Macroscope | The US dollar is standing in the way of a truly global monetary response to the coronavirus crisis
- The dollar’s dominance denies the IMF the right to act as a global lender of last resort with the SDR.
- Instead, the world’s reliance on the dollar risks an erosion of confidence in national currencies as central banks print more of them
The coronavirus crisis is forcing the world to renew its focus on the concept of globalisation – economic, social and political – as “we’re all in this together” assumes new meaning and the Trumpian philosophy of putting “America first” begins to look absurdly inappropriate.
And yet truly global policy actions are still not possible in one area where arguably they are needed most: the multilateral coordination of monetary action, where China, Japan and even some European powers have long sought more influence.
If the IMF were allowed to employ this currency, Special Drawing Rights or SDRs, more freely to provide member countries with a means to deal with the global financial crisis triggered by coronavirus, the international arsenal of tools could be strengthened significantly.