 Good afternoon, welcome to Plenary Session 5. I'm John Lipsky from the Johns Hopkins School of Advanced International Studies in Washington. And I have the honor of moderating this panel on the politicization of the international system of payments and the future of the international monetary system, a small topic. But happily, we have a truly all-star panel of experts in this field. And I'm sure we're going to have illuminating interesting discussions. They hardly need any introduction. And since we're running late, I don't want to spend too much time other than you can read along with me. Geoffrey Frieding, the government professor from Harvard, Akunari Hori, who was a now special advisor and member of the board of directors of the Cannon Institute for Global Studies, but long stalwart of the Bank of Japan, Professor Helen Ray, Professor of Economics at London's Business School, and of course, well-known in international economic circles for her important work in this area. Sergej Sarchak, Deputy Finance Minister of Russia, and a long veteran of G20 meetings, and where these issues have been discussed. And of course, last and definitely not least, Jean-Claude Trichet, who definitely needs no introduction in this venue. So let me just begin by giving a few basic facts that set the stage for this issue of the future of the international monetary system. One is, of course, the dominance of the US dollar in the US system. A few factoids, global GDP in 2019 at market rates about what in America we'd say $88 trillion, or $88,000 billion, I guess in European parlance. International reserves that are often focused on in this context actually only represent less than $12 trillion or $12,000 billion. In other words, a small percentage of the global GDP. Daily turnover in the forex market this year was estimated by the Bank for International Settlements at $6.6 trillion every day, $6,600 billion every day. In other words, a vastly larger sum than GDP and an incredibly larger sum than international reserves. And according to the BIS, of the daily turnover, 88% of all transactions have the dollar at least on one side. The euro, 32%. The yen, 17%. And a number that may surprise you, China's R&B, 4%. So let me just give a quick potted history of how we got here. The dollar's dominance in the international system began with the end of World War I, but it was formalized in the Brettonwood system, agreed at the end of World War II. That system, a dollar exchange standard, had the dollar at its center. It was intended to be a global system, but the Soviet Union declined, although they participated in the negotiations, declined to participate in the system, instead formed a competing system, Comicon. The dollar's dominance survived the end of the formal Brettonwood system in the sense of move to floating exchange rates, survived the oil shock, survived the Latin debt crisis. And in 1990, with the collapse of the Soviet Union, the entry of China and India into the global trading system began the period of what I call true globalization, and the dollar remained dominant again. Subsequently, came the Tequila crisis, the Latin debt crisis, the mid-'90s, the Asian currency crisis of the late-'90s, the dot-com recession, the bursting of the dot-com bubble, and eventually the global financial crisis of 2007-89. One of the constants of this period was that the US GDP throughout this period was declining as a percent of global GDP, and yet the dollar remained dominant. Two other factors are important here, especially in the context of our theme of the politicization of the system, was the beginning of the use of widespread and often broadly sanctioned sanctions. First, I think in this context what we call FATF, but here it's called the group d'action financier, to combat money laundering and the financing of terrorism, began an effort to put roadblocks that are essentially for political goals, as well as economic policy goals, that have now been ramped up in a unilateral way by the US. So what we look at is trade conflict that the Bass panel just dealt with, also encompassed the use by the US of selective payment sanctions for political reasons, taking advantage of the centrality of the US financial system and the dollar-based system and the US banking system in that context. There was an interesting speech at the Federal Reserve's Jackson Hole gathering symposium this year by Mark Carney, the governor of the Bank of England. He said the old consensus was that flexible inflation targeting and floating exchange rates were the best way to conduct policies. And in that context, that there were modest gains for international policy cooperation. However, a rethinking of the current circumstance focuses on dominant currency pricing that reduces the impact. If everything's priced off of dollars, it reduces the impact of domestic monetary policies and reduces the ability of exchange rates to act as shock absorbers. All of this despite, again, the trend decline of US GDP as a percent of the total. So we now have a much more integrated global rate setting, as has become very clear in the last few years, and a sense of reduced monetary independence on the part of central banks. And a concern that has been quite heightened by the recent economic developments in that the US economy has seemed out of sync with other advanced economies. Growth has been stronger. And hence, if the dollar centrality has been increased in many ways in its impact on the effectiveness of monetary policy elsewhere, the question remains, is this advisable? Mark Carney suggested that in the long run, we would want and need a multipolar international system. He suggested the creation, in fact, of something quite speculative, a synthetic hegemonic currency, which is quite a step. So let me now turn to the panel and ask them to comment on three broad themes. One, or as they wish, but suggest three broad themes. One, what are the elements that have explained the dollar's continued dominance in the context of the US economy shrinking, not absolutely, but in relative terms, relative to the rest of the economy? Is it, should we expect, as a matter of course, that eventually that shrinkage, relative shrinkage, will tend to diminish the dollar's dominance? And where is the system likely to go, and where should it go? We're going to ask for