Main Reserve Currency Research Articles

ПРОБЛЕМЫ И ПРОТИВОРЕЧИЯ ФУНКЦИОНИРОВАНИЯ СОВРЕМЕННОЙ ВАЛЮТНОЙ СИСТЕМЫ И ПЕРСПЕКТИВЫ ЕЕ ТРАНСФОРМАЦИИ

This article examines and analyzes the problems and contradictions of the Jamaican monetary and financial system, which have been accumulating throughout its existence since its inception in 1976. The article analyzes how, within the framework of the Jamaican monetary and financial system, the U.S. dollar became the main reserve currency in the world economy and what consequences it led to. In this paper the author expresses his opinion that the problems and contradictions under consideration have become the reasons for the crisis of the Jamaican monetary and financial system today. The paper discusses the possible directions of development of the future world monetary and financial system, which include currency polycentrism, commodity currencies, digital currencies and supranational money.

Кризис бреттон-вудской валютной системы и начало европейского валютного сотрудничества

The article aims to identify the impact of the crisis of the Bretton Woods monetary system on the beginning of European monetary cooperation. Russian scholars' publications on European monetary integration usually examine in detail the internal prerequisites for the emergence of the Werner Plan and only sketch the external environment. Drawing on available European and American sources, this research provides a more nuanced picture of the origins of European monetary cooperation in the context of a general collapse of the post-war international monetary order. The article begins with the characteristic of the main features of the Bretton Woods monetary system. In the late 1960s and early 1970s, the intrinsic contradictions of the Bretton Woods mechanism, such as the problem of liquidity, confidence in the key currencies, and the adjustment mechanism, generated numerous monetary crises. All efforts to reform the international monetary system stalled because of disagreements between countries with surplus and deficit payment balances. The research also focuses on the US monetary policy. As the US dollar was the main reserve currency, the stability of the entire monetary system depended on its position. Since the late 1960s, conflicts over monetary issues developed between the United States and Western European countries, culminating in the Nixon administration's unilateral decision to abolish the gold standard in August 1971. Monetary crises and the weakness of the dollar pushed the countries of the European Economic Community to develop their own currency grouping. The article analyses the Werner Plan of 1970 that proposed the creation of an Economic and Monetary Union (EMU) with a single European currency as the ultimate goal. Based on fixed exchange rates between European currencies, the EMU represented a regional replica of the Bretton Woods system. The single European currency was seen by Europeans as an alternative to the dollar and the unpredictable American policy. The author concludes that the end of transatlantic monetary cooperation gave an additional impetus to the development of European monetary integration. Although first European efforts to create the EMU had failed because of the different approaches of France and the Federal Republic of Germany as well as the economic crisis of the early 1970s, the Werner Plan marked a crucial phase in the history of European integration. The Werner Report became a blueprint for the European Monetary System (EMS) of the late 1970s. The success of the EMS paved the way for the creation of the European Monetary Union envisaged in the Maastricht Treaty of 1991 establishing the European Union and the adoption of a single European currency - the euro.

Diminishing Dollar Hegemony: What Wars and Sanctions Failed to Accomplish, COVID-19 Has

The United States has turned into an anarchic Hobbesian in part triggered by; weakening dollar’s natural pull as the main reserve currency; China’s massive foreign reserves; fast rise of the renminbi; the failure attempts to dismantle gold and its readiness to reclaim a monetary role at the heart of the next monetary system. President Trump’s selfish “America First” policy and its spinoff actions have debilitated the economies of Iran, Venezuela, China, Russia, Turkey, the Middle East as a whole and a host of other countries in Europe. Coronavirus was the final blow to put the already fragile world economy into state of coma. The world’s nations would have been in a better state financially to fight coronavirus if the United States since 2016 has unjustifiably pushed many economies off the cliff via instability-inflicting policies and engagements in video game like warfare, all of which were purposely strategized with the goal of maintaining American supremacy and preventing the dollar hegemony from further diminishing. Since the Fed creates infinite money through credit expansion, United States unlike any country can engage in more than one war simultaneously, but this time the unusual enemy coronavirus will not be defeated through an arsenal of weapons of mass destruction. The GFC of 2008, originated in the U.S., was a near financial meltdown; with coronavirus, thousands of deaths and the resultant fear may cause many economies including that of the U.S. to collapse.

