The world’s reserve currency is the U.S. dollar. How did the U.S. dollar end up to be the current global currency
***Brandlyin:
The world’s reserve currency is the U.S. dollar. How did the U.S. dollar end up to be the current global currency? In 1944, the Bretton Woods Agreement was established for monetary and exchange rate management (Bretton, n.d.). Currencies were fixed to the price of gold, and the U.S. reserve currency was associated to the price of gold (Bretton, n.d.). Under the Bretton Woods Agreement, currencies were converted for trade between other countries. The agreement ended in 1973, as the U.S. dollar value became so strong, the exchange rate was equal to the price of gold, leading to the collapse of the system (Bretton, n.d.). However, with the collapse of the Bretton Woods Agreement, the U.S. dollar remains the reserve currency to this day. Since the U.S. dollar has yet to be devalued, it continues to have a favored status (Edwards, n.d.).
I view the U.S. dollar being the world’s reserve currency as being good for the United States. The U.S. dollar has continued to be strong, so it is not losing its reserve currency status and as long as the U.S. economy continues to keep its strength, the value of the dollar will continue to increase. Also, the dollar keeps interest rates low, as this contributes in helping America (Conerly, 2013). The United States treasury debt is bought by foreign countries as an investment but also, the dollar denominated assets, are one of the best ways to hold the foreign exchange reserves (Conerly, 2013).
Is a strong dollar good for U.S. businesses? I think that the strong dollar can be positive for U.S. businesses, but also negative. On a positive note, with the U.S. having a strong dollar, it means that the currency buys more goods from foreign county’s and this is good for international travelers and consumers, as goods and places to go are cheaper (Little, 2018). On a negative note, when U.S. companies sell goods to foreigners they suffer, in relation to having a weaker currency, the U.S. goods cost more (Little, 2018). When this happens, in the global market, the U.S. companies are at a disadvantage, which could lead to moving manufacturing plants overseas with lower costs to remain competitive (Little, 2018). If manufacturing plants move overseas, then jobs will be lost in the U.S.
The strong dollar hurts the U.S. BOP as the dollar continues to stay strong, the U.S. exports are more expensive in the international markets, thus, the buyers look for cheap options in other countries (Burden, 2017). If the dollar continues to appreciate, that will lead to increased imports and decreased exports, and this results in a deficit in the BOP, which will eventually hurt the U.S. economy (Burden, 2017).
****CRYSTAL:
The U.S. dollar remains the world’s reserve currency. Is this good for the United States, and if so, why? Reserve currency is a large quantity of currency maintained by central banks and other major financial institutions to prepare for investments, transactions and international debt obligations or to influence their domestic exchange rate. Gold and oil are priced in the reserve currency and other countries hold currency to pay for goods. Yes, I feel it is good for the U.S. as it minimizes the exchange rate risk. The U.S. dollar has been the primary reserve currency used by other countries since 1944. Countries has accumulated so much of the U.S. dollars is the reason why it remains the world’s currency reserve. My main reason for stating why I feel it’s good for the U.S. is because it minimize the exchange rate risk.
People usually think a “strong” dollar is good. Is this true for U.S. businesses, and does it help or hurt the U.S. balance of payments? The dollar is the most powerful currency. During my research I found around $580 billion in U.S. bills are used outside of our country; 65 percent of $1 dollar bills; 75 percent of $100 bills, 55 percent of $50 dollar bills and 60 percent of $20 dollar bills. Soviet Union & Latin America is where most of these bills are. Yes, I feels it helps the U.S. balance of payments. The U.S. dollar can be of value depending on how it is earned and spent; we must trade and spend wisely to keep the “strong” dollar a good commodity
Answer preview The world’s reserve currency is the U.S. dollar. How did the U.S. dollar end up to be the current global currency
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