Any Replacement for US$…? Yes I have One

Toady US dollar is the sole primary currency used to measure National Output, Exports/Imports, Forex Reserves, etc, etc… . Of course it is the major currency ruling all over the globe. But the question is how long…???

China raised its concerns over U.S. dollar being the primary reserve currency for long, but is lacking support to make an overhaul. The so called existing SDR probably may not be the right choice to replace U.S. dollar, because Special Drawing Rights were created way back in 1969.

As we know One SDR was defined as having a value of 0.888671 grams of gold, the value of one US dollar at that time(Ref: Wikipedia). In the early 1970's SDR was redefined in terms of a basket of currencies. Today, this basket is composed of Yen, US dollar, British Pound, and Euro, and the proportion each of these four currencies contributes to the nominal value of a SDR is reevaluated every five years. For the period of 2006-2010, One SDR is the sum of 0.6320 US dollars, 0.4100 Euro, 18.4 Japanese Yen and 0.0903 Pound Sterling (Ref: Wikipedia).

I agree to the point of revaluation of SDR every five years, but not the constituents of it.

So, I suggest the following for a Global Reserve Currency:

The reserve currency need to be a composition of different currencies like SDR, and suggest the following criteria

1. The currencies involved should represent the ever changing Global Economic Environment

2. Top nations by GDP/GNP output be chosen and given fifty percent weight age to the GDP value

3. The remaining weight age be given to the global trade, that is countries by Trade (i.e. Imports + Exports)

4. The score should be considered to decide the representative currencies in the Global Reserve Currency.

So the SCORE = 0.5*GDP+0.5*GLOBAL TRADE, whoever features in the top five to be considered for the composition of Global Reserve Currency.

The above formula should be fair one to determine the ‘Global Reserve Currency’ and to be reevaluated every five years or the period deemed to be fit.

There should be criteria for choosing the countries like the trade surplus or deficit should not be more than 4% of the GDP, which is thought to be one of the prime reasons for the present Global Recession creating Global Imbalances. The nation should follow free market economic policies to create a level playing field in the global environment. I think these criteria are long way ahead to be considered or fulfilled, as each country tries to be preserving their own interests rather than contributing to the global welfare.

These are my personal opinions and any suggestions/comments to the above are welcome.

China Vs India – Cold War II

I have been thinking of writing a blog about China Vs India for quite some time.

I have my own predictions for the future in this note. I think 21^st Century will be dominated by headlines about GDP growth, military expansion and modernization, increasing global influence of these two neighbours.

Both the economies similar in nature – vast geographically, over 1 billion population, featuring among the largest militaries … etc… etc… Both the countries wanting to gain global influence and protect national interests will lead to conflicts in many fronts. Like oil and metal resources required to meet the rapidly growing domestic consumption. Both the countries have been investing heavily in military expansion. India being pressurised to do so because of military buildup in China. The growing young population of India will soon make the worlds fastest growing economy. All the below predictions are going to be evinced surely in the coming decades.

We can compare the current situation with that of Cold War Era - I – USA Vs Soviet Union. Even though it ended with the collapse of Soviet Union but I can not say whether Cold War –II between Indian and China will end up the same way. As of now we can say we are at the very early stage. But I can take some inferences from CW-I like failure of third party state/country. During CW-I we saw the US lead upsurge of Afghanistani Taliban fighting the Russian forces, at the end Failure of the Afghanistan as a country, paying the price of CW-I, Iraq is another example, Iran may be the third country if USA decides attack to Iran.

So I am sure that there will be a state/ country(s) suffering or failing due the Cold War –II . One obvious choice emerging right now is Nepal, stuck between two growing powers China and India is already paying the price- hung government, civil unrest etc… etc… Next country in line (is only my prediction) may be Burma, or some other country in West Asia or Africa (only time will tell) waiting to pay the price.

China and India definitely cannot afford to fight a War like US and Russia cannot, but there will definitely be someone paying the price wait and watch U will come to know,,,,,, in the years and decades to come….. GOD save the people of these victim states…….