The US dollar is the strongest currency globally today, and it is deployed for transactions worldwide. It is the benchmark for international goods’ costs, making it the reserve currency for the entire globe. In simple terms, a reserve currency is used for global trade and financial transactions worldwide; today, the US dollar proudly occupies this privilege!
Kavan Choksi and the history of the American dollar
Kavan Choksi is a skilled and well-esteemed entrepreneur with expertise in business, investments, and finance. According to him, the American dollar had an exciting past before it evolved to become the world’s reserve currency. Before the emergence of the dollar, nations used gold and silver for trading and transactions. At the Bretton Woods Conference in 1944, leaders worldwide decided to make a system where there would exist a fixed rate of exchange for significant currencies for the dollar. This meant that gold would not serve as the world’s reserve currency, and the US dollar would take its place instead.
Why was the USA dollar chosen as the reserve currency of the world?
One of the critical reasons for the other nations to unanimously agree on the dollar as a reserve currency for the globe was because the economy of the USA remained the same even after World War II, and there were no adverse effects on its economy like its peers Germany and Japan. During this time, the dollar could be converted into gold for a rate of $35 per ounce. The USA owned most of the gold in the world and had a constant source of supply, so it was chosen to be the primary hub for trading for the world economy.
What does the future for the US dollar look like today?
In the war-free world, the USA owned 50% of the world’s economic output posts the Second World War. Sadly, the nations considered modern during that time were victims of some chaos or were under the domination of the communists. During this period, the USA began its ancient interventionist policy for foreign relations. One example of the above was The Marshall Plan, which aimed to rebuild Europe.
According to business expert Kavan Choksi, the USA did not want a Third World War. It maintained a strong military presence to deter the forces of the Soviet Union in Europe. During this phase, the assets denominated by the American dollar were safe, while the rest of the world was crumbling due to political instability.
The US Dollar is the most potent currency in the world. It is used for transactions across the globe and is the benchmark for fixing the prices of goods internationally. Today, it is the reserve currency for the whole world. It is the only currency in the world against which other currencies are pegged. You cannot deny the power of US Dollar. And from the current context, we can safely say that US Dollar will be in the limelight for years to come unless something drastic happens and things change completely.