A brief history of global trade or reserve currencies

Historically, just a single currency has played a dominant role globally.

Historic global trade currencies

The silver Drachma issued by ancient Athens in the 5th Century B.C. was most likely the first currency that was widely circulated.

The gold Aureus and silver Denarius coins issued by Rome were next and they were the dominant currencies from 1st Century B.C. to 4th Century A.D.

Inflation caused major devaluation of the Roman-issued currencies, causing them to become increasingly less accepted making way for the Byzantine Empire’s gold Solidus coin to become the dominant currency in international trade from the 5th Century to 6th Century.

The Arabian Dinar replaced the Solidus as a global trade currency between the 7th to 10th Century.

The 13th Century saw Florence issued Fiorino become the dominant trade currency until the 15th Century.

Modern trade/reserve currencies

Various Currencies of Portugal 1450 to 1530 (80 years)

The Portuguese currency was the dominant trade currency for 80 years between 1450 to 1530 until the Portuguese Succession Crisis caused its downfall.

Various Currencies of Spain 1530 to 1641 (111 years)

The Iberian Union saw the Spanish currency becoming the dominant trade currency between 1530 to 1641 until the fall of the Iberian Union saw it being replaced.

Various Currencies of Netherlands 1642 to 1720 (78 years)

The rise of the Dutch India trade company saw the currency issued by the Netherlands become the international trade currency. Paper bills began replacing coins at this time.

Various Currencies of France 1720 to 1815 (95 years)

Anglo Dutch wars saw the currency issued by France become the dominant trade currency.

UK Pound 1815 to 1920 (105 years)

As Britain became the dominant trading country with the rise of the British East India Company, the British Pound became the dominant world trade currency. British Banks became the leading financer of trade and opened branches globally. British shipping companies were leaders in their space and British insurers became the main insurers of trade globally. The decline of the British East India company and the start of World War I saw the share of the pound decline in world trade.

US Dollar 1920 till date (98 years so far)

Post World War I, the US dollar became the key trade currency as the US economy played a key role in world trade. The Bretton Woods system in 1944 established a currency regime where the US dollar became the principal reserve currency directly pegged to the price of gold. As a result of that many currencies were linked to the dollar. In the 1970s, US President Richard Nixon released the dollar from its peg, creating the floating currency markets that exist today.

Modern reserve currencies have lead global dominance for an average of 95 years with an average variance of 10 years. Just by the law of averages, the US dollar has another 7 years as the world’s reserve currency.

7 Replies to “A brief history of global trade or reserve currencies”

  1. With the gradual withdrawal of the US $ set to accelerate the 95 year average +- 10 years looks right on track !!

  2. Not sure if I can see that happening ~2025. Which currency would replace it? China has serious issues, India also, the Pound Sterling has had its time. Bitcoin? I doubt it!
    Also, the US is resilient, still is the most influential country with the most powerful military and most global trade is done in USD.

    In the same way the current bull market is much longer than statistically expected, the USD will be the dominant currency for the foreseeable future.

    1. The US is the largest debtor country on earth. China is expanding around the globe with little push back. The EU is more competitor than partner. Whatever problems China may be dealing with, their central one party system is better suited for their future than our own two party system. One last item not covered in this article, is the certitude expressed by every previous world currency holder had months and weeks before their currencies fell-we will be no different. Regarding the size of our military, it has little influence on our currency. We maintain influence over the world not by our military but by our currency. Japan has the most stable currency and is the safest currency to hold at this time. With the massive printing this year the Treasury and the Fed have investing/printed nearly 4 trillion dollars for QE, not included in the 3 trillion dollars for the CARES Act, and the 2trillion dollars tax cut in 2016. I give the US greenback a decade at best. Jerome Powell has been talking about this weekly since the beginning of the Covid outbreak.

    1. A couple of sources, including coin collecting literature and central bank archives.

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