DE-DOLLARISATION AS A CONSEQUENCE OF INTRODUCING A MULTICURRENCY SYSTEM IN THE WORLD

Abstract

Ever since the introduction of money into trade, currencies of certain empires or states have periodically taken turns, usually over centuries, in the role of the world currency. In this paper, we first provide a brief overview of the most important world currencies throughout history that served as world currencies before the emergence of the US dollar. We cover the period of the Roman Empire, when the Roman silver denarius dominated the entire ancient world, then give a short overview of the role of the Greek silver drachma, the Byzantine solidus, and the British pound. The largest part of the paper is dedicated to the US dollar, as it is the central focus of our research, having been the world currency for more than one hundred years. A general rule that applies to all currencies dominant in a certain period is that the conditions for the emergence of a strong currency were mostly the same: a stable economy, monetary stability, balanced public finances, a balanced foreign trade balance, solid gold (and sometimes silver) reserves, and a strong military. If any of these elements weaken, significant disruptions occur - typically reflected in increased money issuance, which is referred to as money debasement by the science. This has also happened with the US dollar, since it has lost its gold backing, strong economy, stable public finances, and balanced exchange with the world. As a result, de-dollarisation is taking place, as other currencies enter the global financial scene – currencies based on the strong and stable economies of rapidly developing countries, their positive trade balance and solid gold reserves, which is, first and foremost, the basis for Chinese yuan.