The US dollar is one of the strongest
currencies on the globe today. It is the national currency of the USA and
several other nations worldwide. The first dollar currency bill was first
printed in 1914. After decades, the US dollar became the global reserve
currency, and different countries started pegging their currencies against it.
This took place after World War I. The International Monetary Fund, or the IMF,
also stated that about 59% of foreign reserves are denominated in US dollars in
different banks worldwide. Today, despite the accepted position and the value
of the US dollar in the international market, it is not the most potent
currency globally. It is placed at the 1oth position regarding the strongest
currency in the world list.
Kavan Choksi – an
insight into the gold standard of the US dollar
Business and finance expert Kavan Choksi states that under the
Federal Reserve Act of 1913, the currency system was quite unstable during that
time were made organized. The Federal Reserve had to respond to this unstable
currency system, and so many banknotes of different countries were pegged to
gold so that the currency exchange rates could be stabilized. It was at the
same time that the economy of the USA surpassed the economy of the UK to become
the largest in the world.
After the outbreak of the First World
War, several nations began to suspend the use of the gold standard for payments
of military costs, and they were replaced with paper money. This led to the
other currencies becoming evaluated at a much larger value, with the exception
of the UK, which retained the gold standard for maintaining its position as its
primary currency across the world, and it borrowed cash for the first time
during the First World War In this way, the USA became the lender of choice for
several nations that wanted to purchase US dollar bonds. It was at this time
that the US dollar started to replace the UK pound sterling as the global
reserve currency.
The
status of the US dollar today
As mentioned above, the US dollar stayed
as the globe’s reserve currency after the First World War. Central Banks of
different countries today hold 59% of their reserves in US dollars, according
to the IMF. The debts that are denominated in US dollars still continue to
grow, and as per the latest statistics taken in 2020, it stands at about $12.6
trillion. As per the statistics released by the CMC Market Report, the US
dollar holds the 10th strongest position in the globe today.
According to Kavan Choksi, the reserve status of the dollar is based on how
strong the US dollar is and its dominance in the financial markets in the nation.
Despite being the biggest spender, there are still trillions of US dollars in
the tertiary security of the country, which is considered to be one of the
safest ways to store currency.
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