MONEY AND COMMODITY MARKETS, Part 1

Integrity deficit has its price
By Henry CK Liu

In a global financial architecture of national fiat currencies, the role of a reserve currency in international trade is to keep all trading nations monetarily honest.

This is done by requiring each and every currency issuer to adopt monetary policies that will protect and maintain the exchange value of their separate fiat currencies to the reserve currency. Thus for the exchange rate regime to work, it is imperative for the reserve currency itself to hold constant purchasing power.