World's Most Expensive Currency | Dhruv Rathee
What if I asked you which is the world’s most expensive currency? Considering that there are only a handful of so-called major currencies in the world, your guesses would include the US Dollar, Euro, Pound or even the Japanese Yen. However, the correct answer would be- The Kuwaiti Dinar or the KWD(its denomination). At the time of shooting this video, 1 Kuwaiti Dinar equals almost 250 Rupees! Why is that the case? How did the Kuwaiti Dinar become so valuable that it has outperformed even the USD (which makes up 60% of the forex reserves in the central banks across the world even today!)? And how does cryptocurrency like Bitcoin fit in terms of valuableness? I explain in today’s video.
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00:00Hello, friends.
00:01Today, the price of $1 is about to touch Rs 75.
00:05On the other hand, 1 Euro has crossed the mark of Rs 85.
00:09And one pound has hit a century in rupees.
00:12But do you know that much more expensive than all these expensive currencies
00:17is the world's most expensive currency?
00:20The world's most expensive currency.
00:22Can you guess what currency it is?
00:25Kuwaiti Dinar.
00:26One Kuwaiti Dinar is almost equal to Rs 250.
00:31The question here is what is so special about Kuwaiti Dinar
00:35that it became the world's most expensive currency?
00:37Although, on the other hand, the US Dollar is the world's most popular currency.
00:42It couldn't become so expensive.
00:44But Kuwaiti Dinar became so expensive.
00:46In today's episode, let's try to find out.
00:51Friends, you can consider this video as a continuation of my old
00:55What If 1 Dollar Equals 1 Rupee video.
00:57You liked that video a lot.
00:59So today's video is on a similar topic.
01:03Before talking about Kuwaiti Dinar, we'll have to go into the history of Kuwait.
01:07You might be surprised to know that 70-80 years ago,
01:11the currency used in Kuwait was issued by the Indian government.
01:17You heard it right.
01:18The Reserve Bank of India used to make Kuwaiti currency at one time.
01:22The name of that currency was Gulf Rupee.
01:25It was quite similar to Indian Rupee.
01:27It looked something like this.
01:29And you can see on this note that the Government of India is written on it.
01:32The numbering of Indian Rupee and Gulf Rupee
01:35had a letter difference.
01:37The numbers of Gulf Rupee always started with a Z.
01:41The special thing about this Gulf Rupee was that it couldn't be used in India.
01:46It was only used outside India.
01:47The next question here is
01:50what was the need for a country like Kuwait?
01:52To use a currency that was being issued by the Indian government?
01:57The answer to this, friends, is hidden in history.
01:59For almost 200 years, from 1763 to 1961,
02:04the British rule was under control of the Persian Gulf.
02:08In this area, there was a country, Kuwait.
02:10It wasn't that the British rule had total control over Kuwait.
02:15Throughout the years, there were different degrees of control over Kuwait.
02:19The British Indian government saw that the economy of Kuwait was quite small.
02:24What would they do by making a separate currency?
02:26It would be easier to use the same currency that was being used in India.
02:31Initially, this decision was of the British Indian government to use the same currency.
02:36But in 1947, when India got independence,
02:39India saw this happening and gave permission to Kuwait
02:42to continue using the Indian Rupee.
02:45So till this point of time, the exact same Indian Rupee was being used
02:49in both Kuwait and India.
02:50Remember, this was the time when the economy of Kuwait was quite small
02:54because there was no oil boom.
02:55Although the oil discovery in Kuwait had already happened in the late 1930s,
03:00but because of World War II, Kuwait couldn't sell so much oil to the rest of the world.
03:04It started happening around the 1960s.
03:07But a few years after India's independence,
03:09India saw a problem.
03:11Gold trafficking.
03:12In the Gulf area, gold was being trafficked on a large scale.
03:16What did the smugglers do?
03:17They would take the gold and sell it in India.
03:19In return, they would take the Indian Rupee
03:21and exchange it for the other foreign currencies in the Gulf countries.
03:26This caused a lot of damage to the Indian economy.
03:29For this reason, in 1959, the Indian government decided
03:33to introduce a separate currency for the Gulf area.
03:36It would be called the Gulf Rupee.
03:39It would be converted from Indian Rupee to 1 is to 1.
03:42But the difference would be that the Gulf Rupee can't be used in India.
03:46This prevented smuggling to a large extent.
03:50After this, in 1961, Kuwait got independence from the British.
03:53And in 1963, Kuwait became the first Arab country
03:57to conduct its parliamentary elections
04:00and to create a constitution.
04:03By the 1970s, progress was so good
04:06that Kuwait became the most developed country in its area.
04:10In fact, in the matter of press freedom,
04:12Kuwait becomes one of the top countries of its time.
04:16You may not believe it but this is the truth, friends.
04:19At one time, Kuwait was well-known for its liberal values.
04:23Even today, the situation is not so bad.
