tag:blogger.com,1999:blog-2595455932654799850.post7581925476706916783..comments2023-11-02T10:55:07.208+01:00Comments on The Monetary Future: Dollar Share of Global Reserves DropsJon Matonishttp://www.blogger.com/profile/04111660030028727950noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2595455932654799850.post-61571205018483532582009-10-09T02:49:53.651+02:002009-10-09T02:49:53.651+02:00Patrick, thanks for the comment. Economists and me...Patrick, thanks for the comment. Economists and media reporters frequently state, "no other choices exist besides the US dollar, so where will central banks go?" While it is true that a reserve currency must be free of exchange restrictions and be fully convertible into other freely-traded currencies, there are many scenarios for a new reserve currency besides a trade-weighted basket, the euro, or the yuan. According to the Triffin Paradox, a country issuing a 'reserve currency' must also be prepared to run a current account deficit and the US dollar has readily stepped up to the challenge. Other central banks have been unwilling to do this. Chronic current account deficits and fiscal mismanagement will only get a country so far and soon the exportation of domestic inflation will be recognized.<br /><br />Currency reserves, as expressed by the IMF, include ONLY foreign currencies, not gold. The US dollar may end up below the 50% level for currency reserves, but remember that is only against other currencies - it is only a numeraire. The important expression is against gold as the monetary standard which will gain as a percentage of overall central bank reserves.<br /><br />I foresee a viable competitor to reserve currency status deploying a strategy that gets products priced in the new numeraire and simultaneously expands the 'pie' of worldwide trading volume.<br /><br />Yes, this means encroaching into the dollar's role in the underground economy and trade pricing. Since a reserve currency is somewhat based on overall trade volume, the anonymous currency of the Internet economy will prevail. A new digital currency issued by a country with significant gold reserves would be able to accomplish just that.Jon Matonishttps://www.blogger.com/profile/04111660030028727950noreply@blogger.comtag:blogger.com,1999:blog-2595455932654799850.post-41786732920974260102009-10-08T22:44:11.034+02:002009-10-08T22:44:11.034+02:00Jon,
Once again, excellent summary of information...Jon,<br /><br />Once again, excellent summary of information. I have a couple of questions, and perhaps I can illicit some comments from you.<br /><br />It seems that U.S. Dollar holdings dipped to the high 50% mark in the early to mid 90's. This can most likely be attributed to the recession of 90/91. GDP growth remained sluggish until '92, if memory serves. So, where do you see the "bottom" for US Dollar holdings in percentage terms? Or, do you see a "bottom" this go 'round?!?!? Are we going the way of the British Pound Sterling? Has our debt lead us to walk the monetary plank?Patrick Hobbshttp://mises.org/noreply@blogger.com