The bar has been significantly lowered in the last year since the US has decided to commit bigly to unpredictability. Another 3 years of these kinds of manipulations and the Yuan could very well look like the lesser evil to a lot of countries.
I don't understand why gold-backing is required. I'm a novice.
My understanding is that a reserve currency requires fluid markets and a stable, reliable, metrics-based currency policy. It's why the Fed is so stubborn about its relatively simple policy goals: 2% inflation and low unemployment.
China appears to be attempting to reproduce what the USD was before it was free floating.
USD is currently backed by debt and nominally military might. If the US defaults then all of the US bonds held by foreign banks become worthless. That is an enormous risk which is why countries have been divesting from US bonds. If USD was still gold, as it was before 1913, if you hold your money it cannot be made worthless by a third party. After 1913 USD became gold backed bills with partial reserve. It is why USD became the global reserve currency. But, reserve requirements were reduced and more paper was produced. In 1971 Nixon removed the convertibility of paper bills to gold metal effectively stealing the gold of any nation that asked the US to hold it.
One of my favorite bits of currency trivia is that a $20 double gold eagle coin used in circulation prior to 1933 had a gold content of 0.9675 troy ounces. Twenty dollars in your hand was literally nearly an ounce of gold.
> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS.
But then you have to choose an actual currency(s) to do transactions in, so will you trust them to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
All reasons that a paper currency backed by gold has never lasted long. Going to paper currency is the first step to start cheating by fudging numbers. The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
The bar has been significantly lowered in the last year since the US has decided to commit bigly to unpredictability. Another 3 years of these kinds of manipulations and the Yuan could very well look like the lesser evil to a lot of countries.
The Euro is like, right there? Its a market larger then the US.
Europeans dont make stuff i want to buy.
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> The bar has been significantly lowered in the last year since the US has decided to commit bigly to unpredictability.
The yuan/renminbi is currently about 8.5% of all foreign currency transactions. That's on a similar to CAD and AUD (6%):
* https://en.wikipedia.org/wiki/Template:Most_traded_currencie...
It has a ways to go still.
Still nowhere near what the CCP does.
The Yuan already is a popular reserve currency.
What is this crazy idea that every single country must act all the time in the same simplified way?
The Yuan is not a popular reserve currency. It has less than 2% of share vs 57% for the USD.
The first currency to be gold backed will take the crown. China appears to be building towards that end.
I don't understand why gold-backing is required. I'm a novice.
My understanding is that a reserve currency requires fluid markets and a stable, reliable, metrics-based currency policy. It's why the Fed is so stubborn about its relatively simple policy goals: 2% inflation and low unemployment.
Partially gold backed reduces counter-party risk. Fully gold backed, and exchangeable, eliminates counter-party risk.
China appears to be attempting to reproduce what the USD was before it was free floating.
USD is currently backed by debt and nominally military might. If the US defaults then all of the US bonds held by foreign banks become worthless. That is an enormous risk which is why countries have been divesting from US bonds. If USD was still gold, as it was before 1913, if you hold your money it cannot be made worthless by a third party. After 1913 USD became gold backed bills with partial reserve. It is why USD became the global reserve currency. But, reserve requirements were reduced and more paper was produced. In 1971 Nixon removed the convertibility of paper bills to gold metal effectively stealing the gold of any nation that asked the US to hold it.
One of my favorite bits of currency trivia is that a $20 double gold eagle coin used in circulation prior to 1933 had a gold content of 0.9675 troy ounces. Twenty dollars in your hand was literally nearly an ounce of gold.
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Looks like the BRICS initiative is building towards this with an August announcement. But until it happens, this is still in rumor territory.
https://bmg-group.com/russia-confirms-brics-will-create-gold...
A semi-joke-y take on BRICS:
> Pretty straightforward really. You combine Brazil's history of monetary stability, with Russia's respect for property rights, India's domestic tranquility, China's financial transparency, and South Africa's investment opportunities - and hey presto, you've got a new global money
* https://twitter.com/davidfrum/status/1665053372402081792
Of course more countries may enrol in the system, but that dilutes the influence of the five namesake nations of BRICS.
But then you have to choose an actual currency(s) to do transactions in, so will you trust them to be stable? Or perhaps go with a 'theoretical' currency likes Keynes' bancor?
* https://en.wikipedia.org/wiki/Bancor
* https://en.wikipedia.org/wiki/World_currency#Single_world_cu...
As for gold-based currencies, see perhaps "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts":
* http://archive.is/https://www.theatlantic.com/business/archi...
* https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...
Who stores the gold? Who audits the gold? Who trusts the audits? It isn't hard to wrap gold around tungsten.
All reasons that a paper currency backed by gold has never lasted long. Going to paper currency is the first step to start cheating by fudging numbers. The only money that has ever lasted is actual coins/bars of metal, precious or otherwise.
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