Reserve currencies
“ The currency of the world ’ s largest trader tends to see an even greater proportion of global trade settled with it than the size of that economy would imply ”
Ed Smith Co-chief investment officer at Rathbones
finance . Network effects then stem from these factors . What causes a currency to lose its reserve status is more difficult to nail down . It is sometimes assumed that Britain ’ s war debts brought the end of sterling ’ s dominance , but Smith disagrees . Instead , he argues its decline started in the late 19th century when its economy went into relative decline . “ The transition to the dollar was just drawn out by British imperialist policies ,” he explains .
“ The currency of the world ’ s largest trader tends to see an even greater proportion of global trade settled with it than the size of that economy would imply . This is where the network effects kick in : if it costs more to trade with someone who
Issue 91 - January 2023 / 25 /