commentary across the panel. Start with Jeffrey. Great. Thank you, John. Well, as John has pointed out, the dollar maintains and has maintained its dominance in international monetary relations, international trade and payments. And there are a variety of reasons, many of which John mentioned. It's due to its historical reserve currency role. It's due to its usefulness as a vehicle currency for international trade and payments. It's due to network externalities, so that the more people use the dollar, the greater the incentive to use the dollar, and things along those lines. But I'm going to focus on a somewhat different angle, which is perhaps, I hope, at least within my comparative advantage, as a political economist rather than an economist, which is that it also depends on features of America's domestic monetary and financial conditions. The expectation of monetary stability in the US, the expectation of a commitment, the expectation of financial depth that is a broad and deep financial market, and the expectation of a high level of financial and commercial openness. All of these, I think, have been important to the international role of the dollar. The expectation that the Fed and the American Monetary and Financial Authorities would stand behind both the value of the currency and the openness of America's financial market. All of these are highly political. Dollar dominance has rested, in large part, in my view, on the expectation that the American political order would protect and defend the real value of the US currency, that it would protect and defend the stability and the openness of its financial system. And I think that theory and history both tell us that these are central to the international role of any currency, including the dollar. And I think that this focus, by the way, on the importance of domestic politics and the political support for monetary stability for an open financial system for financial stability, helps explain the difficulties of the euro, given the unsettled nature of the politics of money and finance within the euro zone, and the difficulties of the Chinese currency, the RMB, given the non-transparent nature of politics in China, and significant doubts about the stability of the country's financial institutions. So it is the domestic, the political will of the American authorities that I think, in many ways, stands behind the willingness of people around the world to continue to use the dollar. Now, for the first time since the 1930s, as the panel earlier, the previous panel points out, for the first time since the 1930s, there are some really significant questions being raised about the extent to which the United States is, in fact, committed to the core principles that have underpinned the international role of the dollar. This is worrying for anyone who is concerned both about the dollar, but more generally about the international monetary and financial system. And fortunately or unfortunately, we have some historical precedent. In the 1920s and early 1930s, the US was the world's largest lender, the world's largest foreign direct investor, the world's largest trading nation. It was also deeply committed to isolationism, therefore deeply hostile to international economic cooperation to the extent that Congress prohibited any agent of the American government to participate in international economic conferences. The weakness of the international monetary, commercial, financial order of the interwar period, in my view, stems in large part from the fact that its most important player was non-involved politically and, in many ways, hostile to international cooperation. And I'm sorry to say, and to agree with Marcus Nolan and some of the others on the previous panel, that it looks like the US, certainly it has gone back in that direction, and there are important indications that it may continue to move in that direction. So that leads us to your final question, or one of your final questions, which is can the international monetary system go on if confidence in American political stability and American economic and financial leadership erodes, and specifically to the case of sanctions, if fears about the politicization of the payment system grow? My answer would be sure it can go on. And we have, in a very small way, a bit of a precedent, which is the Cold War. During the Cold War, because the Soviets were concerned, Soviets and their allies were concerned, about the politicization of the payment system, they began parking in their dollar reserves in London banks, which they felt were off limits, or probably off limits to the American authorities, and to protect them from potential seizure by the American authorities. The results were the euro markets, the offshore markets, which have become the basic form of contemporary international finance. So there are workarounds that people can come up with on the payment side. But if this is going to be a longer term phenomenon that affects not just the Soviets, or not just one segment of the international order, and involves an American withdrawal, in some sense, from this leadership position, or it's making its leadership contingent on playing by American rules, then it presents a problem for the other members of the OECD, or the G7, or the G20. In my view, those countries could, if they wanted to, create both a financial system and a payment system that bypasses the US. It would be costly, it would be difficult, but it's doable. Is it a good thing? In my view, no. Because we lose a substantial amount of the scale and history, the history of stability, that I, at least, would associate with the US dollar. But we have to take stock of what has been happening in the US and some of the trends that have been talked about, for example, in the previous panel in the United States. What if reality, what if the reality of American politics continues to give us a United States that is unreliable, that is populist, that is economically nationalistic, that is geopolitically aggressive? Then, I think, the world has no choice to move forward without the US. And sadly, as an American, I'm very sorry to say that the probability that the US continues to move in this direction is not zero. Thanks. Okay, thank you. Please. The international monetary system has been one of my most favorite topics of discussion since