Tag Archives: Reserve-Currency Advantages

178. Major Nations Question US Dollar “Reserve” Status

7 Jul

Trump’s obsession with balance of trade and being cheated is bluster.  The fact is that the US-Dollar is the global “reserve currency,” giving the USA a big trade advantage. US exporters and importers do not need to convert currency, which adds some cost to each transaction, and the US can borrow money at lower rates. So any US losses due to foreign trade tend to balance out because the US-Dollar has this special world status.  We can buy products from all major countries with US dollars and when we sell, we receive US dollars. This is a major financial advantage and high prestige for the USA.

Here is more information about “reserve currency.” It is also known as “anchor” or “hard” currency.

“Reserve currency is commonly used in international transactions, international investments and all aspects of the global economy.” (Wikipedia)

For centuries, the world has had various reserve currencies. These include the Dutch Guilder, EURO, and the UK Pound Sterling. Whichever country was doing the most world trade during a certain period, usually has its currency established as “reserve.” After World War II, there was an international agreement, “The Bretton Woods System,” which established the US-Dollar as reserve.  The rules and traditions of international trade, banking, and investment are complicated and I have only presented a few basic facts.

For the past few decades, many countries have questioned the status of the US-Dollar as reserve. China, for example, does a huge amount of trade and wants to use its currency to pay for oil. Trump and Republican lies and instabilities have  lead to global uncertainties, which trouble all investors.  Recent US political Government shut-downs and delayed Government payments have increased this questioning. Further complications occur in the area of international sanctions. We need reliable government to maintain our world leadership.