An Introduction to the World Reserve Currency

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

Article Source: http://EzineAr

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).

Simple Implications for Traders

For traders, there are a few things we can think about when considering the reserve currency:

 

1. It is the de facto safe haven. If you want your assets to be safe, if you want to be "out of the market," the reserve currency is likely to be a place where you want to park your assets. This has NOT been the case for the past ten years, in which the US dollar has lost much of its purchasing power; one explanation for this is that we are in a transitional period in which the world is moving to a new world reserve.
2. There will be times when the world currency changes. Because the world reserve is the centerpiece of the global economy, changes in the reserve currency can have a monumental impact. These changes tend to occur slowly over a number of years, and often come with many political changes as well. Gold has historically rallied during this transition period. News related to this shift can thus be extremely important for traders wishing to incorporate fundamental analysis to watch.
3. Psychology is a huge part of trading -- not only in your personal psychology and how you manage risk, but also in the psychology of certain market participants who are primary drivers of the market. Understanding who controls monetary policy of the reserve currency and their personal psychology can be of great use to traders in formulating an accurate forecast of the global economy that they can profit from.
4. Important factors related to the world currency include: changes central bank holdings of foreign currencies (are they moving away to a new reserve?) and changes in what currencies commodities are increasingly priced in on international markets.

The world reserve currency can be thought of in a few ways:

 

1. The most popular currency in the world
2. The currency most stored by the world's central banks
3. The currency used to price international commodities, like precious metals, soybeans, coffee, etc.

 

In light of those three points, if you ask yourself, what is the current world reserve currency? The answer is the US dollar (and Euro dollars, which are technically a part of the US dollar M3 money supply -- completely different and not to be confused with EURUSD in spite of the similar pronunciation).

Throughout history, there have been periods where central banks and nation-states have come to agreements as to what the reserve currency should be. In 1944, the governing bodies of the world came to the Bretton Woods Agreement, which established gold and the US dollar as bearers of the reserve currency role. Gold was officially dropped from the picture in 1971 via what is now referred to as the Nixon shock.

Reserve Currency as Centerpiece of the Financial Universe

The world reserve currency can be thought of as the centerpiece of the financial markets. Everything else revolves around it, and what happens to the reserve currency affects the entire world. From this line of thought, actions affecting the reserve currency are extremely important to formulating a fundamental analysis viewpoint.

Currently, for instance, we have seen the Federal Reserve expand the money supply, offering the logic that doing so would stimulate the economy. We have thus seen M2, a measure of the US dollar money supply, reach all-time highs in January of 2011 (as well as other measures like MZM and M1).

Because the global economy is anchored around the reserve currency, other central banks have followed along, and have engaged in competitive devaluations -- widely referred to as currency wars.

This is a simple example of how the reserve currency acts as an anchor to the global economy, and how it often leads the way and dictates how the world economy will change.

Political Implications Surrounding the World Currency

Those who control monetary policy of the world currency have immense influence over the global economy, and thus are likely to be caught up in international politics. If the central bank of a nation-state is issuing the reserve currency, it creates the potential for that nation-state to enjoy a material advantage in purchasing power due to the excess demand for its currency, and that the nation-state will enjoy great international political influence as well. This is one reason why some favor a move to a world currency issued by a monetary authority not attached to any single nation-state -- such as the IMF or World Bank (though of course there are contrary perspectives to those arguments as well).