the 1980s when I was an economist at the BIS. Actually, I published a paper, BIS economic paper entitled Reserve Currency Diversification in 1986. And things have hardly changed over the decades. So, let me explain. And some of the statistics have already been mentioned by John and partly Jeff. I hope you can read the table, maybe too small for you. That table is taken up from the central bank survey conducted by 53 central banks and aggregated by the BIS every three years. And as John said a few minutes ago, daily turnover of global forex market amounted to 6.6 trillion dollars. And the BIS shows its currency distribution by percentages whose total being 200% rather than 100% because exchange takes a pair. On that basis, because the table is so small, let me pick up some statistics. As John said, the dollar captures 88% in the 2019 survey, this year's survey. Dollar's proportion remained virtually unchanged at 90 or a little less since the BIS began its survey in 1989. The first column says what, 88 or 89 or something. The second and third currencies actively traded on the forex market, the euro and the Japanese yen. To the left, and in 1989, there was no profit and no euro, of course. I combined the Deutsche Mark, French Franc and other EMS currencies to come up with a number of hypothetical euro in 1989, 33% while the euro actually captured 32% in 2019. Big change by one percentage point. The yen had a share of 27% in 1989, the peak of the bubble economy of Japan, which dropped to 17% by 2007. That is not shown in that table. But Japanese yen's number has since fluctuated around 20. In short, the currency market hardly changed, as I said, as far as distribution of major currencies are concerned. Now, let's look at the emerging markets, economies, currencies. In 2001, the renminbi ranked 35 on the currency league table with an negligible percentage share, but moved up to eight with 4.3% share in 2019. Big increase. Other emerging economies also increased percentage shares as illustrated on the graph on the right bottom panel. Big increase, but the numbers are small, anyway. So despite these salient increases, however, the presence of emerging market currencies is still pretty small in contrast to the size of their GDP and international trade of goods and services. Now, let's discuss the qualifications of the international currency. Jeff Franco, Peter Kennan, and all those academic experts pointed out several conditions. Number one, economic size. Number two, developed financial markets. Number three, confidence in the value of the currency. Number four, inertia. That's the favorite, you know. First of all, the economic size, but economic size does not immediately entail wide international of the use of the currency. The US dollar, for example, it was in the late 19th century that the US economy overtook the UK economy and so did German economy, actually. But both the US dollar and Reichsmark failed to impress the market. And at that time, Pound Stirling continued to be the international currency. Jeff pointed out the US politics mattered in that regard because of US isolation policy. It may be true, here's a point. But I think demand side elements also matter. In my opinion, market confidence matters a lot for an actively used international currency. It's not only a confidence in the value of the currency, but confidence in its integrity that matters. You know, the integrity of the currency is maintained only when it functions properly as a means of exchange, unit of account, and store value. To be a little more specific, the monetary authorities have to create and maintain a system so as to ensure reliable means of payment, wide, deep financial markets, supported by many down-to-earth elements. For example, banknote counterfeit deterrence capabilities, legal stability, and the transparency of rules and regulations, as well as low enforcement capability over financial fraud and wrongdoings, and last but not least, the political and economic independence of the central bank from both domestic and international pressures. So, now let me turn to potential competitors of the US dollar. First, the renminbi. It's so obvious to me that there is a long, long way for the Chinese currency to go before it gains confidence in the market on all the accounts I discussed. In my opinion, it is highly unlikely that the renminbi becomes the vehicle currency in the market this century, maybe next century. Okay, what about the euro? Of course, the euro has a natural appeal, and in fact, it's the second international currency. But in order for the euro to play a bigger role, its financial markets need to become much wider and deeper. German bonds markets, French treasure market are the most actively traded markets in euros at the moment, but the sizes are small. And liquidity are a thing in comparison with the US treasury market and JGB's market. I think governments within the EU could begin to appeal the market by issuing common euro bond, of course. They don't have to create a big project of consolidation of all individual countries or budget, whatever. I think they could begin by issuing a Euro-denominated bond collectively, covering a small part of EU common budgets, like common defense or refugees assistance or space program, whatever. Before encompassing a wide array of the budgets, okay, I have actually argued this point for a long, long time with my colleagues in the European central banking circles. But to our regret, little progress has been made. I'm sorry. What about the SDR and others? I suffice it to quote Charles Kindelberger, who I remember referred to the SDR as the artificial language Esperanto in finance. And gold he compared with Latin, okay? And US dollar with English, okay. So I thought that that analogy was pithy and I continue to do so after three decades. I'm afraid I'm spent most of the allotted time, but last word for maybe 30 seconds. I'd like to discuss what Jeff Frieden discussed a few minutes ago. It's not Mr. Trump. Several years ago, the US government under President Obama tried to use its cloud over a global financial system as economic sanction against Russia and Iran. It was reported then that the US might even try to limit Russian banks access to Swift, the global message transfer system. Even before Mr. Trump became potus, the Chinese began to worry