X22Report: We Are Coasting to the Collapse - The Central Bank Has Taken it's Foot Off the Pedal - Video

X22Report

Published on Aug 14, 2018

Venezuela is preparing to use the El Petro for all its oil transactions, this will bypass US sanctions. The credit impulse is still in the negative territory, the central banks have taken their foot off the gas pedal and we are coasting towards the collapse. The world does not have to wait for another reserve currency, all countries need to do is use their own currencies. By doing this the dollar will not be in demand and the currency will begin to collapse which will have extreme repercussion on the US economy.

All source links to the report can be found on the x22report.com site.

From Wikipedia

A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. The reserve currency is commonly used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency. People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they do not need to exchange their currency to do so.

By the end of the 20th century, the United States dollar was considered the world’s most dominant reserve currency. The world’s need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year.

Contents

• 1History

• 2Global currency reserves

• 3Theory
• 4Major reserve currencies
  • 4.1United States dollar
  • 4.2Euro
• 5Other reserve currencies
  • 5.1Dutch guilder
  • 5.2Pound sterling
  • 5.3Japanese yen
  • 5.4Swiss franc
  • 5.5Canadian dollar
  • 5.6Chinese yuan
• 6Calls for an alternative reserve currency
  • 6.1Special drawing rights
• 7See also
• 8References
• 9Further reading

History

Reserve currencies come and go. International currencies in the past have included the Greek drachma, coined in the fifth century B.C., the Roman denari, the Byzantine solidus and Arab dinar of the middle-ages, the Venetian ducato and the Florentine florin of the Renaissance, the seventeenth century Dutch guilder and the French franc.

Under the gold standard, the predominant global financial systemfrom 1870 to 1914, paper notes were convertible into preset, fixed quantities of gold.

The Dutch guilder emerged as a de facto world currency in the 18th century due to unprecedented domination of trade by the Dutch East India Company. However, the development of the modern concept of a reserve currency took place in the mid nineteenth century, with the introduction of national central banks and treasuries and an increasingly integrated global economy. By the 1860s, most industrialised countries had followed the lead of the United Kingdom and put their currency on to the gold standard. At that point the UK was the primary exporter of manufactured goods and services and over 60% of world trade was invoiced in pound sterling. British banks were also expanding overseas, London was the world centre for insurance and commodity markets and British capital was the leading source of foreign investment around the world; sterling soon became the standard currency used for international commercial transactions.

John Maynard Keynes (right) and Harry Dexter Whitehelped to draft the provisions of the post-war financial system. Here, they meet at the inaugural meeting of the International Monetary Fund, 1946.

Attempts were made in the interwar period to restore the gold standard. The British Gold Standard Actreintroduced the gold bullion standard in 1925, followed by many other countries. This led to relative stability, followed by deflation, but because the onset of the Great Depression and other factors, global trade greatly declined and the gold standard fell. Speculative attacks on the pound forced Britain entirely off the gold standard in 1931.

After World War II, the international financial system was governed by a formal agreement, the Bretton Woods System. Under this system the United States dollar was placed deliberately as the anchor of the system, with the US government guaranteeing other central banks that they could sell their US dollar reserves at a fixed rate for gold.

In the late 1960s and early 1970s, the system suffered setbacks ostensibly due to problems pointed out by the Triffin dilemma—the conflict of economic interests that arises between short-term domestic objectives and long-term international objectives when a national currency also serves as a world reserve currency.

Global currency reserves

The IMF regularly publishes the aggregated Currency Composition of Foreign Exchange Reserves (COFER). The reserves of the individual reporting countries and institutions are confidential. Thus the following table is a limited view about the global currency reserves that only deals with allocated reserves:

Currency composition of official foreign exchange reserves (1965–2017)

The percental composition of currencies of official foreign exchange reserves from 1995 to 2017.

Theory

Economists debate whether a single reserve currency will always dominate the global economy. Many have recently argued that one currency will almost always dominate due to network externalities (sometimes called “the network effect”), especially in the field of invoicing trade and denominating foreign debt securities, meaning that there are strong incentives to conform to the choice that dominates the marketplace. The argument is that, in the absence of sufficiently large shocks, a currency that dominates the marketplace will not lose much ground to challengers.

