Reprise: World Reserve Currency. III.

World Reserve Currency. III.


Today I elaborate on criteria II, viz. "the currency must be widely used in international trade."

Why ?

To state the obvious, a world reserve currency must be USEFUL in the world, viz., useful in world trade as that's what money is used for: trade in goods and services.

Hmmm ... can anyone think of commodities that are priced in something other than dollars ?

Cocoa is priced principally in British pounds, as 40% of the world's supplies come from Ivory Coast, a former British colony. I suppose there are others, but I can't think of them now.

Nothing is priced in Chinese yuan. So much for the bloviation of the Red Chinese leader. Nothing is priced in rubles. Ditto for Putin's blather. How about the Euro ? Uh ... zippo. The Euros only been around for about ten years. Eventually perhaps. The Swiss franc ? I suppose cuckoo clocks are priced in Swiss francs. The Japanese yen ? Nope. The Canadian $ ? Nope. The Aussie dollar ? Nope. Gold ? nope. Silver ? Nope.

The US dollar ? Hmm, that list would fill the page.

What about the SDR, the International Monetary Fund's currency blend ? Nope. Nothing is priced in it, not even economists' salaries.

How can something be a "reserve" if it's not very, very useful for trade ?

Lots of pundits and polemics in the US and Arabia and other nations talk about pricing goods and services in other currencies, but they all seem to run into the problems discussed in criteria number I. Not enough of those other currencies are held around the world to make that practical. The cause of that fact was written about Monday, so I won't repeat it.

The US dollar is the only currency widely accepted in international trade and is the pricing currency for nearly every widely traded commodity in the world. No other currency is even a glimmer in the eye of the dreamer.

Word of the Day

"Eldritch" - adjective (Scottish) [$10]
Eldritch means 1. wierd; 2. hideous.
Sentence: The eldritch SDR of the IMF is a joke, being a mere computer conflation of the currencies of the IMF's major contributors of capital.