about the possibility of its application to China and tried to modernize RemMB payment and settlement systems and widening the scope for international use of the RemMB. In recent years, Chinese concerns have become greater. For example, Yu Yunding, my friend and former member of the PBOC monetary committee, wrote an article on a Japanese magazine in July this year saying that the US might deprive Chinese banks of their access to Swift or chips in New York. So he said China should be internationalized for RemMB. Okay. So let me stop here. Elaine. Thank you very much, John. I think what is truly remarkable is that even though Bretton Woods essentially collapsed with a run out of the dollar, ever since 1973 in effect, if anything, the dominance of the dollar as a reason in international financial system. And we have seen a lot of figures. I won't come back on these figures. But I think it's certainly due both to phenomena linked to network externalities and all that, but also simply to the complementarity that is very present in the use of an international currency, complementarity between the different use of a currency. If you are financing in a currency, then you want liquidity in that currency. You transact in that currency, then you want to exchange rate to be paid in that currency. When your central bank has reserved in that currency, then the transaction costs are low in that currency, et cetera, et cetera. So there are complementarities both within the private sector and across the public sector and the private sector. And this makes an equilibrium very, very hard to change. We have seen that with sterling. We are seeing that with a dollar. Now, does it matter? So in fact, if anything, I think the current research in economics, in academia, shows that it matters even more than what we thought in the past. So there are lots of papers now that show that this business about dominant currency invoicing, the fact that a lot of goods are invoiced in dollar, is very important for monetary policy. It's also important for the volume of global trade. We see this amazing correlation at this stage. I would still call them correlation between the valuation of a dollar. So for example, a dollar strengthening and the decline in global volume of trade. And the effects of these correlations are big. So that's one. We also see these big effects of a Fed on global financial condition, the global financial cycle. And that actually affects everyone. So I would say if anything, it seems to matter more from an economic point of view than maybe what we thought before. Now, there's also obviously, and we have seen this in the 2008 crisis, the international lender of last resort function, which has proved, I would say, pretty crucial. 600 billion dollar liquidity, which went in central bank swaps to help the international financial system. And obviously, so that was not the IMF because the IMF cannot print dollars. That was the Fed, which is providing the liquidity. And that means a lot from the point of view of geopolitical power, also from the point of view of economic benefits. So the system has been relatively stable since the Second World War with one hegemon, the US dollar and the United States. And I guess Charles Kindleberger would agree that that's hegemonic stability for you. And that seems to have worked to some extent. But now, how long is it gonna last? I guess it's a big question, right? And there I see so two reasons why things might be changing. And then I will be very brief about where we might be going. So the two reasons are one, which has already been mentioned here, which is that things are stable if you have a relatively quasi benevolent hegemon. Now, if you have a hegemon who starts being over politicizing the currency and really using it for all kinds of purposes, trust evaporates, and that tends to speed up the exit of a currency equilibrium. And we certainly see that, right now, I would say. So that's one factor. A second factor is a little bit more of a trend. And that's what I call the new Triffin Dilemma. So let me tell you what was the Triffin Dilemma. And then I will tell you what the new Triffin Dilemma, so we'll see if you agree with me. So the original Triffin Dilemma, it was in the 1960s, and it was Robert Triffin, was professor at Yale at the time, was explaining that if you have a fixed, or more or less fixed reserve of gold in the United States, and the dollar was backed by gold and picked at a fixed parity, well, even liquidity in dollars in the rest of the world was growing and growing. Eventually, if people wanted their dollars back into gold, there wouldn't be enough gold for everyone, essentially, and therefore that can create a crisis of confidence. You start to think that your dollar is not gonna be worth the parity in gold because there's just not enough gold reserves. Hence a possible run out of a dollar, which did happen, so Triffin essentially predicted it in some sense, and that was the collapse of Bretton Woods, and there was a run out of a dollar into Deutsche Mark, et cetera. Now, we don't have any more an international monetary system backed by a commodity. We just, just not the way it works. We have flexible exchange rate and fiat currencies. However, if you think about what is the confidence in the dollar, well, essentially, it's the fiscal backing of the currency. People still want dollars as a result of currency because in crisis times, and we have seen it in 2008 very much, and we still see it, when things go badly, the value of a dollar, if anything goes up, okay, and we might even fly to safety in the dollar. And this is because of the credibility in a sense of the fiscal backing of the United States. So now picture yourself a world in which we have fiscal capacity of the US, okay, and we have a relative size of the US going tremendously down in the world economy. So now we have a lot of liquidity outside the US, a lot of dollar liquidity in the world. There's a huge demand for US treasuries, as we know, but we have this shrinking hegemon in the middle. The relative size of the US goes down. Now, at some points, clearly, I think there will be also a confidence crisis. There just won't be enough fiscal support to back this whole dollar liquidity in the world economy. Now when will that happen? I have no idea. And of course, also