Which currency do you think is the most valuable? There would be various replies, but the answer to the question is the US dollar. Today, I will talk about the power of the dollar and how come it is so powerful, and also including its risks.
The dollar was first used in the US after the Coinage Act of 1792. The currency was based on the Spanish silver dollar used by the Spanish Empire. However, before 1944 the US dollar wasn’t such a valuable currency like now. Back then, the UK pound was the most valuable currency.
The implementation and negotiation of the Bretton Woods System occurred in 1944. The Bretton Woods System pegged the US dollar to gold, which made the value of the dollar higher. Also, the system made a huge influence on international currency exchange and trade. One good example is that members of the Bretton Woods System created the IMF and the World Bank. Thus, the US dollar’s value increased, but the system didn’t last long. In 1971 there wasn’t enough gold in the US, and this situation led to the collapse of the Bretton Woods System.
In the mid 1970s, the US created a new system that made their currency increase in value again. The new system was called the petrodollar system, which was negotiated with Saudi Arabia. The petrodollar system calls for all oil in Saudi Arabia to be traded with the US dollar. The US guaranteed the Saudi Arabian government’s safety against other countries, in return for implementing the petrodollar system. This made many countries peg their currency to the dollar so that they could buy oil a lot more easily. The system also made the US money become the most valuable currency in the world, up until now.
However, there are some risks of the petrodollar collapsing. One good example is China, whose leaders seek to collapse the petrodollar. China is trying to collapse the dollar by developing the digital yuan. Luckily, the yuan has quite a low value compared to the US dollar, as per the 2021 ranking of currency values. Another good example is the change of energy source. These days there many issues regarding fossil fuels, due to the fact that they harm the environment. This is leading to the change of energy source from fossil fuels to solar panels, which should decrease the price of oil, which in turn could easily collapse the petrodollar. It is sure that we should save earth by transitioning energy source but, on the other hand many Americans and many other people around the world would suddenly lose a lot of their money.
All in all, the US dollar is the most valuable currency in the world, even though there is some chance that it will fall. The strength of the dollar is huge, and it is well known by many people too. Should we save earth and make many people suffer from poverty? What should we do?