The global financial system needs global reform and not just on a per-country basis, says Nobel economist Joseph Stiglitz.
Over the last several decades, financial crises for many countries were not entirely homegrown but rather, the malaise of something that spread from somewhere else.
Prior to the current crisis, the U.S. was unable to manage its inflow of capital, which quickly spread around the world, says Stiglitz, according to the Xinhua newswire.
The United States still tends to worry about its own economy exclusively, whereas it should focus more about the ramifications from policies born in Washington that spread across the world and come back to the United States again.
"The current system does not work well and we need reforms."
Furthermore, the world needs more than one reserve currency, which continues to be the U.S. dollar.
One option could be Special Drawing Rights, which are currency units used by the International Monetary Fund that are actually claims on several currencies in a basket, which shield countries from being overexposed to one currency.
China's currency should be added to that basket, Stiglitz says.
"The current system, where a single currency dominates as a reserve, is an anachronism in the twenty-first century."
The International Monetary Fund, meanwhile, says the dollar is making up less and less of central banks' reserves around the world as part of a global effort to diversify.
The Japanese yen and Canadian and Australian dollars are increasing in demand.
"While the increase appears small, it signifies that the yen has recently found favor amongst [emerging market] central banks as an alternative safe haven," according to Japanese financial institution Nomura, Forbes reports.
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