Comments on: Why issue of reserve currency arises – Update 1

By: Ivo Cerckel

Ivo Cerckel — Mon, 03 Aug 2009 06:30:33 +0000

From The Times
August 3, 2009
China moves to internationalise its currency
Leo Lewis, Asia Business Correspondent
http://business.timesonline.co.uk/tol/business/economics/article6736681.ece
SNIP
A consensus among policymakers has grown from the grudging acceptance that one of the fundamental reasons the country has fallen into the dollar trap is that China’s currency is not international and the global crisis has made the dollar less predictable. UNSNIP

COMMENTS
SNIP
Ivo Cerckel wrote:

Would not a better avenue to prevent falling into the dollar trap be to relinquish the very notion of “reserve currency”?

Gold is money, or at least the free-floating reserve a currency needs to have “some” value.

August 3, 2009 2:20 AM BST

By: Ivo Cerckel

Ivo Cerckel — Thu, 23 Jul 2009 09:59:29 +0000

Before 15 August 1971, the US dollar had a gold reserve.

Now no more.

But it is still called the reserve currency.

By: Ivo Cerckel

Ivo Cerckel — Thu, 23 Jul 2009 09:02:42 +0000

On 15 August 1971, US president Richard Nixon broke the Bretton Woods Agreement which linked the US dollar to gold at fixed parity (then at 40-something dollar an ounce) and all other currencies to the said dollar.

How can the dollar since that day be considered a generic … thing?

Yes, the intrinsic value of paper is …

By: Ivo Cerckel

Ivo Cerckel — Thu, 23 Jul 2009 07:47:30 +0000

“Genera non pereunt”

means that

when the thing is lost,
the debtor is released of his obligation to hand over the thing to the owner

only if the thing is not a generic thing

(Henri De Page, “Traité élémentaire de droit civil belge”, Brussels, Bruylant, 1934, 1st ed., Vol II, sections 599 and 605)

By: Ivo Cerckel

Ivo Cerckel — Thu, 23 Jul 2009 06:48:20 +0000

Yes, I know, green paper can be printed at will and is thus also a generic thing [smile].

Smile because Update 1 clarifies that without intrinsic value, there can be no “genus”.