Yesterday, I gave a presentation on the battle between the Euro and the Dollar. I tried to amend the misperception that the US debts are a sign of something wrong in its economy. Although this may cause problems in the next step. Having a world currency requires several responsibilities and requirements. Yuan is far from this, and so is Euro. Like always, I was fascinated by the talents and insights of John Maynard Keynes who had predicted all of these a long time before anyone else.

2. FUNCTIONS OF MONEY
•Medium of Exchange
•Store of Value
•Unit of Account
According to Gresham’s Law, first and second function might be
independent (bad money is more a medium of exchange and good
money is a store of value), but in the long run, they come close to
one another.
All functions depend on stability

3. WHERE IS EUROZONE
• Eurozone consists of 19 countries:
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Lat
via, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia,
and Spain.
• Nine countries, Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland,
Romania, Sweden, and the United Kingdom, are EU members but do not use the euro.

4. ONCE UPON A TIME …
• An American exporter exports goods to China, sell them in Yuan, and immediately
exchange Yuan for Dollar, to take home Dollar. This is because Yuan is a volatile
currency, bearing risk having it for so long. Therefore, the circle of Yuan in Chinese
mainland remains stable.
• A Chinese exporter exports goods to America, sell them in Dollar, and take Dollar out of
the US mainland, and never bring it back. Even the Chinese government requires
Traders to give their Dollars to the Central Bank. This is because Dollar is such a stable
and valuable currency.
• After some time, imbalance of payment increases in favour of China.

5. BURDENS OF A WORLD CURRENCY
• National or International Interest (Triffin Dilemma) = Monetary policy of the
country with a world currency must consider the stability of the international
monetary system, not just its own national interest
• Balance of Payment: As Keynes predicted, in the long run, the country whose
currency is a world currency, will face severe national debts.
• Two Central Bank: When China has a vast resource of Dollar, it can act like
the second Federal Reserve
• Stronger Leverage: the degree that Federal Reserve must change a monetary
variable to change another monetary variable is bigger for the US than China,
because the US should influence the volume of Dollar much bigger than its
GDP
Weaponization of Dollar: Leave dollar alone, or respect it adequately

6. ALTERNATIVES OF DOLLAR
• Bancor: proposed by Keynes and followed by IMF in form of SDR
• Regional Currencies = Euro, BRICS
• BRICS
• Currency Manipulation Record
• Friction among themselves
• Not cooperating with Euro – Weaponization of Euro is also possible
• Cryptocurrencies
• Problem of Sovereignty

7. WHAT IS NEEDED FOR A WORLD CURRENCY
• Political Commitment
• Strong Army or Security Umbrella
• No record of manipulation
• Low Political Risk
• Could not be threatened by a big power
• Economic Crisis
• Bond credit is required to reduce volume of money at hand in case of crisis
• High Volume of Economy
• Developed Financial Market

8. CHANCES OF EURO
Euro Dollar
GDP 12.6 19.4
Growth 2.5 2.3
• High Volume of Economy
• Dollar Devaluation and the US Trade Deficit

9. EURO OBSTACLES
• 2010 Euro Crisis: it threatens the very existence of the currency, unlike other currency
crisis
• Petro Dollars: Arab oil exporting countries sell oil and reserve their surplus in Dollar.
• Brexit: London is practically Euro’s financial market. It will no longer be!
• Far Right Parties

10. EURO AS STORE OF VALUE
Currenc
y
U.S.
dollar
Euro
Pound
sterling
Japanes
e Yen
Swiss
franc
Other
currenc
ies
2009 62.05% 27.65% 4.25% 2.9% 0.12% 3.04%
2010 62.14% 25.71% 3.93% 3.66% 0.13% 4.43%
2011 62.59% 24.4% 3.83% 3.61% 0.08% 5.49%
2012 61.47% 24.05% 4.04% 4.09% 0.21% 3.26%
2013 61.24% 24.19% 3.98% 3.82% 0.27% 2.84%
2014 63.34% 21.9% 3.79% 3.79% 0.27% 3.14%
2015 64.16% 19.73% 4.86% 4.86% 0.29% 3.13%
2016 63.96% 19.74% 4.42% 4.42% 0.17% 2.55%
2017 62.7% 20.15% 4.54% 4.89% 0.18% 2.5%

11. EURO AS MEDIUM OF EXCHANGE
Euro Dollar
2016 31 42
2017 36 40
Percentage of International Payments

12. EURO AS UNIT OF ACCOUNT
•Dollar is Predominant

13. The Euro’s International Role Remains Close to
Historical Lows

14. Snapshot of the International Monetary System

15. EURO / DOLLAR EXCHANGE RATE

16. CONCLUSION
• Dollar is Dominant in the Foreseeable Future
• Other Currencies are becoming International
• Multipolar Monetary System is not necessarily Stable
• Monetary sphere is different from Economic sphere

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