04:25Till date, Kuwait's Press Freedom Index ranking
04:29is much better than India.
04:31That is, today, journalists have more freedom to speak in Kuwait
04:35compared to India.
04:37Anyways, I got quite diverted from the main topic.
04:40Let's come back to the topic of original currency.
04:42In the early 1960s, Kuwaiti Dinar was introduced
04:46by the new government of Kuwait.
04:48And its price was fixed at 13.33 INR to 1 Kuwaiti Dinar.
04:54Till 1966, the Gulf Rupee was in circulation.
04:58But after that, the Indian government
05:00had to devalue the Indian Rupee for many reasons.
05:03First, India had to face war with China and Pakistan.
05:07I had explained all these reasons in the previous video
05:10about the 1 Rupee and 1 Dollar.
05:12Why India had to devalue the Indian Rupee.
05:15But because of this devaluation,
05:17the Gulf countries are affected.
05:19And they are forced to create their own currencies.
05:22Oman, Qatar, UAE, all these countries
05:25create their own currencies after this.
05:27In 1975, the exchange rate of Kuwaiti Dinar
05:31is fixed to a basket of currencies.
05:33What is fixed exchange rate?
05:36I had explained it to you in the previous video.
05:39Basically, there are three types of exchange rates.
05:41Fixed, Floating and Mixed.
05:43Fixed means that you fix the exchange rate of your currency
05:46with another currency.
05:48And according to that, the value of your currency goes up and down.
05:51For example, if I make a new currency.
05:53The value of my new currency is 1 currency equal to $5.
05:57As the dollar goes up and down,
05:59the value of your currency will also go up and down.
06:01Floating exchange rate means that
06:04looking at the supply and demand in the market,
06:06the value of the currency will go up and down.
06:08It will float.
06:08And the combination of the two is mixed.
06:10Now, the Indian Rupee was also at a fixed exchange rate until the 1990s.
06:15When the economy was liberalised in India,
06:17only after that, the Indian Rupee was brought to a floating exchange rate.
06:21Today, most of the currencies in the world
06:23are at a floating exchange rate or a mixed exchange rate.
06:27With the exception of the currencies of the Gulf countries.
06:31Like Kuwaiti Dinar, which is at a fixed exchange rate till date.
06:35It is not fixed with a single currency.
06:37In fact, it is fixed with a basket of currencies.
06:40There is a basket of currencies here
06:42which has 30% dollars and 20% pounds.
06:45There are different currencies in different proportions.
06:47And their combined ratio is fixed with Kuwaiti Dinar.
06:52Obviously, the next question is
06:54why has Kuwait kept its currency fixed till date?
06:58And why has India not fixed it?
07:00Why has India kept its currency at a floating exchange rate?
07:03Are its benefits a loss?
07:05Fixing or pegging your currency,
07:08it is also called pegging,
07:10the loss is that you will depend on another currency
07:13for the economy of your country.
07:15If you peg your currency according to the US Dollar,
07:19if the US Dollar crashes tomorrow,
07:21if the US economy falls,
07:23then your country's economy will also fall.
07:25Because your currency is running according to the US Dollar.
07:28To avoid this,
07:30Kuwait has pegged its currency with a basket of currencies.
07:34Instead of pegging it with the US Dollar.
07:36But the second problem is
07:38that when you peg your currency,
07:40you have to maintain that peg.
07:43And to maintain it,
07:45you should have a sufficient supply of foreign exchange reserves in your country.
07:49What does maintaining mean?
07:51Look, any currency that is experiencing supply and demand changes in the market,
07:57you have to bear it.
07:59It cannot be avoided.
08:01Whether you are at a floating exchange rate or a fixed exchange rate.
08:03The only difference is that
08:05at a fixed exchange rate,
08:07the forces of supply and demand
08:09to counteract them,
08:11your government has to use foreign exchange reserves
08:13to maintain the value of its currency.
08:17So when India in the 1990s
08:19shifted the Indian Rupee to a floating exchange rate,
08:21the reason behind it was
08:23that India's foreign exchange reserves
08:25were so low
08:27that they could only support 3-week imports.
08:29The only benefit of a floating exchange rate
08:31is that if the country's unemployment is increasing
08:33and the economy is in a bad state,
08:35the Central Bank can control the supply of money.
08:39It can increase or decrease the interest rate.
08:41It can decrease or devalue the value of the currency.
08:45To revive growth.
08:47All this is not possible at a fixed exchange rate.
08:49So I've mentioned so many disadvantages
08:51of a fixed exchange rate system.
08:53But still, why do all these Gulf countries
08:55use this system even today?
08:57The simple reason behind it is
08:59that the economy of these countries
09:01is based on oil.
09:03And as we all know,
09:05the price of oil is very volatile.
09:07It keeps going up and down very fast.
09:09If these countries start using
09:11a floating exchange rate,
09:13then looking at the supply and demand of oil,
09:15the currency of these countries
09:17will also go up and down very fast.
