International Currency Relations

International currency relations involve the conclusion of transactions of two or more countries, the main element of which is the currency, that is, the settlement money. The government of any country independently decides what form of interaction with foreign states to choose.

The functioning of money in the world financial market is inextricably linked with such a concept as international monetary relations. They are considered dependent on the national currency system of the state, since they vary from the conditions of the Armed Forces. So, let's return to the most important element - currency. It can be of several types:

• Partially convertible;
• Freely convertible;
• Inconvertible.

In modern conditions, there are about 209 types of currencies, of which only 27 are considered freely convertible. That is, they can be used absolutely in all transactions in the world financial market and exchanged for another currency in any country without restriction. For example, such is, of course, the US dollar, the Japanese yen, as well as the currency of the UK, Germany, etc.

If we talk about the Russian ruble, then it has partial convertibility. That is, the government introduces a restriction on the exchange of this currency, establishing only certain types of foreign, for which you can freely exchange the ruble. Moreover, such restrictions are supported and controlled by certain normative acts of the current legislation.

International monetary settlement relations can not be carried out using an inconvertible currency, since it is in free circulation only in the territory of the country in which it is national. A clear example is the domestic monetary unit, since before 1992 the ruble could not be exchanged for foreign currency.

The role of gold in international monetary relations

As is known, at present most countries have abandoned the gold and foreign exchange standard. If in the past precious metals could have acted as a settlement under international agreements, then the modern world market recognizes only hard currencies. Currently, they include the US dollar, the Japanese yen and the euro. Economists believe that in the next decade the dollar may give way to a leading position, as the latest crisis significantly undermined the confidence of the population of other countries.

Despite the fact that gold can no longer be directly exchanged for goods, and prices in this equivalent are not set by the government, it has not been completely ousted from circulation. Of course, it is impossible to count precious metals as valuable money, because the function of the means of payment is not being fulfilled. But there is a gold market where you can exchange it for a convertible currency.

International currency relations provide for the existence of operations in which gold is of no small importance. After all, in many situations it serves as a guarantee for the return of international loans, it is a measure of the country's welfare. And as an exception, it serves as a means of calculation in the relations of various states. Thus, it can be said that precious metals take a passive position in the movement of capital of any country, but at the same time are a reserve fund that insures against unforeseen situations.

The popularity of gold reserves increases during the economic crisis, especially on a global scale. When the exchange rate changes quite sharply, and the forecasts differ from reality, the question arises as to how to organize international monetary relations so that it is beneficial to each side. Most states are actively replenishing the gold reserve, because there is no more reliable than this emergency world currency.