Stiglitz: New Global System to Replace Dollar Needed; Reserves Are IOUs

Joseph Stiglitz, Nobel prize winner and professor at Columbia University in New York, says that the world needs a new global reserve currency, adding to the chorus that the current one is obsolete. This is to help prevent trade imbalances, which are in turn reflected in the national debt of the U.S.

He says that a global system is needed to replace the dollar as a reserve currency and help avoid a weakening of U.S. credit quality.
Incidentally, we have  a created  a new U.S. dollar index that includes the Chinese Yuan, the Brazilian real, and the Aussie dollar, and track it live on this site. The old USDX index is tracked here.

“By taking off the burden of any single country, we don’t have to have trade deficits,” “Things would be much worse if it were not the case that Europe was having even more of a problem, but winning a negative beauty pageant is not the way to create a strong economy.”

“Reserves are IOU’s,” “When IOU’s get big enough, people start saying maybe you’re not a good credit risk. Or at least, they would change in their sentiment about credit risk.”

“there’s a very good risk of an extended period of low growth, inflationary bias, instability,”  It’s “a system that’s fundamentally unfair because it means that poor countries are lending to the U.S. at close to zero interest rates.”