09:19Their value will change very fast.
09:21And to avoid this,
09:23they've used a fixed exchange rate system
09:25even today.
09:27And Kuwait doesn't lack
09:29a foreign exchange reserve.
09:31Because this country has earned a lot of money
09:33by selling oil.
09:35And they have a lot of U.S. dollars in the reserve.
09:37So it won't be so difficult
09:39to maintain the PEC.
09:41Kuwait has one of the largest global
09:43oil reserves.
09:45And on the basis of this oil industry,
09:47Kuwait is able to maintain
09:49the PEC.
09:51Theoretically,
09:53why doesn't Kuwait keep
09:55its currency at a more fixed exchange rate?
09:57Today,
09:59Rs 250 is equivalent to 1 Kuwaiti Dinar.
10:01Why doesn't Kuwait say
10:03that Rs 1,000 Indian Rupees
10:05should be equivalent to 1 Kuwaiti Dinar.
10:07We'll keep our currency
10:09at this level.
10:11Theoretically,
10:13Kuwait can do this but
10:15maintaining the PEC will be as difficult
10:17as increasing the foreign exchange reserve.
10:19Today,
10:21the supply and demand
10:23forces of the market,
10:25there are a lot of forces,
10:27which I mentioned in the previous video,
10:29on the basis of these,
10:31the value of the currency
10:33should be maintained around it.
10:35As an example,
10:37a big factor is the balance of payments.
10:39The amount of money that
10:41Kuwait is getting from foreign investments
10:43and exports
10:45is much higher
10:47as compared to the amount of money
10:49that is going out of Kuwait.
10:51The imports and the local people
10:53investing in foreign countries.
10:55This means that foreign people
10:57are buying and investing
10:59a lot of goods and services in the country.
11:01So the demand for the currency is very high
11:03which increases its value.
11:05If we include non-government-owned
11:07currencies as well,
11:09the most valuable and expensive
11:11currency in the world
11:13would be Bitcoin.
11:15Because the value of one Bitcoin
11:17today is almost Rs. 34 Lakh.
11:19And in comparison to other currencies,
11:21why is the value of Bitcoin so high?
11:23Because of the same reason.
11:25Because its demand is so high.
11:27People actually want to buy it.
11:29The adoption of cryptocurrency
11:31is increasing rapidly day by day.
11:33Last year, it was estimated
11:35that $6.6 billion
11:37was invested in cryptocurrency
11:39by people all over the world.
11:41The governments around the world
11:43are accepting it more.
11:45For example, a crypto bill
11:47can be presented in the parliament
11:49in their own country soon.
11:51And the RBI has already ordered
11:53the bank to continue the crypto transactions.
11:55Similarly, more people are
11:57getting motivated to invest in crypto.
11:59Around a couple of crore people
12:01have invested in crypto in their own country.
12:03The word Invest is very critical here.
12:05Pay attention to this.
12:07Because investing in a currency
12:09like Bitcoin or cryptocurrency
12:11has never been considered
12:13as an investment.
12:15Usually, you use currencies
12:17in your day-to-day life.
12:19But the way cryptocurrency
12:21is advancing in the world,
12:23people see it as an asset
12:25and not as a currency.
12:27And this is such an investment
12:29that is very risky.
12:31Because it is more volatile
12:33than the price of oil.
12:35But maybe this is the reason
12:37why people like to invest in it.
12:39Coming back to our topic,
12:41I'd like to tell you one more thing.
12:43Remember that the value of a currency
12:45is not an indicator
12:47of how the economy of a country is performing.
12:49Historically,
12:51a British Pound has always been
12:53more valuable than a US Dollar.
12:55But this doesn't mean
12:57that the UK's economy is stronger
12:59or that the UK is a more powerful country
13:01as compared to the US.
13:03It's not like that at all.
13:05The British Pound has always been
13:07more valuable than the UK's economy.
13:09And today, the UK is more powerful
13:11than the US.
13:13And this is the reason why
13:15despite having the most expensive
13:17currency in the world,
13:19Kuwait is going through
13:21an economic crisis.
13:23Oil prices had crashed
13:25due to the COVID-19 pandemic.
13:27And for a long time,
13:29the oil prices were so low
13:31that Kuwait is now at a loss.
13:33Kuwait spends a lot of money
13:35for the well-being of its citizens.
13:37People in Kuwait get free healthcare,
13:39free education, cheap electricity,
13:41cheap gasoline, and many other benefits
13:43and subsidies.
13:45But now the government has no means
13:47of earning when the oil prices are so low.
13:49The government is trying,
13:51and people are also demanding
13:53that the government diversify
13:55its revenue sources.
13:57Find different ways to invest
13:59in renewable energy
14:02It will be interesting to see
14:04how Kuwait will overcome this crisis.
14:31For more UN videos visit www.un.org