Future Of Reserve Currencies – The Myth Of Safe Assets

Find out more on our website: https://bit.ly/3v1ug1Y A safe asset is generally understood to be a highly liquid debt instrument, backed by a solvent sovereign borrower, that can be relied on to hold its value during adverse systemic events. Quintessential safe assets are US Treasuries. Yet it is questionable whether US government IOUs satisfy this definition today. Against a background of soaring inflation they are priced to deliver negative real returns. Their liquidity in systemic crises since 2007-08 has been questionable. And soaring debt since the pandemic together with tightening monetary policy points to potential Treasury market turbulence. Could this pose a threat to the dollar’s role as the world’s preeminent reserve currency? Reserve currency status is in reality a relative issue. At present none of the main reserve currencies can be regarded as safe. US Treasuries and the dollar continue to look the least unsafe outlets for nervous money. Two pressing questions are whether the global shortage of safe assets is likely to persist and whether US and European sanctions targetting Russia’s official reserves since the invasion of Ukraine have changed the rules of the reserve currency game. Where does this weaponisation of reserves leave the renminbi as a future challenger to the dollar? And what does the closer geopolitical alignment of the US and the EU in the face of the Russian threat mean for the euro’s reserve currency role? Speaker: John Plender is a British writer, broadcaster and journalist based at the Financial Times in London. After Oxford University, he joined Deloitte, Plender, Griffiths & Co, qualifying as a chartered accountant in 1970. He then moved into journalism and became financial editor of The Economist in 1974, where he remained until joining the UK Foreign Office policy planning staff in 1980. On leaving the Foreign Office, he became a senior editorial writer and columnist at the Financial Times, a role he combined for a time with broadcasting for BBC Television and Chanel Four. A past chairman of Pensions and Investment Research Consultants (Pirc), the UK shareholder activist, John Plender served on the UK government’s Company Law Review steering group which provided the basis for the Companies Act 2006. He joined the board of Quintain PLC as a non-executive director in 2002 and chaired the company from 2007 to 2009. John is a trustee of the £4bn Pearson Pension Fund and a member of the World Bank/OECD Private Sector Advisory Group on corporate governance. His recent books include Going Off The Rails: Global Capital and the Crisis of Legitimacy, John Wiley (2003) which anticipated the financial crisis and Capitalism: Money, Morals and Markets, Biteback Publishing (2015).