The Bank of England governor, Mark Carney, has challenged the dollar’s position as the world’s reserve currency, arguing that it could be replaced by a global digital alternative to end a savings glut that resulted in 10 years of low inflation and ultra-low interest rates.
Likening the move to the end of sterling’s command of international money markets 100 years ago, Carney said the dollar had reached a level of dominance that meant it was a barrier to a sustainable recovery.
He said a new digital currency backed by a large group of nations would unlock dollar funds that governments currently hoard as an insurance policy in uncertain times.
Governments stockpile dollars to insure against swings in the US economy, which in recent times have intensified, leading to a significant rise in the cost of borrowing.
A digital currency “could dampen the domineering influence of the US dollar on global trade”, Carney said in a speech at the gathering of central bankers from around the world in Jackson Hole, Wyoming. “If the…