As the first Blog, it seems appropriate to explain the Pacemaker.Global mission. Pacemaker.Global starts with the observation that all open economies integrated with the global economy are multi-currency economies. Central banks, governments, banks, asset managers, investors and even individuals make conscious and generally sensible choices to trade, borrow, lend and invest across borders, and increasingly within the domestic economy, using foreign currencies, mostly USD and EUR, but also others.
Dominant currency pricing, borrowing, lending, margining, investing, and trading present challenges to open economy central banks attempting to maintain domestic monetary and financial stability. Often the biggest risks to an open economy come from beyond its borders. These include foreign exchange volatility, funding disruption from distant credit shocks, sudden CCP and prime broker margin calls, or spillovers from market dysfunction in dominant currency asset markets. Wider credit spreads, forced selling, and other spillovers can have long-lasting and deeply damaging financial, trade and growth impacts that cannot be easily or fully countered by sound domestic monetary or fiscal policies.
A rapidly changing global financial landscape presents other challenges. Markets that used to be deep, liquid, and resilient under stress are now vulnerable to sudden illiquidity and dysfunction. Mandatory margining means all derivatives market participants and prime brokerage clients must be able to source margin assets at short notice as volatility drives CCP and prime broker margin calls, risking sudden forced selling in vulnerable OECD and EMDE asset markets. The drive for faster payments and digitalisation of markets risks accelerating dominant currency pricing trends and a growing digital divide between those who have preferential access to dominant currency liquidity and those who don’t. Digital assets and digital currencies risk fragmenting and masking capital flows. And climate change holds the whole world hostage to unknowable and unmeasurable risks.
The team at Pacemaker.Global believes better tools are urgently needed for measuring and managing multi-currency risks. Central banks and policy makers need to see their domestic economy as a multi-currency economy. They need permanent and flexible tools to provide support to their domestic financial sector and markets to address sudden multi-currency stress scenarios. We believe that as all open economies face the same challenges, they should work together with Pacemaker.Global to design and deploy the tools they need for a new multi-currency toolkit.
Pacemaker.Global intends to collaboratively design and build the tools for multi-currency toolkits, and to globalise those tools equitably to all open economies. Join us to contribute to this innovation and secure the benefits of better monetary and financial stability.