You must be logged in to use this function.
Euro father slams Fed's 'catastrophic' slip
Tuesday 18 January 2011 - by Andrew Naylor
The professor who laid the groundwork for the introduction of the euro has called on central banks to stabilise the price of the dollar and the euro.
Speaking at the Asia Financial Forum in Hong Kong, Professor Robert Mundell, who is professor of economics at Columbia University, said the US Federal Reserve had made a "catastrophic mistake" in allowing the dollar to appreciate during the crisis, making US recovery even harder.
While acknowledging that the US is "far from broke", he said the key to a successful recovery is stabilising the US dollar, euro and Chinese RMB.
Referencing calls by Chinese President Hu Jintao, currently on a state visit to the US, that the Renminbi should replace the US dollar as the major international reserve currency, Mundell said that throughout history no country has proactively sought currency dominance and that "it was thrust upon them".
Mundell went on to say that for the RMB to take on this role, it must be fully convertible and flexible which he says is not in the interest of the Chinese government because one of the biggest external sources of demand for US dollars is China, and this is unlikely to change for the foreseeable future.