Another mess they are going to get us into, to hide the real truth. Not a War Anthem, History. READ> Reserve currency From Wikipedia: A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves, and that is commonly used in international transactions. Persons who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than persons in other nations because they need not exchange their currency to do so. According to economists such as Valéry Giscard dEstaing, a former French Minister of Finance and president, a reserve currency gets certain benefits called the exorbitant privilege. As of 2013 the United States dollar is the worlds reserve currency, and the worlds need for dollars has allowed the United States government as well as US Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year.[2] By, however, increasing the value of the dollar, its status as a reserve currency hurts U.S. exporters. Various political leaders from Russia and China have called the world to move towards a super-sovereign reserve currency. Similar discussions have been had in Europe by the Board for Global Financial Stability. History As emphasised by the economist Avinash Persaud, reserve currencies come and go. International currencies in the past have included the Chinese Liang and Greek drachma, coined in the fifth century B.C., the silver punch-marked coins of fourth century India, the Roman denari, the Byzantine solidus and Islamic dinar of the middle-ages, the Venetian ducato of the Renaissance, the seventeenth century Dutch guilder and of course, more recently, sterling and the dollar.” Before 1944, the world reference currency was the Pound Sterling. After World War II, the international financial system was governed by a formal agreement, the Bretton Woods System. Under this system the United States dollar was placed deliberately as the anchor of the system, with the US government guaranteeing other central banks that they could sell their US dollar reserves at a fixed rate for gold. European countries and Japan deliberately devalued their currencies against the dollar in order to boost exports and development. In the late 1960s and early 1970s the system suffered setbacks due to problems pointed out by the Triffin dilemma, a general problem with any fiat currency under a fixed exchange regime, as the dollar was in the Bretton Woods system. United States Dollar The United States dollar is the most widely held currency in the Allocated Reserves today. Throughout the last decade, an average of two thirds of the total Allocated foreign exchange reserves of countries have been in US dollars. For this reason, the US dollar is said to have reserve-currency status, making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact or even postponing a currency crisis. Central bank reserves held in dollar-denominated debt, however, are small compared to private holdings of such debt. In the event that non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the US economy. Changes of this kind are rare, and typically change takes place gradually over time; the markets involved adjust accordingly. However, the dollar remains the favorite reserve currency because it has stability along with assets such as United States Treasury security that have both scale and liquidity.US dollar dominant position in global reserves is very much challenged currently, because of the growing share of unallocated reserves, and because of the doubt regarding dollar stability in the long term. Euro The euro is currently the second most commonly held reserve currency, comprising approximately a quarter of allocated holdings. After World War II and the rebuilding of the German economy, the German Deutsche Mark gained the status of the second most important reserve currency after the US dollar. When the euro was launched on 1 January 1999, replacing the Mark, French Franc and ten other European currencies, it inherited the status of a major reserve currency from the Mark. Since then, its contribution to official reserves has risen continually as banks seek to diversify their reserves and trade in the eurozone continues to expand. Former U.S. Federal Reserve Chairman Alan Greenspan said in September 2007 that the Euro could replace the U.S. dollar as the worlds primary reserve currency. It is absolutely conceivable that the euro will replace the US dollar as reserve currency, or will be traded as an equally important reserve currency. Econometric analysis by Jeffery Frankel and Menzie Chinn in 2006 suggests the euro may replace the U.S. dollar as the major reserve currency by 2020 if (1) the remaining EU members, including the UK and Denmark, adopt the euro by 2020 or (2) the recent depreciation trend of the dollar persists into the future. In recent years, the euros increase in the share of the worldwide currency reserve basket has continued to increase—albeit at a slower rate than prior to the beginning of the worldwide credit crunch related recession and 2010 sovereign debt crisis, which adversely impacted the Euro and slowed its adoption Since 2009, the reserve currency use of the Euro has continued to drop, down to 23.9 percent in 2013. A report released by the United Nations Conference on Trade and Development in 2010, called for abandoning the U.S. dollar as the single major reserve currency. The report states that the new reserve system should not be based on a single currency or even multiple national currencies but instead permit the emission of international liquidity to create a more stable global financial system.Countries such as Russia and the Peoples Republic of China, central banks, and economic analysts and groups, such as the Gulf Cooperation Council, have expressed a desire to see an independent new currency replace the dollar as the reserve currency.On 10 July 2009, Russian President Medvedev proposed a new world currency at the G8 meeting in London as an alternative reserve currency to replace the dollar. According to economist Michael Hudson, China has said, we dont want to make any more foreign exchange reserve of any paper currency, because all the paper currencies are government debt currencies. China, Russia, India, Turkey, Brazil, Venezuela and oil-producing countries have recently agreed to transact all of their mutual trade and investment in their own currencies effectively minimizing the need, at least in the short term, for a global reserve currency. And yet oil is still priced in dollars, which has brought complaints about OPECs policies of managing oil quotas to maintain dollar price stability. Special drawing rights Some have proposed the use of the International Monetary Funds (IMF) special drawing rights (SDRs) as a reserve.China has proposed using SDRs, calculated daily from a basket of U.S. dollar, euro, Japanese yen and British pounds, for international payments. On 3 September 2009, the United Nations Conference on Trade and Development (UNCTAD) issued a report calling for a new reserve currency based on the SDR, managed by a new global reserve bank. The IMF released a report in February 2011, stating that using SDRs could help stabilize the world economy.
Posted on: Thu, 07 Nov 2013 23:29:46 +0000
Trending Topics
Recently Viewed Topics
© 2015