Dollar
THE RISE AND FALL
How
$
Became
world's reserve currency
GOING BACK TO
BRETTON WOODS SYSTEM
Basically a planning of Post-war reconstruction
by US and UK.
Sought to secure the advantages of the Gold standard
without its disadvantages.
Emerged the "Pegged Rate" currency regime
with $ as the principal Reserve Currency.
$ now played the role of Gold now!
35$ per ounce to bolster faith
&
WW II put Europeans in high debt
$ effectively becomes World Currency.
But why did Bretton Woods System choose $ as its reserve currency ?
Insufficient Gold production
&
The Soviet Union
Thus emerged $ as the strongest.
DId you know ?
Haiti, Liberia, New Zealand & Soviet Union did not sign the Bretton Woods agreement.
$
in
international market
Leading transaction currency in
International market.
$ is way ahead !
Widespread use in invoicing foreign trade
Prominent currency in the international debt market
$'s Share of Debt Securities
Countries anchoring their home currencies
to Dollar
Dominance in foreign exchange reserve portfolios
8 major REasons
why
$'s
reign may end
# 1
CHINA & JAPAN
The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.
Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.
- BBC Report
# 2
BRICS
The five major emerging economies of BRICS -- Brazil, Russia, India, China and South Africa -- are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.
- ZeeBiz
# 3
RUSSIA & CHINA
# 4
CHINA in AFRICA
We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.
- Standard Bank, Africa's largest bank
# 5
UAE & CHINA
# 6
IRAN
# 7
CHINA & SAUDI ARABIA
# 8
World Reserve Currency
A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.
- IMF
"As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world. So you don't have to take my word for it."
- Barack Obama
what if
$
loses dominance ?
WHat the
Fed
thinks
Small reduction in seigniorage revenues of the $
Rather unlikely rise in $ transaction cost
Dollar depriciates
&
imports become more expensive
"Loss of global prestige"
gracias!
presentation economics
By surajkumarsau
