IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 1
Dr. Armin Haas,
with the collaborat...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 2
A Sustainable Currency Order?
Count...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 3
A Shifting Global Landscape
• The r...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 4
Currency Reserves
0
50
100
150
200
...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 5
Currency Reserves
0
500
1,000
1,500...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 6
A Shifting Global Landscape
• Many ...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 7
Celestial Mechanics
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 8
The 3-Body-Problem
Source: Daniel P...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 9
The Reality of Postponing Risks
The...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 10
Keynes’ Vision
In the 1940s, Keyne...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 11
Keynes’ Vision
Keynes conceived th...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 12
Bretton Woods and Beyond
• The Bre...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 13
A Chinese Proposal
• Zhou Xiaochua...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 14
Touching Stones to Cross the River...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 15
Are we at a River Passage?
• Is it...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 16
Possible Stones in the River?
• A ...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 17
The Palace and the Temple
• Histor...
IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 18
Institute for Advanced Sustainabil...
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Dr Armin Haas, "After the dollar?"

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A presentation held by Dr Armin Haas, Institute for Advanced Sustainability Studies, Potsdam, at the high level seminar "Towards a sustainable financial system" hosted by the Stockholm based think tank Global Challenge in cooperation with London School of Economics and The Swedish House of Finance on September 12th 2013.

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Dr Armin Haas, "After the dollar?"

  1. 1. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 1 Dr. Armin Haas, with the collaboration of Prof. Carlo Jaeger and Prof. Klaus Töpfer Institute for Advanced Sustainability Studies e.V. (IASS Potsdam) Sustainability, Finance, and a Proposal from China Towards a Sustainable Financial System Stockholm, September 12-13, 2013
  2. 2. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 2 A Sustainable Currency Order? Countries issuing reserve currencies can find it difficult to maintain the value of their currency while providing liquidity to the world. Examples of the US-Dollar history: • Fighting US inflation in the 1980s contributed to the Latin American debt crisis. • Avoiding US deflation after the dotcom bubble and 9/11 contributed to the 2007 global financial crisis.
  3. 3. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 3 A Shifting Global Landscape • The rise of the BRIC states will change weights in the international economic and political landscape.
  4. 4. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 4 Currency Reserves 0 50 100 150 200 250 1998
  5. 5. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 5 Currency Reserves 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1998 2011
  6. 6. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 6 A Shifting Global Landscape • Many take the development towards a multipolar system of nationally issued reserve currencies for granted. • A system based on more than one national reserve currency may show disruptive economic and political dynamics.
  7. 7. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 7 Celestial Mechanics
  8. 8. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 8 The 3-Body-Problem Source: Daniel Piker, http://vimeo.com/11993047
  9. 9. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 9 The Reality of Postponing Risks The present global monetary system is not sustainable: • It suffers from a key problem of our civilization: the tendency to postpone risks so that they are neglected in today’s decisions. • Attempts to simply stabilize the current monetary system may lay the grounds for even bigger crises in the future.
  10. 10. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 10 Keynes’ Vision In the 1940s, Keynes envisioned a global monetary system, which came with schemes for • Delivering sufficient liquidity for enabling economic growth of all nation states; • Keeping destabilizing macro-economic imbalances in check.
  11. 11. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 11 Keynes’ Vision Keynes conceived the Bancor, an international reserve currency: • Basically, the Bancor was a fiat currency. • In Keynes’ vision, it was used for stabilizing commodity prices via commodity buffer stocks. • By stabilizing commodity prices, Keynes aimed at macroeconomic stabilization.
  12. 12. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 12 Bretton Woods and Beyond • The Bretton Woods conference established the US-Dollar as world reserve currency, and the IMF and the World Bank as global financial institutions. • In the late 1960s, Special Drawing Rights were created as an alternative source of international liquidity. • Special Drawing Rights are options that enable countries, if need arises, quick and easy access to currency loans under favorable conditions.
  13. 13. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 13 A Chinese Proposal • Zhou Xiaochuan, the governor of the Chinese central bank, made a remarkable proposal: • In the long term, he aims at an international reserve currency with a stable valuation benchmark. • “The creation of an international currency unit (…) is a bold initiative that requires extraordinary political vision and courage.”
  14. 14. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 14 Touching Stones to Cross the River • In the short term, he proposes to strengthen the role of Special Drawing Rights as stepping-stones towards the long-term goal. • Developing IMF’s Special Drawing Rights towards an international reserve currency “should be a gradual process that yields win-win results for all.”
  15. 15. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 15 Are we at a River Passage? • Is it a promising idea to start where we are and develop SDRs towards an international reserve currency?
  16. 16. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 16 Possible Stones in the River? • A world government with the power to tax. • Value backing. • Paying interest rates. • Reputation of issuing agency.
  17. 17. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 17 The Palace and the Temple • Historically, money was controlled by “the warriors” or “the priests”. • In our times, this translates into the question of independence of central banks. • IMF is controlled by governments. • Would the BIS be a more promising candidate for controlling an international reserve currency than the IMF?
  18. 18. IASS Institute for Advanced Sustainability Studies – Dr. Armin Haas – September 2013 18 Institute for Advanced Sustainability Studies e.V. Berliner Straße 130 D – 14467 Potsdam Web: www.iass-potsdam.de Thank You for Your Attention
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