United States dollar
The dollar as International Reserve Currency
In March, 2009, China and Russia called for a discussion on how to replace the dollar as the world's primary reserve currency. In June, 2009, both countries started to promote the use of rubles and yuans in trade.
In February, 2011, the International Monetary Fund started discussions on a possible replacement for the dollar as the world's reserve currency and recommended its Special Drawing Rights, or SDRs, could help stabilize the global financial system.
The Bank of India has stopped using the US dollars as intermediary currency between the rupee and the Chinese money. The BRICS group of fastest growing economies - Brazil, Russia, India, China and South Africa - signed an agreement in April, 2011, to use their own currencies instead of the predominant US dollar in issuing credit or grants to each other.
The United Nations warned in May, 2011, of a possible crisis of confidence in, and even a "collapse" of, the U.S. dollar if its value against other currencies continued to decline. It noted that the dollar exchange rate against a basket of other key currencies had reached its lowest level since the 1970s.
As of December, 2012, the list of reserve currencies recognized by the International Monetary Fund has grown to include the US dollar, the Australian and Canadian dollars, euro, British sterling, Japanese yen and Swiss franc. This measure reflects the growing diversification of the world’s foreign exchange reserves, marking the onset of a multi-currency reserve system and a new era in world money.
Origins of the US Dollar
The "dollar" began in sixteenth-century Bohemia as a one-ounce silver coin minted by the Count of Schlick, who lived in Joachimsthal. Because of this coin's goegraphic origins and minter, the coins were called Joachimsthalers, or Schlichtenthalers. This was shortened to "thalers" and when the coins made their way into Spain, the coins became known as "dollars".
The Spanish milled Dollar was a silver coin carrying the name Dollar and having a weight in silver of approximately 368 to 374 grains of fine silver. It was also known as “Pieces of Eight”. Divided into 8 parts or bits, two bits were a quarter, slang still used today. The Spanish milled Dollar, was the most common coin in circulation in the colonies prior to the American Revolution. In other words, the medium of exchange selected by the market, became the money unit or dollar of the United States. A silver coin of 368 to 374 grains of fine silver is what the word Dollar means as used in the Constitution. The definition of a dollar was not defined within the Constitution since it codifed the medium of exchange already in use. We have to go to various surrounding documents, reports, recommendations, etc. in order to find the definition a dollar.
Between the market and the Constitution of the United States a dollar has the following characteristics which define the properties of a U.S. Dollar prior to 1965:
(i) that money’s constitutional meaning is silver and gold and nothing else,
(ii) that the dollar is the money-unit of the United States,
(iii) that the dollar is defined by a silver weight of 371.25 grains of pure silver (as defined by The Coinage Act of 1792),
(iv) that the government will coin silver and gold money,
(v) that the Congress will regulate coin value,
(vi) that the only possible legal tender, if there is any, is silver and gold,
(vii) that the government may borrow money, and
(viii) that neither the federal nor the state governments may emit paper money (bills of credit).
- The Federal Reserve. "The Implementation of Monetary Policy - The Federal Reserve in the International Sphere" (PDF). http://www.federalreserve.gov/pf/pdf/pf_4.pdf. Retrieved 2010-08-24.
- Heidi N. Moore. "Central banks start to abandon the U.S. dollar", CNN Money, July 9, 2010. Referenced 2011-02-28.
- Gleb Bryanski. "China backs talks on dollar as reserve -Russian source", Reuters, March 19, 2009. Referenced 2011-02-28.
- Lyubov Pronina and Alex Nicholson. "Russia, China to Promote Ruble, Yuan Use in Trade", Bloomberg, June 17, 2009. Referenced 2011-02-28.
- Ben Rooney. "IMF calls for dollar alternative", CNN Money, February 10, 2011. Referenced 2011-02-28.
- Saibal Dasgupta. "Bank of India becomes first to offer trade settlement in yuan", The Times of India, February 24, 2011. Referenced 2011-02-28.
- "BRICS credit: Local currencies to replace dollar", The Economic Times, Apr 14, 2011. Referenced 2011-02-28.
- Patrick Worsnip. "U.N. sees risk of crisis of confidence in dollar", Reuters, May 25, 2011. Referenced 2011-06-06.
- David Marsh. "Aussie, Canada dollars termed reserve currencies", Marketwatch, Nov. 19, 2012, referenced 2012-12-10.
- Murray N. Rothbard. "The Case Against the Fed", The Ludwig Von Mises Institute, 1994. Referenced 2011-03-22.
- Michael S. Rozeff. "The US Constitution and Money: Corruption and Decline ", The Ludwig Von Mises Institute, 2010. Referenced 2011-03-22.
- Both sides of the loonie: Why U.S. dollar bill's days may be numbered by Tristin Hopper, December 2012 (about the seignorage incomes from coins and banknotes)
- "How Much Longer Will the Dollar be the Reserve Currency?" by Patrick Barron, October 2013
- United States dollar on Wikipedia