September 2008

The financial crisis and its consequences

In the wake of the great financial crisis and the Lehman bankruptcy, concerns grow again that the USdollar system may have reached its end.  

In March 2009, the head of the People’s Bank of China (PBoC), Zhou Xiaochuan, speaks out for the first time. In a remarkable speech at the Bank for International Settlements (BIS), he calls for a move away from the USdollar and the establishment of a new monetary system. China’s central bank chief makes direct reference to the entire monetary history since 1944 and quotes Keynes and his bancor idea.  

In November 2009, legendary journalist Robert Fisk reportson an agreement among China, Russia, Japan, the Arab world, and France (i.e., the euro zone) to move away from the USdollar-based system.  

“In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Cooperation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. ‘These plans will change the face of international financial transactions,’ one Chinese banker said. America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate.”  

In November 2010, Vladimir Putin says that Russia will one day join the euro or form a monetary union with Europe.  

Also in November 2010, World Bank President Robert Zoellick advocates gold  as the “reference point” for a new monetary order.  

In February 2011, thenIMF chief Dominique Strauss Kahn proposes replacing the USdollar as the world reserve currency with special drawing rights. He is arrested in New York in May 2011 and resigns as IMF head. The charges against him are dropped by the public prosecutor’s office after several months.  

The PBoC announcesin November 2013 that it is no longer in China’s interest to expand its reserves of US government bonds.  

On July 5, 2014, the then-CEO of the European oil company Total, Christophe de Margerie, speaks out in favor of using the euro in oil trading. On October 21, 2014,de Margerie dies in an accident at Moscow airport. The Total CEO was on his way back from a meeting with Russian Prime Minister Dmitry Medvedev. De Margerie was considered a friend of Russia and a critic of the sanctions imposed on Russia by the West at the time, because of the annexation of Crimea. His private jet had collided with a snowplow. An investigation concludes that the driver of the snowplow was drunk.  

Russia and China sign a gas deal in May 2014 that is described as the “holy grail”. It is negotiated for 10 years and is to extend over 30 years.  

September 2014: China launches an international gold board in Shanghai,denominating the price of gold in yuanto increase international participation in the Chinese gold market.  

Luxembourg central banker and ECB director Yves Mersch saysin November 2014 that the ECB “could buy gold to stimulate the economy”. It is the clearest signal yet that euro zone central banks are no longer on the sell side of gold.  

In his last major speech as EU Commission chief at the end of 2018, Jean-Claude Juncker directly addresses the international role of the euro, saying it needs to be strengthened and calling EU energy trading in USdollars “absurd”. His speech is entitled “The Hour of European Sovereignty”.  

From 2018 to 2022, many bilateral steps will occur between countries such as China, Russia, Iran, Saudi Arabia, and the Europeans. Trade is often switched to national currencies. But one thing never happens: another global currency conference.  

Instead, the monetary system is redone by political action – such as the freezing of Russian USdollar and euro currency reserves following Russia’s attack on Ukraine in spring 2022.