for the crisis of confidence to realize itself, you need to be able to run out of the dollar into something else, okay? And this is where I go to the third point. So I do believe we are gonna go to a more multipolar world because of this fundamental trend and also given the behavior of the current government in the US when I don't know, but so what will be the possible substitutes there? So clearly, number two, the euro. Okay, what's missing from the euro right now? A safe asset. It's missing to complete the financial architecture of a euro area, okay? So for a euro to become a more important currency, we miss the same thing that would make the euro area more stable. So that would be a policy goal. And I think it had been neglected, but I think Europeans are becoming a little bit more aware of that and there's a lot more attention given to these matters, at least I hope now. So that's the euro story. The R&B. The R&B clearly varies the political will. As we've seen from the data, we're still way below what it would require for an international currency to be viable, prime of convertibility, liquidity of market, et cetera. But there's clearly a push from the Chinese authority. And given the size of China, I think if there is, at some point, things start to move, they could move actually maybe quicker than we expect. And one reason for that was that for the moment, maybe we see a whole area in the world economy which is more or less pegging to the dollar, stabilizing section rate vis-a-vis the dollar. But by doing so, it's also stabilizing its exchange rate vis-a-vis China because they are shadowing a little bit each other. And if at some point we see a decoupling between China and the dollar, it could be that actually the true economic area because of the trade links, et cetera, is a Chinese economic area rather than the dollar one. And so this could actually speed things up maybe quicker than we think. But we are still not there for sure. And then I would just say one last thing, which is we've seen recently some contests coming from the private sector. Libra will probably not happen. We don't know, but other things like that. So why? Because these things build on an existing network. Of course, they lack any of the good functions of money, et cetera. So again, I don't think it's a viable proposition. But at least in terms of scale, I think that's something that is really new because of the existing network which could right away play in the medium of exchange function. But of course doesn't have any fiscal backing. This is why by the way the synthetic hegemonic, or the synthetic hegemonic currency of Marconi, which is like an SDR, but with digital currency, is also not gonna fly. Because for the same reason the SDR did not fly, because it doesn't have a liquidity provision and the fiscal backing. Sir. Thank you, John. With your permission before I make some comments, I would like to ask the audience one question. Does everyone agree that national currency, which has been used and circulated within the national border, is a public good? I think everyone is agree with this. It can be, it should be. So if it is positive answer on the basis of previous speakers said, can we declare with some thinking standard about that US dollar is a global public good? Unfortunately for many of people the answer under recent conditions, under recent circumstances, under the figures shown on the screen, the answer can be only positive. Yes, we can like it or dislike it, but US dollar is a global public good. So shall we blame the dollar itself for different kinds of policy actions and utilization of the currency by different people, by different authorities? I don't think sure that we should blame the dollar itself. It is an X, which can be used either for constructing houses or taking lives. The same story with the dollar. So based on this observation I can see that the biggest issue for multi-polar world, for multilateral relationship, is the responsibility of those who issue the reserve currencies. In nowadays it's not only one single currency, but in principle, the responsibility of authorities of reserve currency economy or reserve currency nation. So we can speak about substitution. Dollar for Rambi, dollar for Europe, dollar for everything, but the responsibility will rest with the authority. So my judgment at this point is that what we are really need is to start working on the rules, principles, high level principles, guidelines, we can call it differently, on the behavior or reserve currency nation. So the movement towards that directions will save us quite a lot of energy at least. Because when we substitute we will have the same story, whether on which way the national currency as reserve currency have been used by national authorities. So we are living in the world when the title of our panel, when the monetary system, or I would better say that infrastructure, for a financial infrastructure of one particular country is being used as a political weapon. It's really a bad story. So what is happening and we somehow need to accommodate to it and we are accommodating. For example, there's decisions to develop a special payment system within European Union in order to make settlements with trade, when we are trading with Iran. There's decisions are taken by Central Bank of Russia to decrease the portion of US treasury in our international reserves. So it can be done in different way, but what is really interesting about US dollars, you cannot escape the fact that the biggest invoicing is taking place in US dollar. It is easy to speak about the international trade in general, but what was much more important, it's invoicing. You can make settlement in any different countries, as happening in my case, for example, we allow our obliges, our debtors, for example, when we grant state credits to foreigners, pay whatever they want, rubles, euros, dollars, whatever, but invoicing stealing the dollars. Even when we speaking about with new financial institutions as new development banks set up by BRICS nations, Asia Infrastructure Investment Bank set up by China and others. What's happened at the end that the authorized capital, paid in capital, all are nominated in dollars? So that's why we are living within this framework. So a couple of examples of how guidelines or principles of responsible