![]() ![]() ![]() (I have discussed the criteria in earlier papers. The other important criteria came soon thereafter: creditor status for the country the perceived prospects for the currency to remain strong in value and deep, liquid, open financial markets. The US did not even have a permanent central bank until 1913. If trade is the measure of size, the US first caught up with the UK during the First World War. In recent research (Frankel 2011), I argue that the first point is right. Furthermore, the date when the dollar is said to have come to rival the pound in importance has now been moved up to the mid-1920s. It took until the First World War for the dollar to fulfil the criteria of an international currency. The “new view,” represented in particular on this site by Eichengreen (2011) and Eichengreen and Flandreau (2010), is that the lag was in fact rather short. There was said to have been a long lag between the date when the US economy passed the UK economy with respect to size (1872, by the criterion of GNP) and the time when the dollar passed the pound (1946, by the criterion of shares in central banks’ holdings of reserves). It used to be thought that international currency status was subject to much inertia (e.g. The basis of this prediction is, first, the likelihood that the Chinese economy will surpass the US economy in size and, second, the historical precedent when the dollar overtook the pound sterling as the number one international currency during the period after the First World War. Some are now claiming that the renminbi could overtake the dollar in the number one slot in the international currency rankings within a decade. Foreign central banks have been able to hold renminbi since August 2010, with Malaysia going first. Some of China’s international trade is now invoiced in the currency. A renminbi bond market has grown rapidly in Hong Kong, and one in renminbi bank deposits. Just in the last year or two, the Chinese currency has begun to internationalise along a number of dimensions. All of a sudden, the renminbi is being touted as the next big international currency. ![]()
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