Why Hasn't The Dollar Fallen? | Lessons from Currency Historian Barry Eichengreen
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Central banks are shifting reserves from dollars to gold
“I think we are seeing the beginnings of the decline of the dollar as a global currency, as central banks are trying to hedge their bets, moving out of dollar, US treasury securities into gold and other non-traditional reserve currencies.”
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Spanish pieces of eight were the first global currency
“Spanish silver got everywhere. And as you say, it was, in a sense, the first true global currency in that earlier international currencies like the Dutch gilder, they got to Asia via the Dutch East India Company... but they never got to Latin America. Spanish silver got everywhere.”
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Currency decline accelerates like an iceberg melting and calving
“The analogy I sometimes use is like an iceberg, which melts very slowly until a whole chunk, big chunks, calve off all at once. So that's kind of the scenario I imagine.”
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China adopted silver for higher value transaction convenience
“But copper is inconvenient for large value or significant value transactions. Copper is not a very, it's abundant, it's not very valuable. People had to carry around large numbers of copper coins on a necklace around their neck or in their pockets. They needed something of higher value. And silver was convenient for regular commercial transactions in China.”
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Maintaining coin purity ensured Spanish silver's long-term dominance
“By and large, this process worked well, just like the comptroller of the currency keeps careful watch on the quality of the banknotes that are printed in the United States today. The Spanish crown had a mechanism... the quality of the coin was maintained for three centuries and more. And that's what made for its wide acceptance.”