Pure Gold for Economic Freedom: A Supranational Medium of Exchange to End American Monetary Hegemony as the World’s Main Reserve Currency

Before the invention of money (coin, paper, or digital) there was barter trading, a form of exchange without the use of a monetary medium. The evolution of money has kept pace with the evolution of humans. Money was not invented solely for transaction purposes; it was created to quantify wealth (i.e. bookkeeping of resources by bureaucrats) and functioned as a sign of power (i.e. aristocrats used it in social contracts between royals and servants). Throughout the human history, money has served as an important link (social relationship) between lenders and borrowers, contractors and workers. Facilitating exchange has evolved from barter to bimetallism (silver and gold), monometallic (gold), and paper (fiat) to gold as the basis of currencies. The emergence of fiat money was not to replace barter even though Adam Smith (1776) described barter trade as primitive in his seminal book titled in short “The Wealth of Nations”. The classical gold standard emerged as a true global standard in the late 19th century but lasted only about three decades, it collapsed bouts of unprecedented shocks of World War I. The interwar gold exchange standard was very brief which suffered similar flaws known as the Triffin dilemma. The inherent flaws of the gold standard and Bretton Woods made the U.S. more susceptible to the inevitable convertibility crisis; in reaction, the U.S. policies accelerated inflation, this in turn caused the system’s demise. The current ailing international monetary system is going to face the same predicament of the last generation regimes unless serious reforms are made.

Reports of the dollar's demise greatly exaggerated

▀ Speculation that the dollar could lose its status as the world's main reserve currency “sooner rather than later”i looks, in our view, wide of the mark. Across a range of international uses, the dollar accounts for 40–60% of transactions – a share that has been stable or even increasing in recent years. Potential rivals are far behind, especially the Chinese renminbi, which accounts for just 1–2% of transactions. As a result, the dollar's pre‐eminence looks unlikely to be seriously threatened for many years to come. The US's gains from the dollar's global role may also be more modest than often thought. ▀ The dollar's position is supported by factors including its widespread use as a trading and commodity‐pricing currency, the size and liquidity of US financial markets, and the continued lack of a credible rival. None of these is likely to be significantly eroded in the near term, even with some moves afoot to shift away from dollar payments in oil and other areas. Historical evidence suggests that a world of multiple reserve currencies is possible but also shows it can take decades for reserve currencies to lose their dominant status.

The Official Use of International Currencies – Assessments and Implications

Abstract The paper analyses the official use of international currencies as reserve currency (store of value) and anchor currency (unit of account). Examining the role as a reserve currency we note that the US dollar is the main reserve currency even if it recorded a decline given the decrease of the value of the US dollar reserve holdings and the gradual diversification of the currencies used. Since 2010, the euro's share decreased continuously may be due to the Eurozone crisis and the euro's depreciation against the US dollar. Then we show that the US dollar dominates as an anchor currency, though it was temporary abandoned during crisis time, having more than a regional dimension. At the same time, the use of the euro in exchange rate arrangements appears mainly in the regions that have close links with the euro area. Over the last few years, we have witnessed a gentle orientation towards a multimonetary world, especially regarding the use of the international currencies as reserve currency given the diversification of the currencies in which central banks understand to hold international reserves and the increasing share of the nontraditional currencies in total foreign exchange reserves.

Western European inflation and the reserve currencies

The article is a text read and discussed at Chatham House, London, in February 1968. The author establishes to what extent and in what ways British monetary policies, and those of the other main reserve currency countries, have interacted with the European Economic Community’s. The analysis is confined to the years following the return to convertibility, starting with 1959 and ending with 1966. Two extreme lines of thought are distinguished, which are so far removed the one from the other as to leave a very wide field of opinion in between. At one extreme, there is the school of thought that maintains that the reserve currency countries have been exporting inflation. At the other extreme, it is claimed that they have been importing, if not actual deflation, at least certain deflationary impulses from the non-reserve currency countries, mainly those in continental Western Europe. The evidence might show that the same kind of impulses emanated from both sets of countries, and that the difference between them was only one of degree.

Can The Dollar Remain The Worlds Most Important Reserve Currency?

In the future, there is no one currency that is likely to replace the dollar as the main reserve currency. Although the euro and yen meet some of the requirements of a reserve currency, neither is sufficiently strong to take over. Instead, the world might evolve towards a multiple reserve-currency system, shared among the dollar, euro, and yen, (or perhaps the yuan?) at some point in the future. It remains to be seen where the dollar is going and whether Paul Volckers concerns will be realized in the years ahead.

