World Reserve Currency Moving With Globalization Finance Essay

Download .pdf, .docx, .epub, .txt
Did you like this example?

Over the past several decades, the U.S. dollar has enjoyed its status as the world’s most important and dominant reserve currency. Every major government and financial institution in the world now holds significant quantities of U.S.

Don’t waste time! Our writers will create an original "World Reserve Currency Moving With Globalization Finance Essay" essay for you whith a 15% discount.

Create order

dollars as part of their foreign exchange reserves. However, are we seeing that the dollar’s role as the world’s dominant reserve currency may be coming to an end? But before getting into the details of Reserve currency and its evolution, let us take a walk into the fact that might draw the end of period of the dominance of US dollar. In 1965, the United States of America was the largest creditor nation in the world. Today, it is the world’s largest debtor nation. Figure 1: Brother, can you spare a couple billion? The most widely quoted figure for the debt of the United States is called the national public debt. U.S National Debt Clock in Manhattan quotes the figure currently at $12.311 trillion [2] . It has increased from $2.6 Billion to $12.311 trillion in the past 100 years. We will start analyzing this first by understanding what exactly is a reserve currency, its evolution and why does it matter?

World Currency

In the foreign exchange market and international finance, a world currency, supranational currency, or global currency refers to a currency in which the vast majority of international transactions take place and which serves as the world’s primary reserve currency [3] .

Reserve Currency

A reserve currency, or anchor currency, is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc [4] . It is held by central banks and other major financial institutions of different countries enabling them to pay off international debt obligations and influence their domestic exchange rate. Adding to this is the fact that Reserve currency allows the issuing country to purchase the commodities at a marginally lower rate than other nations. For major currencies, this transaction cost embedded in currency change is negligible with respect to the price of the commodity. The government issuing the currency will be able to borrow money at a better rate, as there will always be more liquid market for that currency than others.

Evolution of Reserve Currency

Spanish dollar: 17th-19th centuries

The Spanish dollar (also known as the piece of eight, the real de a ocho or the eight-real coin) is a silver coin, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Because it was widely used in Europe,

Do you want to see the Full Version?

View full version

Having doubts about how to write your paper correctly?

Our editors will help you fix any mistakes and get an A+!

Get started
Leave your email and we will send a sample to you.
Thank you!

We will send an essay sample to you in 2 Hours. If you need help faster you can always use our custom writing service.

Get help with my paper
Sorry, but copying text is forbidden on this website. You can leave an email and we will send it to you.