So on one hand, no country should ever take its currency's favor status for granted. But if you've ever spent a fraction of your life looking at the rules and regulations behind currency trading by central banks, you'll see two rules everywhere:
1 - Every central bank will trade its own currency.
2 - Every central bank will trade in USD.
(Even if they hate the USD with a blinding passion.)
The USD is the global standard not because of some diabolical scheme by the US, but rather because it is liquid beyond liquid. EVERYONE IS WILLING TO TRADE IT!!
Can the same be said about the Mexican Peso ? Nope, even some of its neighboring central banks are not willing to trade it.
The reason USD is standard is because the US used to be gold backed.
So all the countries in continental europe inflated like crazy and got off the gold standard. That left England and America which became the standard. Then England inflated, so it was down to America. America got off the gold in standard in 1971, but there was no one else to go to. America could then inflate its currency essentially taxing all holders of US Dollars, many of which are over seas.
This is the cause of the current economic problem. By removing all ties to gold the FED was able to inflate the currency causing malinvestment & seeking risky returns to stay ahead. The final play out of this is either a tough recession or hyper-inflation; what's going to happen isn't exactly clear -- it depends on how much money they continue to print.
The USD is the global standard not because of some diabolical scheme by the US, but rather because it is liquid beyond liquid.
It also helps that oil is traded in US $ and that everybody needs oil. Not a diabolical scheme but I'm sure some talented people spent a lot of effort linking oil to US $.
Not quite whats going on. It sounds more like they just want to create some sort of international currency instrument which is a blend of %44 dollar, an the rest being a mix of euro, pound and yen. The idea being (cf normal investing) that a blend of these will be more stable than any single one.
None of them will be stable if you want something stable it has to be based on some sort of real asset, so that they can't print as much money as they want.
The title is unfortunate: it doesn't reflect the tone of the article; the UK government isn't plotting against the dollar's reserve status; and the phrase "dollar as global reserve currency" implies a monopoly that does not exist (http://en.wikipedia.org/wiki/Reserve_currency).
1 - Every central bank will trade its own currency.
2 - Every central bank will trade in USD.
(Even if they hate the USD with a blinding passion.)
The USD is the global standard not because of some diabolical scheme by the US, but rather because it is liquid beyond liquid. EVERYONE IS WILLING TO TRADE IT!!
Can the same be said about the Mexican Peso ? Nope, even some of its neighboring central banks are not willing to trade it.