also been modified from an original version for clarity.

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