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In the foreign exchange market and international finance, a world currency, super currency, or global currency refers to a currency in which there is a vast majority of international transactions and acts as the world's primary reserve currency. The US dollar, and the euro, to some extent, is the most commonly used currency in terms of global reserves. About 40 to 60 percent of international financial transactions are recorded in US dollars.
Since the middle of the 20th century, the real world currency is the United States dollar. Dollar has been the principal reserve currency of the world for decades, and even today the dollar dominates the global currency reserves, in which the euro has a 63.9 percent stake in the dollar compared to 26.5 percent. While many currencies of the world are seen against the dollar, some countries, such as Ecuador, El Salvador and Panama, have moved forward and removed their currency in favor of the United States.
Since 1999, the domination of the dollar has begun to be destroyed by the euro, which represents a large size economy, and there is a possibility of the Euro adopting countries as its national currency. The Euro inherited the position of a major reserve currency from the German Mark (DM), and since then its contribution to the official reserves has increased since banks want to diversify their reserves and expand trade in the euro area.
With the dollar, some currencies of the world are seen against the euro. These include Eastern European currencies such as Estonia Kroon and Bulgarian Lev, as well as many Western African currencies like Cape Verden Escudo and CFA Frank. Other European countries such as Andorra, Monaco, Montenegro, San Marino and Vatican City - during the time of being a member of the European Union, have adopted the euro due to currency associations with member countries, or by acquiring unilateral currency. In December 2006, the euro crossed the dollar in the combined value of cash in circulation.
During and during the 1800s, international trade was referred to in terms of currencies which represented the weight of gold. Most of the national currencies of that time were in essence with only different ways of measuring the weight of gold. During World War I, the emergence of the international gold standard had significant impact on global trade.
In the period after the 1944 Bretton Woods Conference, the exchange rate worldwide came against the dollar of the United States, which could be exchanged for a certain quantity of gold. It strengthened the US dollar's dominance as a global currency. During the 1980s, Japanese Yen was rapidly used as an international currency, but with the Japanese recession in the 1990s, this usage decreased.
An alternative definition of a global or global currency refers to an approximate single global currency or super currency, proposed Terra or Day (abbreviation for the dollar euro yen), which is produced and supported by the central bank, which is used by all around Transactions are carried out in spite of the nationality of the institutions (individuals, corporations, governments, or other organizations) involved in the transaction, the world.
There is no such official currency at present and there are many different variations of this idea, in which it is likely that it will be on the gold standard. Another variation is the digital gold currency, which can be seen as an example of how the global currency can be implemented without obtaining the national government's consensus. Another option is a World Reserve Currency issued by the International Monetary Fund, which is in the form of development of existing special drawing rights and is used as a reserve of property by all national and regional central banks.
In March 2009, as a result of the global financial crisis, China and Russia have been pressurized for immediate consideration of the global currency and the UN panel has proposed to expand the SDF or special drawing rights of the IMF. Call for a constructive improvement of the existing international monetary system towards an international reserve currency is being given to reduce the risk of future crisis and to increase crisis management capacity.
The IMF's special drawing rights, dollar, euro, yen, real and sterling currency bases can work as a super-sovereign reserve currency, which is not easily affected by the policies of individual countries.
Among other proposals for a super currency, it is worth mentioning that Venezuelan President Hugo Chavez proposed a proposal to make petro as a super currency, in order to combat the volatility that the Fiat currency has been born in the world economy. They suggested that petro-currency should be supported by the huge oil reserves of oil producing countries.
Counsel, specifically Keane of global currency, argues that such a currency will not suffer from inflation, which has a devastating effect on economies in extreme cases. In addition, many people argue that a global currency makes the international business more efficient and will encourage foreign direct investment (FDI).
Counter logic is that given a very different national political and economic systems in existence, a single global currency is unnecessary. Apart from this, there will be less chance of using the interest rate to stabilize the economy, generally in a large currency area, because in different regions, boom-bust may occur in different phases in cycles, and interest rate settings vary There should be a settlement between the interests of the currency area. There is also an argument that in the present world, the nation is not able to work adequately enough to be able to produce and support a common currency.
A high level of trust is necessary between different countries before making a real world currency. In addition, there is the risk of reducing the national sovereignty of small states in a world currency. Another problem that can prove to be a failure for the world currency is that Islam is one of the world's largest religions, against the idea of paying interest for the loan.
However, there will be many benefits of a common currency compared to rising regional "normal currencies." With the use of a single global currency, there will be no need for expensive currency exchange. The need for expensive hedges against currency fluctuations will also be eliminated as currency speculation will be the balance of currency risk and the problems of paying problems will become things of the past.