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You're the global reserve currency if you have 50% of world GDP and are the exporter of last resort. As for issuing bonds internationally, this has to do with the expectation that sovereign default won't happen, not only because you're a net exporter but also because the principle of free contract is deeply ingrained in your country's laws and mores.

The US stopped exporting oil in the 70's and much of anything else since then. But old habits die hard.

The question is whether people believe BRIC will remain the world's exporter of last resort, as well as be unlikely to default on their sovereign debt. Brazil and Russia have a history of that, not so India or China, but they also don't have a long history of issuing bonds in their own currency. China just issued Yuan bonds internatinally for the first time.

Now people are talking about making the IMF the world's central bank, possibly using SDR as a global reserve currency. Maybe that will give us another 30 years or 5 before it goes bankrupt in its turn, and then what?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Oct 7th, 2009 at 04:07:42 AM EST
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