alt Hacker NewsPrior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. It's too much power that's too tempting to abuse. But they also learned from the collapse of Bretton Woods that even orchestrated agreements with built-in penalties just don't work, because countries can simply ignore them when beneficial.
So I think we're headed to a future where no currency will dominate. This is probably also why the dollar's decline doesn't have any clear successor filling the vacuum. If anything, countries are accumulating far larger stores of gold. I expect this is also why BRICS is having difficulty creating their own trading currency. No countries can, or should, trust other ones which complicates matters greatly.
Replies
- no currency will dominate....
There is excellent research in "currency diversity", start with Prof B. Lietaer
No country is accumulating more than token amounts of gold. There just isn't much physical gold available relative to the size of the world economy.
This is exactly my take. Except I think there was never an interest by China to make the yuan the new global reserve currency but instead slow walk it back to a gold standard, and that's what has been happening since 2008.
If a single country's currency is the global reserve currency, all you're finding out is whose thumb you're under.
> Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency.
That's a misleading statement. First of all at the beginning of the 20th century the British pound was clearly the global currency - where a lot of the international commerce happened. Then towards the 1930s and later on the Dollar took over that role. But that role carried much less weight back then - globalization was still in its infancy and a "global reserve currency" as we understand it today simply didn't exist back then. Right now some Dutch pensioners money is invested in American, Canadian, Australian, German, etc. companies. And the parts for most consumer goods are coming from all over the world. Pre Bretton Woods basically none of this existed. This global financial system we speak of today is unprecedented and only exists since the late 70s - where most countries abandoned their currency controls (apart from the US and CH which never really had them).