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New Global Currency

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As dollar is depreciating because of increase in American fiscal deficit and Inflation, emergence of New Global Currency is likely a possibility. …

As dollar is depreciating because of increase in American fiscal deficit and Inflation, emergence of New Global Currency is likely a possibility.
But the question is will America like to lose its hegemony?

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  • 1. New Global Currency .
    or SDR’s
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 2. Scope
    Dollar as reserve currency and falling confidence in it.
    Global currency
    What?
    Why?
    By whom?
    Benefit with global currency.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 3. Dollar as reserve currency
    How did dollar emerged as reserve currency?
    Bretton Woods Agreement of year 1944.
    Chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 4. Dollar as reserve currency
    When did dollar emergence as reserve currency?
    In the face of increasing financial strain, the system collapsed in 1971, after the United States unilaterally terminated convertibility of the dollars to gold.
    This action caused considerable financial stress in the world economy and created the unique situation whereby the United States dollar became the "reserve currency" for the states which had signed the agreement.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 5. Why outcry against dollar ?
    “The largest debtor is very unlikely to dominate any currency arrangement today”
    • OusmeneMnadeng (Head Ashmore IM)
    Quadrupling of budget Deficit eroding 70% of Foreign Exchange reserve of world’s currency denominated in dollar.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 6. Reactions
    “We can not develop in the next 10 years if we do not create a new infrastructure including new currency systems”
    - Dmitry Medvedev (Russian President)
    “A more diversified international monetary system”
    - BRIC leaders
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 7. “Better surveillance of the world economy is required .I have no doubt we’ll have an international monetary fund that looks more like an independent central bank”
    - Gordon Brown (British Prime Minister)
    “The outbreak of the current crisis and its spillover in the world has confronted us with a long unanswered question i.e what kind of intl. reserve currency we need to secure and eco. growth”
    - Zhou Xiaochuan (China’s Central Bank Governor)
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 8. “The major part of India’s reserves is in dollars-that is something that is problem for us”
    - Suresh Tendulkar (PM EAC)
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 9. Why America Wont like this………
    Because they issue cheques and can print dollars to cash these cheques.
    Supremacy in Danger
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 10. Global Currency
    What ?
    Why ?
    From whom ?
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 11. Global Currency
    Majority of international transactions take place.
    Which serves as the world's primary reserve currency.
    Other names……..
    World Currency and supranational currency
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 12. Why Global Currency ?
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 13. Benefits of a single Global currency
    Zero Transaction cost- trade becoming more profitable.(savings of $400 bn)
    End of Currency fluctuation and currency speculation.
    End of BOP, Current Account & Global Imbalances problems for currency areas.
    No need to maintain international reserves of other currencies.(underproductive usage)
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 14. Zero manipulation by countries of their currencies.
    Increased International Trade.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 15. From Whom?
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 16. Europe
    China
    Russia
    Japan
    IMF - SDR
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 17. SDR’s
    Basket of major currencies used in international trade and finance.
    The United States dollar, the euro, the Japanese yen, and the pound sterling.
    the relative importance of the currency in international trade and finance.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 18. Why not Euro?
    Reluctance of ECB– improvement in Eurozone’s exports.
    Limited role in global monetary affairs.
    Fragmentation of policy making in financial area- lack of financial depth w.r.t to U.S .
    Poor long term growth prospects– expectation of easing of interest rates by ECB.
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 19. Other probable currency
    Yuan – yet to become a fully convertible currency.
    Rouble– Russia yet to implement RTGS.
    Yen– Japanese Economy still to recover.
    SDR– basket of currency (dollar -44%,Euro-34%,Yen-11%,Pound-11%)
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 20. Why dollar depreciating?
    Trade deficit
    Fiscal deficit
    High inflation
    Negative real interest rate
    NIILM-CMS, Mathura Road,MCA, New Delhi
  • 21. Thank You !
    NIILM-CMS, Mathura Road,MCA, New Delhi

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