One Block History
For a long period of time human economic system was based on barter trade, meaning direct exchange of one goods to the others. Then precious metals appeared to be a “buffer product”. Necessity in permanent quality control and accuracy in metal weighing caused appearance of iron money, meaning particular “standard commodity”, which can be exchanged into anything without risking to be shafted. This system held up for more than 25 hundreds of years. Paper money (which were previously bonds) was the same “standard commodity” till 1976. It was backed by real gold in governments’ storages.
Gold Standard Cancellation
With transition to Jamaican Currency System, money turned from goods into services, i.e. social contract. While the economy is in good conditions, price of money is formed with the help of consolidated trust of society. But if the government starts breaking the rules of modern monetary policy, people trust money less and so money becomes goods again. If the state has gold, oil or currency, money depreciates and turn into index of “quantity of money / gold and currency reserve”. If the state does not have these assets, then money turns into nothing, paper, while economy collapses and country steps into chaos.
Causes of SDR Occurrence
SDR appeared during ‘gold standard’-times as an instrument of overcoming economic paradoxes of that time in the conditions of actively developing economy. Until 1976 problem of lack of gold was solved with the help of SDR. But since 1976, SDR has become a factor of economy stabilizer on a planetary scale.
SDR Today
Since 2016, the SDR unit is formed on the basis of market prices for the five largest world currencies: the US dollar, the euro, the Chinese yuan, the Japanese yen and the British pound sterling, and it is expressed in dollars. The proportions of national currencies in the SDR basket are reviewed every five years, and the calculations are based on the role of the currencies in the economy of the planet. The rate is recalculated and published daily.
So the dollar is used as a reserve currency, accordingly, its share is high. And the huge economy of China, producing everything in the world, takes less than the euro, as the Chinese market is highly regulated, focused on domestic consumption and closed from other countries.
At the same time, it is important to note that special drawing rights are neither a debt obligation nor a currency, but are used as a kind of index for expressing national monetary values on the world arena. Simply put, it is the exchange rate stabilized by the largest economies, using which it is convenient to conduct interethnic settlements.
SDR Importance
For all of us, SDR can mean nothing, because in everyday life we almost do not come across the results of this cunning system. But for humanity as a whole, SDR is a consolidated trust in the economy on a planetary scale, an indicator that prices can be agreed on, even in conditions of fluctuated exchange rates.
