The dollar seems to be on top of the world of currencies for the moment, but could the dollar’s spot in this position of power be in peril? Learn more in this episode of USMR Market Insights with Coy Wells.
Will the U.S. Dollar Be “top dollar” For Long? – Video Transcription
Coy Wells: 00:00
The U.S. dollar is one of the most popular and powerful currencies in the world. Several countries such as Ecuador and El Salvador use the dollar as an official currency. Others like Saudi Arabia and The Bahamas have their value pegged to the dollar. It is held as a large quantity by reserves and many foreign banks and monetary authorities, giving it a status as a “global reserve currency.” In fact, it is the most prominent and widely used of the reserve currencies. The world needs the dollar and has given the United States tremendous economic power, but will the dollar be the “top dollar” for long? The dollar's status may be in jeopardy for a variety of reasons. Part of it may be that protectionism and the protectionist policies, could divert trade away from the United States.
Coy Wells: 00:45
Another danger is from competing currencies. Both the euro and the Chinese renminbi have been gaining steam and popularity. This is in part due to the extended efforts by the Chinese government and the European Union to expand the role and use of their respective currencies. A further threat could be countries moving away from using the dollar to denominated oil. There has been discussion from China, Russia, and even the EU to not use the dollar for oil purchases. Furthermore, Saudi Arabia has vocally considered selling their oil in a currency other than U.S. dollars if the United States passes a bill known as the NOPEC bill, which would allow OPEC and other international cartels to be sued for violating U.S. antitrust laws. However, it's not all bleak for the dollar. There are several reasons why the dollar might stay on top for quite some time. Many of the world's most precious commodities are denominated in dollars. This includes oil, but if there is an en masse move away from the dollar, it could take a long time to develop.
Coy Wells: 01:45
The challenger currencies have some weakness too. Mistrust of the Chinese government by other foreign powers may slow down other countries' willingness to use the renminbi. Like the European Union, lack of a central government may prove to be a deterrent for the euro. Lastly, one of the major reasons why the dollar might remain strong has to do with 2008. During the financial crisis of 2008, many banks across the world were worried that they would not have enough dollars to pay for their dollar-based debts. The Federal Reserve was able to use quantitative easing to ensure the banks all over had enough dollars for liquidity. This led many to trust in the dollar, in a time of crisis, giving it a degree of prestige that might help it to stay on top.
Coy Wells: 02:28
For a better understanding of market crashes in the past, such as the 2008 crisis. Please call the number on your screen to receive U.S. Money Reserve's latest special report, U.S. Stock Market Crashes, Lessons from the Losses. This report provides many of the causes of previous market crashes. So click the link below or call the number on your screen right now to get your copy and please give us your thoughts and share this video. If you're watching us from Youtube, please subscribe to our channel so you don't miss a single episode. I'm U.S. Money Reserve's Coy Wells and thank you for watching Market Insights.