BANGKOK (Reuters) - A new global reserve system is needed after the global financial crisis exposed the U.S. dollar-based system as flawed and risky, Nobel Prize-winning economist Joseph Stiglitz said on Friday.
The “dollar now is yielding almost zero return,” Stiglitz said in a speech at the United Nations regional headquarters in Bangkok. “The current global reserve system is fraying. It’s falling apart. The issue isn’t whether we go to a new system. The question is do we do so in an orderly or disorderly way.”
The build up of the U.S. deficit, debt and “the boiling up of the balance sheet” is cause for anxiety, he said.
Stiglitz urged rich nations to provide funds to help poorer countries avoid a steep crash during the financial crisis.
The group has called for global coordination to avoid competition to cut taxes, and for a worldwide increase in tax on high earners. Dubbing itself the “Shadow GN,” the group has urged governments to opt for bank nationalizations rather than bailouts in order to drive the pace of fresh lending.
Stiglitz said a new global reserve system would be good for global aggregate demand, global stability and global equity.
“It’s very hard to have a globally integrated financial system based on a single currency when there’s such uncertainties about the economic fortunes of that particular country,” he said.
Reporting by Thin Lei Win. Editing by Jason Szep