I mean,it could’ve been any other currency🤷🏻♂️
Edit: Not like “international currency” more like for trade and stuff
In: Economics
>I mean,it could’ve been any other currency
It actually can’t; in order for a currency to actually be a global reserve currency, it has to be attached to a market that’s large enough to actually have enough natural demand for that currency to liquidate the global system, which means you need it to be attached to a nation or bloc that has enough people. In the current world, that limits it to the Dollar, the Euro, the Yuan, and the Rupee.
The Rupee is out first because despite the size of the Indian market, the country itself is just too poor and can’t generate enough economic activity to liquidate the global economy. Further, India *deliberately* holds itself apart from most of the global financial systems due to lingering doubts about foreign influence via trade that they suffered from as a result of the British Colonial era. Thus, India doesn’t want to play in the global market, and without them being willing to play, the Rupee cannot be a reserve currency.
The Yuan is out next as China engages in pretty strict capital controls; they actually tried to float the Yuan as a global reserve currency a few years back, but then immediately stopped it as too much money was leaving the country. China is terrified of the prospect of capital flight (which would tank their currency and prevent the government of China from functioning), so they keep strict capital controls in place to prevent it from being a global reserve currency.
The Euro looks good on paper, but it’s got issues of being a little too new (in comparison to the US Dollar). Further, Europe’s economy hasn’t been doing so well since 2008 (particularly in Southern Europe, where unemployment rates for under-30s were around 20-30%). Now, with Brexit about to happen, and with Italy looking like they might have their own referendum to leave, there is a lot of concern about the long-term stability of the EU. Without stability, there is no EU. Without the EU, there is no Euro.
Thus, the Dollar isn’t just the best currency to be a global reserve currency, but it’s realistically the **only** possible reserve currency, and will remain in that spot for probably the remainder of the century.
During World War II, the U.S. supplied the Allies and got paid in gold propelling the U.S. to the largest holder of gold. After the war, countries linked their currencies to the dollar, which was linked to gold. The gold standard ended, but the dollar’s reserve status remained.
Would be nice if the US no longer used the Dollar’s reserve currency status as a political lever to further it’s foreign policy goals though.
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