For it to be sustainable, the basket will have to be a rules based currency with international (or large private conglomerate) backing. There does not (and should not) be a central banker to manage the money supply. Only the reference basket needs to be managed.
And I don't think that you have to issue bonds in it. As I see it, every country and corporation can settle their debt or bonds in any currency they see fit, but the covenants will reference the basket.
China is already doing something similar with CNY. It is pegged to a basket of currencies and PBoC sets the midpoint for the trade.
So in the future, countries may barrow 1B EUR, but the interest payments and maturity will be pegged to the basket. As EUR moves up or down, your payments and settlement will vary accordingly.
This is not a big deal for the world at large. It is how they are doing it already, except that they are normally measured against the USD. As a result, the Fed ends up with an unspoken mandate to maintain the global financial stability on top of its explicit dual mandate. This makes the job of the Fed too difficult and creates various conflicts. If on the other hand the covenants were stated in a neutral third party which could be a basket of commodities as well as currencies, then the USD could go up and down without having an outsized effect on the global markets, just like JPY, CNY, or EUR move without causing a financial collapse elsewhere. |
