I was curious. Over time in the recent past, other hegemon currencies failed, but those countries managed to hang around, even still today. So, what happened to those folks in those countries who lost the “exorbitant privilege?” Here is a chart showing different currencies, that were dominant at one point in the recent past. From my historical understanding, this era is referred to as the mercantilist era, and had to do with international trade following the discovery that the world was indeed round. http://azizonomics.com/2012/01/04/a-history-of-reserve-currencies-in-one-graph/ So, let us ask: why was such currency at the time the hegemon? Mercantilist banks cleared transactions in the dominant currency at the time. Duh. Makes sense. Who wanted payment in something that had no value? Which bank wanted to loan value and be repaid in something not presently in demand? Since the strong banks in the dominant countries set the terms of transactions, it was natural for transactions to be cleared in the currency of the dominant trading regions or countries of the time. But still, it nags me that each and every one of those currencies were not fiat, but real, tangible coins, or they were bills, that is, paper claims upon gold / silver specie. So, one holding a paper bill could exchange the bill for the real deal. Unlike the situation today, and unlike since 1971 when Nixon closed the gold window. So those currencies, the hegemons of the time, were not pure fiat, like today. Even that being the case, what is the lesson to learn? ...
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