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The End of Super Imperialism?
With intensifying concerns regarding the soundness and stability of the international monetary and financial system, calls for reforming it have been on the rise. One recent call was made by the Bank of England Governor Mark Harvey, in August 2019, in which he suggested a synthetic hegemonic currency to replace the US dollar as the key reserve currency. Whether such calls will lead to an end of the key reserve currency status of the dollar remains to be seen.
Oldrich Vasicek is an old friend. When I started my “quant” career in bonds in January 1994 in Walnut Creek, California, Oldrich was there. A recently graduated PhD in mathematics, I received my first real-life finance education from him.
Vasicek (1977), a statistician by trait, is famous for developing the first theory of term structure of default risk-free interests rates in 1977. But, despite this, he had been unfortunate until lately because his theory allowed for negative nominal interest rates. Many modellers considered this as a flaw because negative nominal interest rates were unimaginable then.
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