KONCEPCJA PIENIĄDZA MIĘDZYNARODOWEGO W WARUNKACH GLOBALNEGO KRYZYSU FINANSOWEGO

The purpose of this article is to analyze, whether and to what extent a global financial turmoil, initiated with the U.S. subprime crisis, can provide a stimulus towards a creation of the new international money. A reduction of the dollar’s share in the official foreign exchange reserves is considered to be a first step in order to achieve this goal. Following issues are examined in the article: 1) the possibility of granting the unit of account of the IMF – SDR – the status of the main reserve currency; 2) the possibility of the fall of the dollar’s share in the official foreign exchange reserves of the IMF’s members in favor of other currency. Conducted research supports the view that these scenarios can become reality. However, this depends to the highest degree on the stand of the Asian countries on this matter. These very countries create very strong demand for the American securities, helping keep the dollar dominant.

Will the Dollar be Dethroned as the Main Reserve Currency?

The U.S. dollar was in the line of fire as leaders from the largest developed and developing countries participated in the G8 meeting in July, 2009. China and other emerging market heavyweights such as Russia and Brazil are pushing for debate on an eventual shift away from the dollar to a new global reserve currency. These countries are particularly concerned about the heavy debt burden of the United States and fear inflation will further debase the dollar which has lost 33 percent in value against other major currencies since 2002. Will the dollar continue as the main reserve currency of the world? What are the other currencies to watch as challengers to the throne? This paper addresses these questions.

The Dollar and the American Economy in the Year 2005

This short paper presents a panoramic view about the future development of the dollar as the world main reserve currency, the commonly accepted means of exchange and the source of value to most Central Banks' international monetary reserves. Analysts, regard that the American Dollar to remain as the world's central banks preferred international monetary reserve, has to eliminate the fiscal deficit - induced by the realist policy of financing the world peace and borrowing in its own currency to finance cheap imports into the American market. The long term political problem the dollar faces after loosing the privileged position of being America a net creditor country is being converted into a net debtor dislodging the incumbent currency as happened with the dollar when usurped sterling's role in the world.

Stabilizing the international monetary system

The paper focuses on one key difference between the international monetary system of the 1960s and the one prevailing today. In the 1960s, the dollar was the main reserve currency, and governments not wanting to accumulate dollars had only one obvious option—buying gold from the US. Treasury. Today, they have a different option—using dollars to buy euros. There is as yet no firm evidence that Asian central banks are switching from dollars to euros, but a less radical change in their behavior could pose serious problems. They may go on buying dollars to keep their currencies from appreciating but then return to the foreign-exchange market to sell the dollars for euros. The euro would then appreciate sharply, and US interest rates would rise because of the fall in the foreign demand for US government debt. These unwanted effects could be avoided by either of two innovations: (1) The ECB could establish a special facility to accommodate the demand for euros; its liabilities would comprise euro-denominated claims issued off-market to other central banks, and its assets would comprise US government debt. The ECB would incur an exchange-rate risk unless the US Treasury were willing to issue euro-denominated debt in exchange for dollar-denominated debt acquired by the ECB. (2) Central banks could deposit unwanted dollars with a facility administered by the IMF; its liabilities would comprise SDR-denominated claims, and its assets would comprise US government debt indexed to the dollar value of the SDR. The first proposal would confer a large reserve-currency role on the euro. The second would confer that role on the SDR, and it would preclude future instability resulting from subsequent shifts between the dollar and the euro.

Energy policy, the dollar and the US political system

What has prevented the USA from formulating an effective long-term energy policy? In this article R.J. Friedland provides an explanation in terms of the interaction of two decisive factors: the dollar's position as the main reserve currency within the international monetary system; and certain distinctive features of the US political system which bias it towards responding to difficult issues on a short-term basis.

L'inflazione in Europa Occidentale e le monete riserva. (Western European inflation and the reserve currencies)

The article is a text read and discussed at Chatham House, London, in February 1968. The author establishes to what extent and in what ways British monetary policies, and those of the other main reserve currency countries, have interacted with the European Economic Community’s. The analysis is confined to the years following the return to convertibility, starting with 1959 and ending with 1966. Two extreme lines of thought are distinguished, which are so far removed the one from the other as to leave a very wide field of opinion in between. At one extreme, there is the school of thought that maintains that the reserve currency countries have been exporting inflation. At the other extreme, it is claimed that they have been importing, if not actual deflation, at least certain deflationary impulses from the non-reserve currency countries, mainly those in continental Western Europe. The evidence might show that the same kind of impulses emanated from both sets of countries, and that the difference between them was only one of degree. JEL: E31, E52, E42

The Monetary Theory and Policy of Henry Simons

The Monetary Theory and Policy of Henry Simons