I'm thinking its possible that maybe we might have a new world reserve currency soon.Looks like thats the way we are heading.Would explain Russias and Chinas criticisms. How else to achieve some stability. A basket of currencies with maybe some gold? Maybe months rather than years.
I doubt it, they will put it off until they are forced to by the chaos around them. No country has enough gold at the moment to back it up, not the USA, or China, or the Euro. And I often wonder just what the '"Basket' is going to consist of, Gold/Silver/Oil/SDRs? Not sure about SDRs as they are only an authority to borrow money off the IMF, and guess who provides much of the money that the IMF has? Could become VERY untidy and hard to govern, and who is going to do the governing, not the UN surely? OC
I imagine the market conditions,as they arise,will sort it out. When countries start trading in their own currencies thru' currency swaps ,something else will arise as more convenient. In extreme circumstances,solutions that are not now envisaged , will be implemented. We tend to see things ,as they are now,as normal, but big changes will produce a new normal. I don't understand what will happen ,but feel that when something isn't working,something will replace it.
I agree we are certainly heading in that direction but without war i dont see it happening very soon. A basket of currencys is possible but countrys would not like the idea of not being able to create there own currency at the tip of a hat.
I don't see how a basket of currencies would work. That is the same as just using the already existing indexes such as the US dollar index to vaule a currency. It needs to be a basket of commodities. It would simply be a measuring stick (irredeamable for any particular commodity) just so you can obtain a fair trading value of a currency and so the strength of one currency is not affected by the poor fiscal policies of another. You would trade in your own currency and not have to transfer to a reserve currency (like currently happens when changing into the reserve currency of US dollars for international trade) - direct conversion from your currency to the trade partners currency on the other end.
You sort of contradicted yourself there. That's pretty much how a currency basket would work. Brazil, Russia, India, China and South Africa all agreed about 6 months ago to trade between themselves in their own currencies, so the question for them now is how to fairly value, say the Brazilian real against the South African rand. Bringing the USD into the picture doesn't do anything useful because its manipulated by the Americans and doesn't take into account trade practices with the EU or other BRICS countries who actually have resources backing their currencies instead of just loads of debt. Moving to a currency basket would, IMHO, be a much fairer way to doing things because it would lessen America's influence in the world and frankly, I don't think America should have as much influence as it does given the way the U.S. government and Federal Reserve behave.
All the concepts and Idea is great, but the real problem is still unsolved. Who issues the world currency reserve and who monitors? U.S.A again? China? Europe? At the end of the day, reinventing the wheel, different currency, same players.
BAD, Who decides the exchange rate in the trade transactions? Or are they all on the basis of one piece of 'fiat' paper worth another piece of 'fiat' paper? OC
There will not be an orderly progression to a world currency anytime soon. The banksters rule the world, not the politicians. The banksters are going for another giant wealth grab and it will suit them to have the US dollar melt down and swallow trillions of debt. Once the dollar value is a half of what it is now they'll arrange an 'orderly transition' to a new currency which ensures the old power structures stay in place.
Fiat value of one currency relative to fiat value of the other - basically the same as it is now but with an aggregate benchmark of currencies in the middle instead of the USD. The reason you use a currency basket is because it measures one currency against lots of other currencies you might trade in. If you're holding ZAR (South African rand) and you do nearly all your business in USD then the ZAR-NZD exchange rate would be volatile because there is virtually nobody trading rand for kiwi dollars. If you can measure your ZAR (or NZD) against an aggregate of USD, EUR, CAD, CHF, AUD, JPY, GBP, INR, BRL, RUB, XAU and a free floating CNY then the exchange rate takes in the relative worth of your ZAR (or NZD) against most of your trading partners and you get a more accurate valuation that you can use to work out how many NZD (or ZAR) you'll get from the trade.
How would an aggregate of currencies really work though? What is the yardstick? A predetermined equation that is a function of GDP, M3, inflation, and soveriegn debt of each country?? Your still effectively comparing paper to paper, and in that case the US dollar would still have such a large influence beacuse it is the largest economy (please point out the flaw in my earlier post, I am failing to see it yet)
Hey guys! Remember the solutions lots of governements have used? Weimar Germany was a good example. What are the odds the G20 get together and all agree to cut 9 zeros off their debts and currency values and then print their way out of trouble?
Wouldn't a "basket of currencies" prevent any one single country/currency from dominating/manipulating the rest of the worlds reserves? ie if the US couldn't simply "print" money with abandon (I know they don't physically print it) but they do rely on their $ as the reserve currency of the world, to insulate them. Hence China's strong assertion over the weekend for some international oversight of US "printing". ??????
Well, well what do you know? From ABC business news "The Group of 20 major economies held an emergency conference call on Sunday to discuss possible coordinated action to minimise market volatility, a South Korean official said. outh Korean officials said G20 deputy finance ministers participated in the teleconference early on Sunday. Vice finance minister Yim Jong-Yong said "serious discussions" are continuing as the G20 seeks to contain market disruption from Standard & Poor's move and Europe's debt woes. But he said the current issues would not lead to another global economic crisis, after talks with policymakers from the Bank of Korea and financial regulatory bodies. G20 states agreed to consider issuing a joint pledge to make efforts to soothe the global financial market, an unnamed finance ministry official told Yonhap news agency. "Although it's not confirmed, [the countries] are reviewing issuing a joint statement before Asian financial markets open," the official was quoted as saying.
The yardstick is every currency's worth relative to every other currency's worth. Basically it makes the basket much more stable because if the EUR rises against the GBP then the rise in the EUR will be (partially) offset by the fall in the GBP and the value of the basket remains basically the same. How you actually work out how many units of each currency go into the basket is much more complicated but, for example, the IMF's Special Drawing Rights (XDR) is made up of USD (0.660), EUR (0.423), JPY (12.10) and GBP (0.111). So you'd say "What is USD 0.66 worth in AUD? Add that to what EUR 0.423 is worth in AUD. Then add that to what 12.1 JPY is worth in AUD. Then add that to what GBP 0.111 is worth in AUD" and the end figure is what the Special Drawing Rights are worth in AUD. Then you use the XDR as the basis for calculating what the stuff you're trading is worth e.g. "I want to sell 1 barrel of oil at XDR 79" and let the other guy figure out how many of his local currency units he needs to buy it at that price. So yes, you're still comparing paper to paper but you're preventing the value of one of those pieces of paper from being manipulated by the country that issues it. Currently, if the U.S. devalues the U.S. dollar everything gets cheaper for them because they have more USD to buy stuff with. With a currency basket, the U.S. devaluing the U.S. dollar means everything gets more expensive for them - they still have more USD to buy stuff with, but the USD doesn't buy them as much either so they can't get away with just printing more money to get themselves out of a jam.
I think the IMF's SDR's could eventually be the new world currency, though the yuan would have to join it and they would have to get more of them into circulation which they are currently doing who knows, but the end result is another step towards an oppressive world government
What would a SDR be backed by? AFAIK, the IMF has about 2700 tons of gold and various foreign currencies, not sure of the exact total, but that would not be within a bulls roar of the amount required to back a new reserve currency. They would need TRILLIONS!!! OC
