Comment by matt-p
7 days ago
Major question is then, what currency should be reserve?
Euro? - Nowhere near as stable as the dollar, and some quite shaky fundamentals and history? Yen? Pound? Swiss Franc?
I suspect Yuan will be unpalatable.
7 days ago
Major question is then, what currency should be reserve?
Euro? - Nowhere near as stable as the dollar, and some quite shaky fundamentals and history? Yen? Pound? Swiss Franc?
I suspect Yuan will be unpalatable.
The Euro is already a reserve currency and makes up about 20% of worldwide reserves. Which is of course not as much as the dollar which is about 60%, but these numbers could of course shift.
So is the Yen, Pound and swiss Franc - many currencies are. What's your point?
Pound is about 5% if I remember correctly, which is a higher weighting than the Euro for trade:reserve holding ratio.
The new reserve currency won't be a single country's currency but a basket of currencies, where the ratio contribution of component currencies gets adjusted every once in a while.
Ok and who will administer the basket? I'm not saying it's impossible just a bit impractical perhaps.
It is just economically clueless people talking nonsense.
Whatever basket we come up with has all the same properties that cause the Euro to not displace USD but worse. Much worse.
1 reply →
BRICS has been proposing a sort of basket mechanism. Bitcoin is not yet thickly enough capitalized. The historical standard was gold for 3000 years, and that's what backed the dollar until that was "temporarily suspended" in 01971. That's the default.
The Chinese yuan is not a viable reserve currency. Why? Because it's pegged to a basket of other currencies. It should really inflate in value but Chinese government policy is to undervalue it to aid exports. Exports are ~20% of China's economy. It would devastate the economy if the yuan was allowed to freely float, or at least float with the level of central bank management that other developed nations' fiat currencies have.
China has repeatedly tried to activate a consumption economy (like the US) but the Chinese just save and buy real estate, in part because there is no retirement benefits so they have to self-fund that.
So what currency? Currently, there is no viable alternative to the US dollar. It is backed by the largest economy in the world AND the US military.
You might find people who talk about BRICS like it's a real thing. It is not. It's just a group of randomly selected countries meant to sound nice (literally, South Africa is only there for the S sound) with no unified policy or currency.
It's not the euro either. Europe ultimately is still dependent on US defence and beholden to US foreign policy.
pretty much every source in the world disagrees with the idea that China doesn't have a retirement system
https://www.cfr.org/blog/what-chinese-pension-system-and-why...
>It's just a group of randomly selected countries meant to sound nice
Source? Pretty sure BRICS is comprised of the largest regional economies that specifically aren't in the first world, that make for useful alliances for Russia & China specifically.
Africa for a long time didn't have any serious economic contenders for something like BRICS other than South Africa. Nowadays Nigeria is a closer contender on the continent. And of course you have long histories of South African politicians having spent their time in exile during Apartheid in places where they learned to call each other "comrade" even to this day in their political parties. It's not an out of the blue arrangement.
Brazil as far as I'm aware seems to be by far the most economically active in South America too?
India seems like third fiddle to Russia & China in this arrangement as a large economy in Asia.
Perhaps we should dust off Keynes' Bancor proposal? :)
https://en.wikipedia.org/wiki/Bancor
Wasn't an implementation of Bancor attempted on Ethereum?
IMF does have Speecial Drawing Rights that kind of, but not really, acts as a global currency
Bitcoin would be the most fair choice for a new reserve currency. It has equivalent properties as gold but is more practical to use, and there's no geographic inequality to mining it.
No government could benefit from manipulating it. How cool is that ?
> there's no geographic inequality to mining it.
Apart from having access to cheap energy which is collocated with... specific geographic features like geothermal / hydro energy which not all countries have access to.
Okay, it's not perfect equality but it is way, way more equitable than geographic features like "gold mine in your backyard"
Is Bitcoin even a currency? Who spends it? And who keeps it stable?
Gold was the reserve asset for most part of human history and was less spendable than bitcoins (harder to divide some gold than to send a fraction of a bitcoin).
Who keep it stable ? Well, who keeps gold stable ? Once an asset becomes the reserve asset, it becomes the standard and other things are priced in that unit, or in units derived from it (here's a kilogram of beef, I'll sell it to you for 2 British pounds which are worth x units of reserve asset)
But maybe you're talking about the stability of its inner properties (its supply, for instance). That for sure is not as stable as gold's. But is its distributed consensus stable enough ? That's a good question. So far, so good.
It's a reserve. The coupling of reserve and currency is a historical accident, not a fundamental reality
It’s more deflationary than gold due to hard fixed supply plus breakage.
Of course a middle school level view of currency is "cool".
Strong argument you're making here, thanks mate