behavior of reserve currency nation can look like. Just one first principle is keep your own house in order. I mean economic and financial house in order. The second principle, not harm the interests of economic agents. The biggest harm comes from the so-called secondary nations. When you see economic agents are suffering in the cases where they have nothing to do with the foreign policy, with the aims and wishes of the nation who is under the sanctions. And yeah, there's a number of other things can be put as the principles for responsible behavior. Do we have examples that we can cooperate within on multilateral level, on multilateral level in the directions I just described? Yes, we have very good ones. The best one is the international cooperation on taxation. Just recently results, very politically touching issue. I mean taxation, the way it is being paid, where it is being paid to him. But we agree, we agree within OECD within G20 and the agreement, multilateral agreement is being implemented by all without any pressure. Every nations take their responsibility by themselves. So I finish this, but with the hope that my position is being well understood. Thank you. Thank you. Well, we've had an interesting set of different views. Every speaker has emphasized a different aspect. And now we come to Jean-Claude, the one of us who's actually been there, seen it and done it. And can speak with an authority. I don't know. Whether I will speak with authority. I share, of course, many of the views that have been expressed. I have six points I would like to make first, but very rapidly. First, it is absolutely true that we have a currency which is an edgaman in the present system, but it is not entirely unipolar. And then I am a little bit, I would say, out of the emerging consensus. And of course, we should not forget that the structure of the system changed dramatically, I would say overnight in January 99 when we created the euro. Because before you had one currency, the edgaman, 10 times more important depending on your criteria than the other. And that is a system where you can say, well, you don't need to be a great mathematician to see that it has a structure which is a totally different nature from the present system where you have an edgaman, a number two, which is five times the number three, and which is only three times less important than the demand one. So we change dramatically, in my opinion, the system of the international currency. So everybody knows the figure. They have been set for X 60, 20, 4%, international debt 60, 22%, international loans 60, 20. That is the new structure. Now, that being said, when I look at the global payment currency, I have different figures which are illustrating the fact that the euro indeed exists. 45% for the dollar, 34% for the yen. That is the proportion in global payment currency according to the BIS. So why is there such a difference between the global payment currency and for X international debt, international loans? Despite the fact that the trends are a little bit different from what was coming out of the discussion until now. When you look at the figures, you see that the dollar had 70%, at the very beginning, the day we created the euro. It was 70% in reserve currencies. The euro was as computed as was done by here, our eminent colleague, 19, so the same level as today in adding up all the currencies. Today it is still 20, but the dollar came from 70 to 60, 62. And all other currency gained market share. So there is a trend which is not negligible at least according to that criteria of reserve currency which is not hurting the euro but is hurting a little bit the dollar as I just underlined. So still, of course, the dollar is an achievement. Easter is this has been mentioned very wisely as regards the reason why when you have had the central position, you keep the central position for a long time, I was amazed myself to see that the copper was traded in sterling until 93, aluminum until 87, tea until 92, coffee until 92, long, long, long after World War II. And if not too misinformed, cocoa only after 2015. So Easter is this is there. And of course it's associated with complementarity but also with the easiness that you have to continue to have the same unique of account if the currency itself remains liquid, of course. Now there is another reason which is dominating and our colleagues were all very eloquent on that. Of course, what counts is your currency but also the signature behind the currency. The treasuries, if you take the benchmark, the other signatories. And there, of course, we are at a fantastic disadvantage in Europe because it's true that the difference between the volume of the treasuries is very, very important. The daily trading of treasuries in volume in New York is $500 billion. And the equivalent in Germany, in France, in Italy would be approximately the 125th of that level. So we are in totally different universe. Only the creation of a new safe bond would create an element of death and liquidity on the Euro market, which would permit to accelerate the transition. And that is really the point. The point is not that the currency has defect, in my opinion. The currency, frankly speaking, I take it as no defect. But the problem, of course, is that the signatories behind the currency are not the same. Even if you have already Euro bonds, the bonds that are issued by the ESM, for instance, or the EIB are good signatories, but of course it is a very small amount. Now, shall I deplore the fact that we are not at 50-50 vis-à-vis the US dollar? Certainly not, because had it been the case, what would have been the consequence on the exchange market? Which kind of skyrocketing of the Euro vis-à-vis the dollar would we have registered? Unless, of course, it would have been organized with special accounts, the IMF behind, and so forth. But if we are in the universe where we are in a free behavior of market participants, of course it would have been a total catastrophe. So we would have become totally out of cost competitiveness, if I may, in the global trade. So I am not unhappy with the way it proceeds. It's a big transformation, but a progressive one. Now, that being said, is it because of the fact that the Euro is not yet an international currency of the size of the dollar, that we have problem with