Trade Is not Enough

Abstract

Extension of the functions of money from the domestic economy to the world economy argues that expansion of a country’s specialisation and foreign trade will naturally lead to internationalisation of its currency. The economic logic is straightforward and convincing. When a country specialises in trade and develops dominance in the international markets, external demand for its products will expand; hence, there will demand for its currency. The importance of its currency will rise in the global economy, with its functions expanding from the domestic market to the overseas market, from private use to official use, and from the commodity market to the financial market. It will end up as a global reserve currency.