However, some economists, such as Barry Eichengreen, argue that this is not as true when it comes to the denomination of official reserves because the network externalities are not strong. As long as the currency’s market is sufficiently liquid, the benefits of reserve diversification are strong, as it insures against large capital losses. The implication is that the world may well soon begin to move away from a financial system dominated uniquely by the US dollar. In the first half of the 20th century multiple currencies did share the status as primary reserve currencies. Although the British Sterling was the largest currency, both the French franc and the German mark shared large portions of the market until the First World War, after which the mark was replaced by the dollar. Since the Second World War, the dollar has dominated official reserves, but this is likely a reflection of the unusual domination of the American economy during this period, as well as official discouragement of reserve status from the potential rivals, Germany and Japan.

The top reserve currency is generally selected by the banking community for the strength and stability of the economy in which it is used. Thus, as a currency becomes less stable, or its economy becomes less dominant, bankers may over time abandon it for a currency issued by a larger or more stable economy. This can take a relatively long time, as recognition is important in determining a reserve currency. For example, it took many years after the United States overtook the United Kingdom as the world’s largest economy before the dollar overtook the pound sterling as the dominant global reserve currency. In 1944, when the US dollar was chosen as the world reference currency at Bretton Woods, it was only the second currency in global reserves.

The G8 also frequently issues public statements as to exchange rates. In the past due to the Plaza Accord, its predecessor bodies could directly manipulate rates to reverse large trade deficits.

Major reserve currencies

Distribution of global reserve currencies

United States dollar

Main article: United States dollar

The United States dollar is the most widely held currency in the Allocated Reserves today. Throughout the last decade, an average of two thirds of the total Allocated foreign exchange reserves of countries have been in US dollars. For this reason, the US dollar is said to have “reserve-currency status”, making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact or even postponing a currency crisis. Central bank reserves held in dollar-denominated debt, however, are small compared to private holdings of such debt. In the event that non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the US economy. Changes of this kind are rare, and typically change takes place gradually over time; the markets involved adjust accordingly.

However, the dollar remains the favorite reserve currency because it has stability along with assets such as United States Treasury security that have both scale and liquidity.

The US dollar’s dominant position in global reserves is challenged occasionally, because of the growing share of unallocated reserves, and because of the doubt regarding dollar stability in the long term. However, in the aftermath of the financial crisis, the dollar’s share in the world’s foreign-exchange trades rose slightly from 85% in 2010 to 87% in 2013.

The dollar’s role as the undisputed reserve currency of the world allows the United States to impose unilateral sanctions against actions performed between other countries, for example the American fine against BNP Paribas for violations of U.S. sanctions that were not laws of France or the other countries involved in the transactions. In 2014 Beijing and Moscow signed a 150 billion yuan central bank liquidity swap line agreement to get around American sanctions on their behaviors.

Euro[edit]

Further information: International status and usage of the euro

The euro is currently the second most commonly held reserve currency, comprising about a quarter of allocated holdings. After World War II and the rebuilding of the German economy, the German Deutsche Mark gained the status of the second most important reserve currency after the US dollar. When the euro was introduced on 1 January 1999, replacing the Mark, French franc and ten other European currencies, it inherited the status of a major reserve currency from the Mark. Since then, its contribution to official reserves has risen continually as banks seek to diversify their reserves, and trade in the eurozone continues to expand.

Former U.S. Federal Reserve Chairman Alan Greenspan said in September 2007 that the euro could replace the U.S. dollar as the world’s primary reserve currency. It was “absolutely conceivable that the euro will replace the US dollar as reserve currency, or will be traded as an equally important reserve currency.” Econometric analysis by Jeffrey Frankel and Menzie Chinn in 2006 suggested that the euro could replace the U.S. dollar as the major reserve currency by 2020 if either the remaining EU members, including the UK and Denmark, adopted the euro by 2020, or the recent depreciation trend of the dollar persisted into the future. In recent years, the euro’s share of the worldwide currency reserve basket has continued to increase—albeit at a slower rate than before the beginning of the worldwide credit crunch related recession and Eurozone crisis, which harmed the euro and slowed its adoption. Since 2009, the reserve currency use of the euro has continued to drop, down to 23.9 percent in 2013.