Talk:Reserve currency
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[edit] Commodity prices
I don't see why this is true: This permits the issuing country to purchase the commodities at a significantly cheaper rate than other nations, which must exchange their currency with each purchase. It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others. If Germany wants to buy oil priced in dollars, it converts its money into dollars and buys it. If the Euro is high against the dollar, oil is relatively expensive for them; if the Euro is low against the dollar, oil is cheap. Can this either be backed up or removed? Thanks --Afelton 15:21, 24 January 2006 (UTC)
If the euro is high against the dollar, then one euro can buy more dollars and then more oil. But the point of the paragraph is more precisely to explain that whatever the level of a currency like the euro is, it has to be converted to buy US dollars and this operation has a cost.
For interest rates, the fact that the dollar is a reserve currency means that it is used for other purposes than trade with the US or capital investment to or from this country. Other countries demand this currency to build up reserves. As a result, a very high trade deficit for instance will impact the US dollar but much less than it would be the case for any other currency.
"This operation has a cost"
As of March 15, 2006, the bid/asked spread for exchange of Dollars to Euros (assuming large transaction size) is .0002 (Bloomberg Market Data), or .02% of the value of the transaction. I would say that the comment "oil is relatively expensive" is true, but at a .02% higher price isn't going to kill anybody's pocketbook.
"Killing the Pocketbook"
I've never studied economics formally so I may have this slightly off, But I think it works something like this...
As top currency, the US can print pieces of paper (at virtually no intrinsic cost) which China, Japan, etc. are happy to exchange for cars, clothes, oil, etc. (i.e. stuff with real intrinsic value) based on an implied promise that US Dollars will continue to be a strong currency and so the intrinsically valueless pieces of paper they have in their bank vaults will remain exchangeable for real goods at some point in the future.
Kind of like a huge credit card. The risky thing is the transition from "Top Currency" to "Not Top Currency" because with ~1.5 Trillion dollars in debt to China & Japan alone, either could wipe out the US Economy on a whim with the words "Sell US T-Notes"
Cambridgegames 20:13, 9 September 2006 (UTC)
"The Euro ... may also dominate alongside the dollar."
I reworded the previous version which had a double 'most likely' clause, but (I hope) preserved the sense of a 'dual-dominant' option. Is this a commonly accepted theory? If so, could we have a reference for it. My understanding was that Reserve Currency Status was naturally astable, so while we might stay a Dollar world, or end up in Euros, Yen or even back in Gold, it'd be unlikely for us to stay split across several currencies for very long.
Cambridgegames 20:50, 9 September 2006 (UTC)
[edit] Swiss Franc
Why the article says 'perceived stability'?Its an real stability. Just look at charts of CHF against just about any major currency in the past five years. I didnt moved significantly(up or down) against them except the USD which was very weak. Plus the Swiss stance on wars and the fact they only devalued one time in their history(in the 30's when every major currency devalued) makes the swiss franc a real stable currency. Tradingbr 18:27, 21 December 2006 (UTC)
- Agree, but political power and trade volume also matter. --ChoChoPK (球球PK) (talk | contrib) 19:07, 21 December 2006 (UTC)
[edit] Seigniorage?
The article said:
- For this reason, the US dollar is said to have "reserve currency status", making it possible for the United States to run significant trade deficits (financed by seigniorage) with limited economic impact (see currency crisis)...
I don't understand this. The U.S. trade deficit is mainly financed by the sale of stocks, bonds, and real estate--right? At least, that's what Wikipedia says elsewhere. So I changed the word "significant" to "higher". But I have to wonder whether this idea is widely accepted at all. I hope someone more knowledgeable will review this. --Jorend 21:23, 23 January 2007 (UTC)
The idea that US deficits are financed by seignorage (issuing of new currency) seems very wrong; were this to be the case the USD would experience runaway inflation. At the very least this argument needs to be better developed. —Preceding unsigned comment added by 69.176.211.26 (talk) 13:20, 18 October 2007 (UTC)
[edit] Incorrect data for 2006
according to the link of the IMF the share of each currency was the following:
| currency | share |
|---|---|
| dollar | 0,647466381 |
| euro | 0,257987049 |
| pound | 0,044326689 |
| yen | 0,031923576 |
| CHF | 0,001767927 |
| other | 0,016528377 |
as for september of 2005 the share of each currency was: 0,66310335 0,2440334 0,036006355 0,038058584 0,001451461 0,017346122 which is almost equal to the data given by the ECB paper (notice that it does not give the data at the end of 2005), so if both ECB and the IMF give the same numbers, then the data for 2006 of the IMF should be valid.
Could anyone correct the data for 2006? Sdnegel 11:29, 9 april 2007 UTC
- Hello, just there is no correction of this false values. Due to I don't know how to edit, again hint that the numbers are false at least since april. --129.13.108.115 08:50, 27 August 2007 (UTC)
[edit] Table is not "expressed in US dollars"
The title "Percentage of global currency reserves held in the particular currency, expressed in US dollars" is incorrect, it is not in US dollars, it is in percent. Should read "Percentage of global currency reserves held in the particular currency.". But I can't figure out how to edit this table, can anybody help? TiffaF 15:16, 11 June 2007 (UTC)
I had a look and the entry for the table appears missing in edit, cant find any trace of it as was gonna add Q1 2007 data to the table listed as such as it exists in the references now 83.104.138.141 05:44, 21 September 2007 (UTC)
- Dear 83.104.138.141, the original is at Template:Reserve currencies, and you can edit it there.
- I have again removed the text "expressed in US Dollars" Michael Zimmermann objected the first time I did it, but he didn't get back to me. As far as I can see this table is pure %, no units. Which currency you convert the others to to compare them is irrelevant, you should always get the same answer. See the discussion on his user page. TiffaF 07:28, 9 October 2007 (UTC)
"It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others."
A larger market doesn't imply a lower borrowing cost. And USD rates are higher than Euro and Yen rates and have been for some time so this comment seems pretty blatantly false. —Preceding unsigned comment added by 69.176.211.26 (talk) 13:23, 18 October 2007 (UTC)
[edit] Decline on "Other" from 97-99
What was the sharp decline of the group "Other" between 1997 and 1999, from 10.2% to 1.6%. Was it a eneral shift towards US Dollar, or a few specific currencies declining? --Apoc2400 (talk) 18:56, 1 March 2008 (UTC)
- I see now that going from 6.1% to 1.6% between 98 and 99 was probably various European currencies becoming the Euro, but how about 97-98? --Apoc2400 (talk) 18:59, 1 March 2008 (UTC)
[edit] Pound as a reserve currency pre-US dollar
Is there any evidence that the British pound was a major reserve currency? I understand that gold used fulfill this role. 193.132.242.1 (talk) 17:23, 19 May 2008 (UTC)