Iran, that we have problem with the sanctions of the US, and so forth, I don't trust it is the case. I trust the problem is that the United States for cultural reason and political reason does not hesitate to blackmail all those who are not participating in the sanctions. And when I look at all the European firms, it is not because they could not settle their trade in dollar that they interrupted totally their trade with Iran. It was because they would lose a lot in their own interest in the United States of America and more largely in the world because the US had a lot of legal capacity to tease them. So again, the main problem we have, in my opinion, in Europe, if we reason on the Europe balancing the US is of a political nature, both the treasuries and the safe bonds, which are not there, and the geopolitical capacity to say, if you blackmail us, then we will blackmail you. And let's agree that there is no reason that you would impose us, in particular, your own sanctions. It seems to me that it is there that we have the real problem. Iran, the recent experience of trying to create a special vehicle to bypass the US dollar proved that it was not the problem. We have no problem to bypass the dollar. We have a real problem to bypass the capacity of the US to impose legally its sanctions everywhere. Now we have stopped there, if you permit, John, because I would have some... Can I have two more minutes? Please, go ahead. So on the future of the system, as many of the speakers I trust that, of course, the renminbi, when it is fully convertible and when there is a clear will to participate with full convertibility in the international monetary system, we will have necessarily a large multipolar world and that would be, again, probably sooner than we think, but we are far away, nevertheless, in terms of conditions to be a real international currency. How will we run that? There are several possible assumptions. We could run that as we have run the so-called hegemon, but nevertheless, with G5 or G7, whatever, from time to time, giving some indications to the market that the dollar is going too low or the dollar is going too high and I participated in all the such agreements. They are very important. They are useful. They were not necessary in the most recent period of time because for reasons that are extremely complex, the international system, the currencies were relatively stable, even in the worst crisis ever since World War II. So this is something which academia is looking at, but I have no convincing conclusion to understand why we were not trapped in one of these large fluctuations that we had before, and that is an open question. But, of course, we can imagine that the four, the five major currencies would, from time to time, give some indications of what they see and tell the market, as we did in the Louvre agreement, in many such agreements. The last one was the Japanese G7, G5 agreement where we gave market important indications and I was very happy myself to participate in this message to do the market. We could imagine to have a basket of currencies and the SDR perhaps could be, if there is a private SDR market, I mean, it means a lot of will to arrive to that consequence. I don't exclude totally that, and it seems to me that the fact that the same definition of price stability is now the definition of the major issuing currencies for the present basket of SDR, Rinminbi being a part, but the four of them have more or less the same definition of price stability. It is something which has not been looked at very carefully but is very important in my understanding. And of course, I eliminate, I have to say, the possibility of the bank or, and I don't trust that a digital currency, if it is not backed by either a central bank or a pool of central banks, could float. You would really need behind those institutions or this institution, which would be responsible for the currency to have all the three characteristics which were mentioned by Jeff and our Aristotelian definition of a currency, if I'm not misled, the three that you have mentioned. Thank you. Okay, we have a little time left, unfortunately, but let's turn to the audience for questions. We'll gather up questions and let's start over here. Mike, please. Please stay to who you are and your question and please make it a question and brief. Hi, thank you very much. My name is Randy. I come from Paris and I study at Le Corp de Min, which is a public policy program, basically. Thank you very much for your talk. And most of you have mentioned the challenge of trust and indeed, since the last financial crisis, we've seen a crisis of trust in the monetary system and the rise of ICOs, cryptocurrencies. And my question is, do you believe that such technologies are more as a threat or an opportunity for the existing system and especially should we regulate them more or should we leave them as they are? Thank you very much. Thank you. Over here. Thank you very much. That's almost the MB professor from Japan. Fascinating debate, but I'm completely amateur. But the one issue I like to ask Mr. Horizan, you talked about something very interesting, independence of central bank from domestic or international pressures. But I think most of central banks have become hostage to the government needs to reinvent economy, all sorts of things. But if you may, if you pick up top three most independent central bank in the world, and why? Thank you. Final question over here. Thank you. Volker Peres from Germany. Totally naive question by someone who doesn't understand anything about monetary policy. Would I be totally wrong in assuming that there has never been a hegemonic or reserve currency that wasn't backed up by a very strong military force? I've learned a lot about what the reasons are for the hegemonic position of the dollar, but the military was never mentioned. So I'm just asking that. And if it is not totally wrong, what would that mean for the future of the monetary system, particularly if the euro wants to get in? Thank you. Thank you. Okay. Anybody want to comment on the crypto issue? Jean-Claude. Very simple. I would say that it is not the absence of trust in the existing currency which has created the try on the crypto currencies. I think it's technology. Technology is galloping so rapidly that with a number of fantastic