Role of international currency

Thèmes abordés

Dollar international currency

Résumé du document

What is the role, the advantages and drawbacks of an international currency, and place in the world of the dollar

Extraits

[...] Public: increasing military expenses to fight against terrorism (Irak et afghanistan), reform of health system 750bn euros on 10years Katrina, fiscality (1800 bn euro), more easily reversible than trade balance: deficit of GDP in in 2006 = 811bn since 2002 depreciation of USD < number > A new international currency or many world currencies Zhou Xiaochuan (China Central Bank governor) « Cost of being an international currency exceeds benefits. We should create an international reserve currency » Hugo Chavez and USRC (Unified System for Regional Compensation): Russia, China, some African and Middle East Countries are for that currency Seek for compromise: currency panel , structure world into regions. [...]

[...] Countries should adopt one of a major currency (Euro, Yen, Huan, Gold, Dollar) in function of their geographic area. UNO, 6th October 2010: asked for a new international currency which abolish the USD priviledge 1st October 2009: Bernanke (former FED president) acknowledged that dollar status can be in danger in case of budget deficit maintain < number > USD is not frightened in short term USA financial system is the strongest A lot of countries have fixed change with or are anchored on USD (south America, Asia) of world monetary reserves are in dollar 60% of USD are out of USA of Euro 87% of exchanges on exchange market concerns dollar euro yen and pound (on 200% total) 70% of world trade and more than 50% of exportations are in USD A lot of countries have fixed change with or are anchored on USD (south America, Asia). [...]

[...] If Euro becomes an international currency, EU needs to issue much more money That would make Euro stronger, being harmful to european export companies Yuan internationalisation difficult Yuan not convertible Need of China exchange market liberalization Need of finance market development Means reevaluation (now, undervaluated) being harmful to exportations < number > CCL Short term, USD will remain THE international currency World trusts on USA to boost world trade and to help to get out of the crisis Long term: can lead to a new international monetary system sources Monde, 8th october 2009, « après la remise en question de son statut de monnaie pétrolière, le dollar plonge » http://www.imf.org/ « Les alternatives au dollar sont-elles crédibles ? », Le Monde, 9th novembre 2009 « L'euro tient-il ses promesses ? [...]

[...] Introduction International currency is necessary to structure the exchange between countries The Amcerican Dollar has the status of International currency Euro as a potential candidate to become international currency Definition Used by residents of a country which is not the country of this currency Used in international exchanges And financial transaction Circulates all over the world Definition 3 Functions of national and international currencies: Mean of payment Unit of account Store of value Mean of payment Used to purchase a good or a service Increased commercial flow between countries- increased transactions between firms from different countries Currency risk Evolution of a currency is uncertain Unit of account Function is connected with the function of mean of payment Prices must be expressed in monetary units In private international transactions when used as invoicing currency Store of value International currency most important to create exchange reserves Used to manipulate exchange rates to provide a more favourable environment Stable exchange rate will favour domestic companies as it reduces risk of strong changes of exchange rate International currency used most in transactions and therefore stored < number > Store of Value Functions of an International currency grouped through different factors: Cost of transaction Bond´s emisson Political incentives The role of the Dollar as International currency Internationally as unit of account and mean of payment Most important reserve currency More than half of commercial transactions invoiced and paid in US dollars The US Dollar largely chosen as a mean of payment Principal intervention currency Mean of international payment- used as vehicle intervention in private utilisations International substitute currency The Dollar is used as the world unit of account The principal peg of the international exchange reates and invoicing and payment currency and world unit of account 1975: 52 of 128 countries fixed currency according to the Dollar Spread of EU increased number of countries with fixed currencies to Euro The Dollar fulfils the function of store of value End of dollar supremacy? Can we imagine a new international currency or a currency basket replacing USD? [...]

[...] balance of payments necessary to feed the world by means of international payment. Progressive weakening of the confidence of economic agents Proposition: IMF should issue its own currency held by Central Banks as international reserves (conflicts of interest between short-term domestic and long-term international economic objectives.) the important needs of the global economy into a reliable currency paradoxically lead to loss of confidence in that currency. special drawing rights created , but only used between Central Banks (no influence on USD place) < number > World dependency on USD in question Petrodollar to undollarization Petrodollar: USD earned by a country through the sale of petroleum. [...]