Traders and people in the business world have long acknowledged that the current economic system offers exaggerated concessions to the US government. It can be said that this system does not treat all countries equally. The US dollar is the world’s reserve currency, which gives the United States an unfair advantage over others.

The US dollar was the world’s reserve currency and decades ago gold was transformed into a standard currency exchange mechanism. For example, Australia and Japan trade with each other, resulting in Australia owing $ 100 to Japan. Keep in mind that Australia owes Japan to the United States, not Australian dollars. In fact, the Japanese would not accept payments in Australian dollars. They will only accept payments in US dollars. This is because, as soon as they receive the money, their income is used to buy gold, oil and other basic commodities from foreign markets. Since these goods are traded in US Dollars, all differences in payment are settled in them.

If the United States wants to close its current account deficit, it has many advantages over other countries:

1. They can basically buy what they want, and at the moment they receive the money, the United States can simply print dollars and pay. At the same time, they basically devalue the dollar for anyone who holds the US dollar. The offer belongs to the United States due to the dollar’s position as a reserve currency.

2. Second, the money paid to settle debts more or less ends up in the US Federal Reserve again. One country settles its debt with another, and so on, until the dollar finally returns to its real home, the Federal Reserve.

See also  Floods in rivers and lakes: Water levels continue to rise!

3. Thirdly, the US dollar is the currency that everyone needs. This creates an artificial demand for dollars. Also, when people have dollars, they try to invest in safe dollar worth of property, i.e. US government securities. Many investors are investing in the U.S. Willingness to invest in government securities has led to a decline in the yield of those securities, and as a result, U.S. The government can borrow money from the world.

Why does the US dollar offer continue?

Now the question is, if the world is aware of the proportional concessions made to the United States, why not end it? The answer is that the dollar has not faced any significant competition so far. Currencies such as the Japanese Yen and the British Pound are weak and have poor economic fundamentals against the US Dollar. The euro did not appear until 1999, and the ensuing crisis has made the dollar a much weaker competitor.

The Special Drawing Rights (SDR) system introduced by the International Monetary Fund (IMF) did not attract much attention. Therefore, there does not seem to be a viable alternative to the world at this time. However, many experts predict that the current system will be distorted in favor of the United States and will not last. So, sooner or later, an alternative must appear to correct this imbalance, which has continued since 1971.

Gabriel Štefaňák
Ducoscopy Europe


Please enter your comment!
Please enter your name here