The governor of the Bank of England, Mark Carney, disputed the position of the dollar as the world's reserve currency, arguing that it could be replaced by a global digital alternative to put an end to an excess of savings that led to 10 years of low inflation and ultra low interest rates.
Probably the transition to the end of the sterling command on international money markets 100 years ago, Carney said the dollar had reached a level of domination which meant that it was an obstacle to a sustainable recovery.
He said a new digital currency backed by a large group of nations would unlock dollar funds that governments currently accumulate as an insurance policy in uncertain times.
Governments are accumulating dollars to insure themselves against the fluctuations of the American economy, which have intensified in recent times, leading to a significant increase in the cost of the loan.
A digital currency "could dampen the dominant influence of the US dollar on global trade," Carney said in a speech at a rally of central bankers around the world in Jackson Hole, Wyoming. "If the share of invoiced exchanges [a digital currency] were to increase, shocks in the United States would have less powerful shedding through exchange rates and exchanges would become less synchronized between countries.
"The influence of the dollar on global financial conditions could likewise diminish if a financial architecture developed around the new [digital currency] and shifted the dominance of the dollar to credit markets. of the United States on the global financial cycle, this would contribute to reducing the volatility of capital flows towards emerging market economies ".
The Chinese currency, the remnimbi, has been cited as an alternative to the dollar along with digital currencies proposed like the Facebook Balance. Carney said neither of them could replace the dollar, but new technologies could allow a global digital currency to challenge the American currency.
Digital currencies have attracted the attention of central banks in the last year as the perspective of mobile and consumer transactions has become more popular.
At the beginning of this year the Bank of England welcomed the Facebook Balance initiative, which was seen as a challenge for Bitcoin and other cryptocurrencies. Banking officials claimed that the initiative, supported by several banks, could be a useful addition to the trading of goods and services.
A series of central banks have criticized Libra, however, stating that it lacks rules and regulations to be a reliable currency. The European Commission has launched a Libyan antitrust investigation earlier this week, stating that it feared that private digital currency could unfairly disadvantage rivals and be open to abuse.
In what appeared to be a warmer response to Libra, Carney said: "Retail transactions are increasingly taking place online rather than on the main road and through electronic cash payments.
"The highest profile of these was Libra, a new payment infrastructure based on an international budget entirely supported by reserve assets in a basket of currencies including the US dollar, the euro and the pound. It could be exchanged between users on messaging platforms and with participating retailers.
"There are a number of fundamental issues that Libra must address, ranging from privacy to operational resilience. Furthermore, depending on its design, it could have substantial implications for both monetary and financial stability ".
Carney claimed that the UK economy has suffered from several years of insufficient investment, mainly due to the uncertainty about Brexit. A further deterioration in GDP growth could force the Bank's monetary policy committee to reduce interest rates, he said. Carney would be willing to cut back in the event of a recession caused by a departure without agreement from the EU.