Even though the United State government has been printing a lot of money this year due to the coronavirus pandemic and for stimulus, it has not for once affected the value of the United State Dollars. Unlike other currencies like the Pounds, Euro, franc, Yen, Canadian Dollar and so on, the United States dollars is believed to be the strongest of all.
The United State Dollar is actually just like every other currency in the world, in fact some countries have their native currencies like the Ghanaian Cedi, CEFA, Nigerian Naira, South African Rand, and many more, so the Dollar is the official currency of the United States.
Why is the US Dollars a Global Factor Currency?
Is it because it is trusted by other countries as a safe haven and a reserve, or is it because investors believe in the US Dollars as a safe haven because the United State economy is strong. Is the US economy actually strong even after several debt the US is in?
In the past, countries tied their currency to the gold standard which means the country produces the value of the gold available but this didn’t last long as a lot of countries needed to print out more money to pay for military and handle economic affairs and this made the US dollars stronger as it was still tied to the gold standard. Since the money standard was tied to gold, during the Second World War the US sold weapons to its allies and collected gold as a means of payment and since the US kept on collecting gold, the gold it had kept increasing and soon, it owned over 70% of the world’s gold. Although, the US dollar no longer uses the gold standard but rather uses supply and demand, it still remains at the top as it is noticed that there is always a shortage of the US dollars because several countries hoard it during a recession or economic crises because people keep buying the US dollars for safety.
The US dollars has retained its strength thanks to the use of the currency for foreign exchanges. Farmers trade internationally with the US dollars, Oil is traded with the US dollars, most of the things traded internationally are traded with the US dollars. The US dollar influences the world’s economy as it leverages on economic and political power over other countries in the world.
In Summary
It is no doubt that the US dollars is a strong and stable currency and also, a lot of people say that the US dollar might no longer be the world trading currency. My question on this is;
Why is the US dollar so strong and generally acceptable?
Do you think the US dollars will stop being the world’s currency?