BIS, ESCB, ECB, FSB, G30, IAS2, IMF, IMS, OECD, OPEC, LBMA, WorldBank, UN ... Evolution of Monetary System in relation to Gold & Oil as asset classes...
Tuesday, October 18, 2011
BDF - First anniversary of Banque de France's reserve management facility
Jean-Paul REDOUIN, First Deputy Governor « First anniversary of Banque de France's reserve management facility »
in New York October 11, 2011
"...Allow me now to offer you a French and central banker point of view of the current situation...."
"...At this stage, the euro area is paying a double price. One for its mistakes and one for its virtues. The mistakes were to allow the piling up of debt through unsustainable fiscal policies over a decade, and then to create ex nihilo a doubt as to their ability to pay those debts. But we are also paying a price for our virtue as we refuse to liquefy our debt through massive monetization of our fiscal deficits.
Will our virtue be rewarded at the end? I strongly believe so and I will explain why. In the next decade, the world can be grouped in two categories: on the one hand, advanced economies, with high absorption capacity, low savings and high debt with ratios close to 100%. On the other, emerging economies, with high savings, low debt (around 30% GDP on average) and less absorption capacity. Our common prosperity will therefore depend on our ability to create stable channels of financial intermediation between those two parts of the world. That, in turn, will crucially depend on the existence of assets that can be considered safe stores of value. But, as I have argued from the start, public debt may not be able to play that role to the same extent as before. The ultimate safe asset, therefore, could be the currency itself. Markets will trust currencies that are managed with one overriding priority: preserving price stability and the intrinsic value of the currency unit. On this fundamental basis, we can look at the future of the euro with realistic optimism. I see the recent decision by the Swiss central bank to peg the Swiss franc to the euro as an illustration of this conviction..."