Monday, 17 October 2016

Who should be the future economic leader?

From time to time there has been changing trends about the global leaders. The first documents revealed show that Portuguese currency was the first used as global currency in circa 1450s. The trend changed after the Spanish currency took over and remained on the top for around fifty years. The Dutch currency then came over the Spanish one around the year mid seventeenth century. French currency came around late 1680s and dominated the world economy for around hundred years. They we succeeded by the Great Britain Pound and today we have the US dollar as the internationally accepted currency. The United States Dollar took the Great Britain Pound after World War 2 and has been the leader since then. But today there has been a need to understand the need to change the global leader. There has been a strong need to do that because America already seems to struggle with its debt. So let us discuss about whose currency should be the next international reserve currency.
History is a proof of the fact that the US bought huge stock of money at much lower costs that the rest of the world. Scenario is that currently American economy is valued at $19 trillion. All these stats were stated by online website and agency Holborn Assets. This is a website that provides valuable economic stats prevailing in the country and makes us aware about various facets. According to the rules, the economy which needs to be a global reserve economy should have strong domestic value. It should also have a dynamic legal system and lucid central bank rules. The global reserve economies should shift power just the same way as governments change over time. Today, the United States of America’s main debt holders are China (3.2 trillion dollars), Japan (91.3 trillion dollars), Switzerland (0.6 trillion dollars) and Saudi Arabia (0.5 trillion dollars). In order to sustain their status of global reserve currency, the US government must Pay-off foreign debts in the next decade. If they are not able to do so, they might be scrapped off their global reserve currency status. The big question enter our mind now, is that if America loses its power to retain its currency as a global reserve currency, who else is there to make his currency the global reserve. Answer might be found in Asia.
Chinese Yuan is emerging as a global reserve currency of the world. Their size in their domestic economy and importance in international trade is at par with the US dollar. The economy is well defined by state control systems and also addresses problems like unemployment. They only need to bring reforms in the field of making market more liquid and transparent. Chinese market has been less transparent as compared with their US counterpart, which is the only factor that is stopping them to become the next big economy. Last year, the Chinese Yuan entered the IMF basket of reserve currencies of the world. It was the fifth currency to enter the basket, which itself was a huge success for Chinese economy.

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