5 ms·

This is how the worlds reserve currencies has looked historically. My personal guess is that the Yuan will be the next bar in the graph. http://azizonomics.com/

• chimeracoder 11y ago
  I'm more than a bit skeptical of anything pre-1750 in that graph, because the "world's" reserve currency means something very different in today's global economy than what that graph appears to be using to define them. Those might pass for European reserve currencies in a pre-Industrial Era, but they certainly do not reflect the world economy of the time period by any means. In addition to all of that, the USD is the only currency on that graph that was not on a gold standard at the time. That's a huge difference.
  • mikeash 11y ago
    Wouldn't the gold standard render the entire notion of a "reserve currency" meaningless, too? If you're holding a gold-backed currency then you're effectively just holding gold. Holding a currency as a "reserve currency" probably meant actually holding a bunch of gold in a vault. It hardly matters whose face was on it.
    • chimeracoder 11y ago
      > Wouldn't the gold standard render the entire notion of a "reserve currency" meaningless, too? Yeah, it does. The more I think about it, the less sense that graph makes. It's not entirely meaningless because there are still benefits to being the reserve currency in a gold-backed world (e.g. cheaper cross-border transactions from not having to do any forex). But the biggest impact of being the reserve currency today is on monetary policy, which only makes sense in the context of fiat money.
    • justincormack 11y ago
      No, there was still credit creation under the gold standard, and debt markets and so on.
    • jtc331 11y ago
      If "gold standard" had one narrow definition (something like each printed currency unit is back by a specific amount of gold and that amount doesn't float), then yes, it would render it meaningless. But if the amount of currency issued can float relative to the gold reserves held, then the values of currencies relative to each other could still flow significantly. Put another way, it's an issue of trust. If currency X and currency Y are both theoretically backed by gold, but it's far easier or more reliable to convert X into gold than Y, then X as a reserve would be more valuable than Y.
      • mikeash 11y ago
        For most of the time covered by this graph, "gold standard" meant that the money was actually made out of precious metals, not merely that it had some official exchange rate with gold. Concerns about how the quantity of currency issued changes relative to the amount of gold held, or conversion to/from gold, simply wouldn't apply.
        • justincormack 11y ago
          Not true, there was still debt, so unbacked money.
          • mikeash 11y ago
            How much of currency reserves at the time consisted of debt?
            • justincormack 11y ago
              Depends when you were talking about exactly. Currency reserves were not necessarily a thing. In most countries all banks were private, so there were no official reserves. For example the Bank of England was only nationalised in 1946. Fractional reserve banking has been around for centuries.
    • dools 11y ago
      All a gold standard does is increase instability in the economy and reduce domestic policy space. It was abandoned for a very good reason, and typically would be abandoned often anyway even when it was "in effect". It's a ludicrous way to run an economy, similar to a pegged exchange rate.
• dear 11y ago
  I think Gold was the 'global reserve currency' before the 20th century.
  • TheLogothete 11y ago
    You are correct, currency and financial systems today are vastly different. That site seems to be pushing the "THE PETROLDOLLAR IS DYING ANY DAY NOW" agenda.
    • kuschku 11y ago
      Well, because it is going to die. Holding assets in dollar makes little sense for most people on the planet, and when these people become richer, it makes sense they will use their own currencies. With them, their companies. With those, their governments. The EUR, despite current instability, and the Chinese Y have good chances.
      • aianus 11y ago
        > Holding assets in dollar makes little sense for most people on the planet, and when these people become richer, it makes sense they will use their own currencies. You have a lot of misplaced faith in foreign central banks. A lot of foreigners absolutely do not trust their central banks, some even to the point of using the US dollar in their day-to-day transactions (Cambodia, various African nations, etc.) If you're in the position where you don't trust your own central bank, why would you trust the Bank of China instead of the Federal Reserve? It's been around a lot less time and does not have the political independence the Fed does. The dollar is going to be dominant for the rest of our lives IMO.
        • kuschku 11y ago
          Well, for many people it makes sense to trust their own central bank more than a foreign one, especially when their nation is stable. No matter what happens, I can pay my taxes and get food at the bakery in Euro. Even if the Euro crashes. But if I hold Dollar, my government and bakery won’t take Dollar, so I’d have to convert – and lose or make money based on the exchange rate every time. It’s the same reason why bitcoin isn’t effectively used: If you have to exchange currencies every time you try to buy something, the currency is worthless to you. And for a billion chinese people, the Yuan is going to be the currency of choice. For 500 million europeans, the Euro is the currency of choice. But only the US and a handful of instable african or island nations use the Dollar, all combined still less people. For private holdings, the Dollar is going to lose power. (In fact, it has lost the majority of private holdings long ago)
• Rmilb 11y ago
  What advantages does the Yuan have over the USD? I think the next generation will value the transparency and predictability of issuance of a crypto currency similar to bitcoin has far greater advantages. Which doesn't mean that central bankers will be in favor of it. But it has a 'long shot' at getting on that graph.
• thescriptkiddie 11y ago
  For anyone else confused by this comment, China no longer has a dual-currency system. Yuan is just a synonym for Renminbi.