Why The US Dollar Becomes The World Currency Patokan: Here's Why

Why The US Dollar Becomes The World Currency Patokan ( Image - Unsplash)

YOGYAKARTA - Rising prices in the world are usually influenced by the United States (US) dollar exchange rate, so why is US Dollar a benchmark for the world currency? Let's discuss it here, see until it's finished, yes!

The reason is, due to dependence on the dollar, various state currencies in other countries are often pressured by the US dollar, including Russian Rubles.

Launching from the Investopedia website, it is stated that this US dollar was first printed in 1914 after the US central bank the Federal Reserve was founded. Now this US dollar officially becomes a world reserve currency less than 6 decades after that. This US dollar did skyrocket immediately when it was first printed.

Fed was founded by the Federal Reserve Act in 1913. This US central bank emerged because the currency system in the country was abnormal, because banknotes were issued by each bank.

At that time the US economy was superior to Britain and became the world's most economies. Indeed, at that time the UK was still the center of world trade and most trade transactions were still using pounds.

After that most developed countries also set their currency to gold to produce stability in currency exchange.

Now the next World War I also broke out in 1914. In conclusion, many countries are leaving the gold standard so they can pay for military spending with banknotes, which devaluate their currency.

3 years after the war, England, which firmly adheres to gold standards to maintain its position as the world's leading currency, found that it had to borrow money for the first time.

The United States is the giver of choice for many countries willing to buy US bonds denominated for dollars.

England ultimately surrendered to gold standards in 1919, destroying accounts of international merchant banks trading in pounds. By then, the dollar had already taken over the pound as the world's main reserve.

During World War II, the US was the main owner of weapons, supplies, and several other items from the Allies. Uncle Sam's country collects most of its payments in the form of gold.

Until the end of the war, the United States had most of the world's gold. This situation hinders the return of gold standards by all countries that have spent their gold reserves.

In 1944, delegations from 44 Allied countries met in Bretton Wood, New Hampshire. They negotiated to create a foreign exchange management system that did not harm any country. It was decided that the world currency could not be related to gold, but could be related to the US dollar which is adrift of gold.

The agreement was later discovered as the Bretton Woods Agreement, determining that the central bank would maintain a fixed exchange rate between their currency and the US dollar.

In turn, the United States will redeem the US dollar for gold as requested. Countries have several levels of control over currencies in situations where their currency value becomes very weak or very strong relative to the dollar. They can buy or sell their currency to control the amount of money in circulation.

As the result of the Bretton Woods Agreement, the US dollar was officially named the world's reserve currency and supported by the world's most gold reserves. Instead of gold reserves, other countries are collecting US dollar reserves.

Because it requires a place to put their dollars, countries are starting to buy US Treasury securities which they consider a safe store of money.

Since US inflation is still high this year, it ended up making Rupiah Movement Potentially Weak.

So after knowing why US Dollars are the benchmark for the world currency, look at other interesting news on VOI.ID, it's time to revolutionize news!