he Esperanto It is a language designed by the Polish Louis Lazaro Zamenhof in 1887. It is a deliberate innovation to make it easier for people born in any country in the world to learn. For example, there are no exceptions to the rules, which is very difficult when learning another language. If Esperanto has so many advantages, why do the vast majority of people learn English, in addition to what is spoken in their country of origin? Something similar happens with coins. Why, if Bitcoin (the most popular cryptocurrency) and the Special Drawing Right (the currency created by the International Monetary Fund) have so many advantages, do the vast majority of people and countries hoard dollars or securities denominated in said currency?
I talked about this with Al-Masry Victor Eli Arji (1929 – 1993)At the age of twenty, he immigrated to Australia to join his older brother. He studied at the University of Sydney and has taught at Auckland, Sydney and Macquarie University. According to Warner Max Corden and Leslie Stein, “As a friend he was wonderful. He had an aura of childish innocence, but also a very mercurial temperature, and his rage could reach boiling point in seconds. He always felt violated in the face of social injustice. He was very sensitive to the suffering of the weakest, and in the last years of his life he felt particularly hurt by the revival of classical anti-Semitism, both in Europe and in other countries.” He loved cinema, good music, and French cuisine, and he would read about many topics, especially about the meaning of life and death.
– In 1968, I joined the research department of the International Monetary Fund.
– Where I stayed for five years. An important period in my life. My first job was to rigorously develop the model proposed by Jacques Jacobus Pollack. Two of my works were later reproduced Monetary approach to the balance of payments. I returned to the fund in 1977, 1982 and 1990. I had a special interest in Japan, which left an indelible mark on Macquarie. I also activated the Mundell-Fleming model from a forecast point of view, although not to the same extent as Rüdiger Wilhelm Dornbusch did in 1976. The international monetary crisis in the post-war periodpublished in 1981, was a popular textbook, while… International Macroeconomics: Theory and Policywhich is my Magna Opera, came out in 1994.
– What is the history of currencies issued by some central banks, which were or are used as international currencies, whether by private members or countries?
– In the time of Pericles, I don’t know. In modern times, let’s say, in the last two centuries, it’s a very simple story. Thinking about “world” currencies, it starts with the pound sterling, continues with the dollar issued by the United States, and ends with the euro. I say global currencies, because from a regional point of view there may be other examples.
-Do the new currencies replace the previous currencies or complement them?
– In the case of the British pound and the US dollar, this was largely a substitute; Whereas in the case of the US dollar and the euro, it is now a matter of integration.
– Is it reasonable to distinguish between its use by individuals in the private sector, and the use of reserve currency by countries’ central banks?
– He has. The current “global” use of the US dollar by individuals and businesses does not arise from any imposition by the US state; In the case of central bank holdings, during the 1960s the US government “recommended” European countries not to convert their dollar holdings into gold, a recommendation that all countries followed except France.
The integration and abandonment of national currencies used as international currencies is a gradual process.
– actually. Consolidation concerns so-called uses and customs, relating to the ease of exchange between one currency and another, confidence in the economic policy of the countries that issued it, its recognition by people, etc. Let’s think about the latter. One should not think of using the yuan, the Chinese currency, as a hoarding tool, since the banknotes cannot be easily recognized by the population. Of course, dollars issued in the United States can be counterfeited, but how do I know if the rectangle of paper they give me is a real yuan or a fake? Without going that far, the intention of the governments of Argentina and Brazil to use national currencies in commercial transactions between the two countries was a complete failure.
– As for abandonment?
– It is also recorded very gradually, unless some catastrophe occurs in the country where the currency used globally is issued. President Donald Trump’s leadership style may be worrying, but there is a long way to go from there to the rest of the world wanting to convert its dollar holdings, and dollar-denominated assets, into other currencies.
However, both the EUR/USD ratio and the price of gold indicate that some humans are thinking something about this.
– This is true, but they are small enough to change prices, as I indicated, but the United States does not act as if it is waiting for a major abandonment of the dollar as an international currency.
Shame on those who think on an ideological basis.
It happens that wishful thinking is not synonymous with reasoning, at least for decision-making. The birth of the BRICS group made more than one person believe that the relative decline of the G7 had begun, but experience shows that the economies of Brazil, Russia, India, China and South Africa, at the present time, do not bear in mind the performance of the economies of the United States, Germany, Japan, England, France, Italy and Canada.
– never…?
– Sorry De Pablo to interrupt you, but “ever…” is not helpful for making decisions. The banknote appeared in history long after money, replacing other things such as gold, silver or salt. One day they will disappear, replaced by more efficient ways of conducting transactions. This has already begun. We should not confuse the demand for money with the demand for banknotes; But this is a very good example of the gradual disappearance of the asset.
– Don Victor, thank you very much.