WASHINGTON, June 4 (RIA Novosti), Lyudmila Chernova – The growth of China’s economy will ensure the use of its currency in global transactions, Dr. William Black, Associate Professor of Economics and Law at the University of Missouri at Kansas City told RIA Novosti Wednesday.
The Society for Worldwide Interbank Financial Telecommunication, or Swift, earlier reported US is increasingly using yuan for transactions, with 327 percent increase in the value of US yuan payments, compared to last year.
Dr. Black added that there are two advantages to a nation that arise from having its currency used in large numbers of transactions globally.
“The technical advantage is seigniorage. It is cheap to produce paper currencies and the nation issuing the currency gets valuable goods and services in exchange for pieces of paper that are inexpensive to produce,” he said.
“The other advantage is that it is far less risky for a nation to borrow in its own, sovereign currency To the extent that a nation’s currency is used in vast amounts of global transactions it is far easier to arrange to borrow in the national currency, ” the economist went on, adding that the Eurozone crisis demonstrates how severe this risk the “bond vigilantes” pose.
“These advantages are real, but they are typically greatly overstated. This is normal and does not threaten the US or any other economy,” the expert concluded.
