Dollar international currency
What is the role, the advantages and drawbacks of an international currency, and place in the world of the dollar
[...] Public: increasing military expenses to fight against terrorism (Irak et afghanistan), reform of health system 750bn euros on 10years Katrina, fiscality (1800 bn euro), more easily reversible than trade balance: deficit of GDP in in 2006 = 811bn since 2002 depreciation of USD
[...] Countries should adopt one of a major currency (Euro, Yen, Huan, Gold, Dollar) in function of their geographic area. UNO, 6th October 2010: asked for a new international currency which abolish the USD priviledge 1st October 2009: Bernanke (former FED president) acknowledged that dollar status can be in danger in case of budget deficit maintain
[...] If Euro becomes an international currency, EU needs to issue much more money That would make Euro stronger, being harmful to european export companies Yuan internationalisation difficult Yuan not convertible Need of China exchange market liberalization Need of finance market development Means reevaluation (now, undervaluated) being harmful to exportations
[...] Introduction International currency is necessary to structure the exchange between countries The Amcerican Dollar has the status of International currency Euro as a potential candidate to become international currency Definition Used by residents of a country which is not the country of this currency Used in international exchanges And financial transaction Circulates all over the world Definition 3 Functions of national and international currencies: Mean of payment Unit of account Store of value Mean of payment Used to purchase a good or a service Increased commercial flow between countries- increased transactions between firms from different countries Currency risk Evolution of a currency is uncertain Unit of account Function is connected with the function of mean of payment Prices must be expressed in monetary units In private international transactions when used as invoicing currency Store of value International currency most important to create exchange reserves Used to manipulate exchange rates to provide a more favourable environment Stable exchange rate will favour domestic companies as it reduces risk of strong changes of exchange rate International currency used most in transactions and therefore stored
[...] balance of payments necessary to feed the world by means of international payment. Progressive weakening of the confidence of economic agents Proposition: IMF should issue its own currency held by Central Banks as international reserves (conflicts of interest between short-term domestic and long-term international economic objectives.) the important needs of the global economy into a reliable currency paradoxically lead to loss of confidence in that currency. special drawing rights created , but only used between Central Banks (no influence on USD place)
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