innovation, it appeared that you could run payments and transactions at a very low cost with blockchain and so forth. So it seems to me that it is something which is quite natural. I don't interpret that as an absence of trust for traditional currencies. And as far as trust is concerned, the Bitcoin you could see goes up and down, up and down. That was more of a speculative instrument. The try to launch a basket digital then proves that you have to be backed by those traditional currencies that are behind. Elaine, you wanted to say something. Yes. So I think one has to be careful to distinguish between crypto currencies and in particular the blockchain technologies like Bitcoin or Ethereum which have to do with proof of work which in my view are totally harmful and have zero essentially public good aspect to them. Why are they zero public good? They are very bad medium of exchange because the transaction costs are extraordinary high from an energy point of view for environmental impact is absolutely disastrous. They don't solve any problem. I mean there was, you know, we have pretty good medium of exchange with one exception. I will talk about that in a second. But these things are used to mostly for, you know, the dark net. So there's, I would say it's negative from the social welfare point of view and these things should be for sure not connected to the official system and essentially regulated out. That's very different from digital currencies. Central banks could issue digital currencies and this is absolutely fine and some central banks are very far along with that. Now, why is there some kind of need maybe to have some digital currencies or to make some improvement for cross-border transactions? We are still not doing very well. We are doing extremely well for transaction within the URL. We have extremely good technology, etc. But for cross-border payment, there's still too much of fees which are taken there by the financial system and as a result there are some private actors which may come in. Last thing I want to say about that, one has to distinguish between the technology to do this cross-border transaction and the willingness to create a new currency such as the Libra. Technology can be good. Willingness to create a private currency, in my view, that again should be looked at extremely carefully because what does the currency provide? I mean a public currency issued by central banks. We use it for macro-policy stabilization and we are careful about financial stability. What is the goal of a private company? Profitability. The public good dimension there is absolutely not there. So we have to be extremely careful with that and distinguish between technology and creating a new currency. Thanks. Is somebody, an economic historian among us, have a comment on the military? I could fake it. Of course military influence is playing a big role. No question about this. But I think what really happened after the Second World War II is the fact that the dollar was the only currency which can be converted into goods. And the convertibility nowadays plays a big role in international transactions. But if there's no convertibility into goods, meaning that you cannot buy what you want when you possess the currency, it would not help you with any military forces. Thank you. There actually is a connection between the two questions because what makes a currency valuable or valid in international payments is the ability of those using it to turn it into real goods and services. And that's why Bitcoin and other cryptocurrencies are purely speculative. Their value is only based on what people think their value will be in the future. Frequent flyer miles have more trust than Bitcoin because at least American Airlines and United stand behind frequent flyer miles. The military angle is related in the sense that military power is connected to the ability of a government to mobilize resources. And so there's a direct connection between military and broader geopolitical power and the expectation that the government will be willing and able to stand behind the currency. After all, there's trust in the Swiss franc and its stability, but the country is way too small to exercise the kind of power necessary to provide an international currency that is the resources to act as a lender of last resort and provide this public good function that people have been talking about. Did you have a final comment? Before commenting on the central bank's independence, let me see a few words on each alternative to the dollar. First, to Jean-Claude, Euro's market is thinner, as I said. I was a reserve manager of Japan. When I tried to buy 500 million dollars Trezot or Buntsma, Bunts by one shot, that action would move quotations that's counterproductive. But JGB, U.S. Trezols, so if you have joint markets, no such effects. Okay. Reminbi, even Chinese want to get a Chinese currency to place their wealth outside the country. How can foreigners believe in the integrity of Reminbi? Simple. SDR has no client base at all because international investors, they can create their own baskets of currency. If you are a small investor, you're tied to your home currency. But no one is interested in the currency basket SDR. Until now. Until now. Now, central bank independence, it's a long story. It will take hours. Exactly. I could perhaps answer him biologically. I would put the ECB in the three, most independent central bank because the question was, what are the three most independent? Very good. Okay. Well, thanks very much to the panel. They think we can... Let me draw a brief conclusion. Very simple. You heard the old adage, you can't fight something with nothing. And right now, there's a something, it's the U.S. dollar, and there's nothing else ready now. So a sense that for now, the system will remain dollar-centric. A sense that there are lots of reasons to wonder if it could remain this way in the future, but unclear exactly where that leads. It's not obvious what will happen. Mark Carney, in his speech quoted Rudy Dornbush, Rudy Dornbush of MIT, is saying, changes usually take longer than you ever imagine until they actually occur when they happen faster than you thought possible. Could happen here, but Rudy, wonderful as he was, was not a very good policy predictor. Thank you all. And thanks to our panelists.