The end of the month is always statistics time. This month has seen a continued trend decline in traffic. It's most pronounced on his blog, but shows up on all my main blogs.
The first reaction is to think that I have become too boring, but as best I can work out both the number of return visitors and reader response (comments and emails) has remained about the same. The fall seems to be concentrated entirely in search engine traffic.
Just at present, the Australian dollar continues to power away, at one point passing $1.10US. That's good for Australia's international travellers, good for importers, but not so good for the rest of the Australian economy.
All sorts of factors are contributing to the present strength of the Aussie including an apparent increased willingness to hold the currency as part of official reserves.
For those interested in currency matters, on 24 July Stubborn Mule carried a fascinating post, Currencies punching above their weight.
The first chart shows global currencies ranked by turnover. You can see how the US dollar and, to a lesser extent the Euro and yen dominate currency trading. However, I think that many would be surprised to see the size of the Australian dollar trade.
If you look at the size of the US dollar and euro in trade, you get a simple visual feel for the reasons why the continued instability in those currencies creates such difficulties
Having looked at the absolute size of the global trade, Stubborn Mule then looked at the size of trade relative to the size of the economy. The results are shown in the next chart.
I wasn't completely surprised at the Swiss result. However, the next three and especially the New Zealand dollar did surprise me.
In all this, note the absence (among others) of the Chinese and Indian currencies.
Trade in currencies does not properly reflect either patterns of global trade or relative economic size. There are all sorts of reasons for this, but I would have thought that it was something of a longer term issue.
I do not pretend to be a currency expert, but on the surface there are advantages in denominating transactions in the currency of one or other of the trading partners. If Australia is trading with China, then (other things being equal) denomination of the transaction in either aussie dollars or yuan limits exchange risk.
I am aware of all the counter arguments. All I am saying is that I feel that, in the longer term, traded currencies are likely to better reflect real patterns of economic activity. In the past, the reserve currencies (gold, sterling, the US dollar) facilitated global transactions by providing a measurable store of value in circumstances where other currencies were either not traded or were of uncertain value. The position today is different. Who can really say that the US dollar is a secure currency?
The types of changes that I am talking about will take time. However, that time may be less than we all expect. Let me give a simple example.
Even thirty years ago, an Australian travelling internationally would get traveller's cheques, probably US dollar denominated. Who bothers now? While there are still variations between countries, most people use a combination of credit cards, purchases in Australia of currency for key destination countries and Australian dollars themselves. With exceptions including visits to the US, the US dollar has vanished as a means of transaction.
That's a pretty big change in quite a short time.
Consider another small example. In a way, the decision by Australia's Fortescue Metals to denominate certain contracts in yuan was largely symbolic, a gesture to China. However, it was also I think a sign of things to come.