Topic: Reserve Bank of #India Looks for Alt Reserve - page 2. (Read 2891 times)

Except a good part of the criteria are not currently being fulfilled by bitcoin:

• fully convertible: don't know, what does that mean, exactly?
• exchange rate determined by market: CHECK
• there is a issuing country: FAIL
• should acquire a significant share of world trade: FAIL
• should have liquid financial market: MAYBE
• should have open financial market: CHECK
• should have large financial market: FAIL
• policy credibility: CHECK (maybe even good enough to make lack of issuing country not an issue?)

...it is a ponzi, unlike anything seen before.

The Reserve Bank of India is looking for emerging market currencies as alternative reserve currencies to the Dollar.

#Bitcoin is the answer.

Sounds about right

So what the heck is going on here? Inflation may have something to do with it—there just weren’t as many things to buy in 1970 that might require one to slap down a $100 bill—but that still wouldn’t explain why their proportion today has nothing to do with what people see in their wallets.

The short answer is that a lot of money is spending a lot of time outside the United States.

The cognoscenti look at the share of $100 bills as something of a proxy for foreign demand for US currency. An overwhelming majority of the $100 bills come from the Federal Reserve Cash Office in New York City, which handles the bulk of foreign shipments of US currency. A typical shipment is a pallet containing 640,000 such bills, or $64 million, according to a recent Fed paper.

Somewhat surprisingly, it’s unclear exactly how much American money is floating around outside the US. Estimates run the gamut. In the 1990s, one high-profile estimate pegged the number at as much as 70%. But more recent estimates hover around 25%-30%.

And while there are plenty of reasons folks outside the US might want to hold dollars, the thinking is that most people are not using these $100 bills to buy milk and bananas. No, most economists seem to believe $100 bills are most often used as stores of value—almost something like mini-Treasury bills that don’t pay any interest. This is especially so in developing countries, where problems with unstable currencies and inflation often mean the purchasing power of local currency gradually—or not so gradually—erodes over time.

The governor pointed out that one alternative was to have a menu of reserve currencies. "But this cannot happen by fiat. To be a serious contender as an alternative, a currency has to fulfill some exacting criteria. It has to be fully convertible and its exchange rate should be determined by market fundamentals; It should acquire a significant share in world trade; The currency issuing country should have liquid, open and large financial markets and also the policy credibility to inspire the confidence of potential investors. In short, the 'exorbitant privilege' of a reserve currency comes with an 'exorbitant responsibility'," he said.