The world needs a new kind of super-sovereign currency system to replace the U.S. dollar, Shanghai Gold Exchange President Wang Zhenying said, citing currency debasement worries and a fear that the dollar could be used as a geopolitical tool.
Currency debasement fears have been growing around the globe as major central banks turned on their spending taps to fight against the economic fallout of the COVID-19 outbreak.
Wang predicted that the U.S. dollar would decline in the long term while gold prices would rally after the Federal Reserve cut rates to close to zero and embarked on unlimited policy easing.
“Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,” Wang told Reuters in an interview.
“When the Fed turns on the liquidity tap the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he added.
Gold prices have risen to more than a seven-year high on the back of the Fed’s measures to contain the economic damage of the coronavirus pandemic. In April, the yellow metal came close to $1,800 an ounce.
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Wang’s comments on a new global currency echo a previous proposal to reform the international monetary system during the 2008 global financial crisis.
He said the dollar-dominated monetary system had left many countries exposed to potential U.S. sanctions and Washington’s power to freeze a country’s international assets in the event of a dispute.
