Who enthroned the Dollar?

Who enthroned the Dollar?

Have you ever asked why the United States Dollar is the world's reserve currency? Perhaps you may wonder what is so special about the US dollar. This article will enlighten you on what you need to know about the United States dollar and its rise to prominence in the world's economy.

The Federal Reserve Bank of America was created in the year 1914. The first US Dollar of the United States was as well printed this same year. However, in 1944, the Brenton Wood agreement came to a consensus and enthroned the US dollar the world reserve currency.

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World Reserve Currency Before the Dollar

Before World War 1, the British economy was the largest in the world. Britain served as the world center of commerce, and trade was carried out in British pounds. However, in other to ensure stability in the exchange of currencies, the Gold served as a central currency. Every currency including the pound had to be pegged to the value of Gold.

During World War I in the year 1914, many countries dropped the Gold standard. This was because the military expenses were paid in paper currency and not Gold. As a result, the currency of several countries was greatly devalued. Not long after, Britain which held on to the Gold standard began to witness economic degradation and was forced to borrow.

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How Dollar was enthroned

After 5 years into World War I, Britain was forced to neglect the adopted Gold standard. As a result of this, every merchant who traded in pounds was affected. The dollar then became the next world currency reserve.

However, it never became effective until 1944. This was when the major countries around the world agreed to peg their currencies to the value of the dollar. It was called the Brenton wood agreement.

During World War II, the United States was the major arms supplier to the allied countries. To the advantage of the United States, the payment for arms was done in Golds. Consequently, the United States became the custodian of two-third of the world's gold.

Therefore, to ensure the growing exchange will be advantageous to all participants, 44 countries were asked to send delegates to Brenton wood, New Hampshire. And, since the United States is the major holder of Gold, it was agreed that all currencies of the world should be pegged to the Dollar. Meanwhile, the value of the dollar was pegged to Gold.

Not only that, the central banks of each country are expected to maintain a fixed exchange rate between the dollar and their currencies. However, when the currency value of such a country becomes too strong or weak against the dollar. Such countries can sell or buy their currency in an attempt to regulate the money supply.

To consolidate the agreement made at Brenton wood the International Monetary Fund (IMF) and World Bank was instituted.

Conclusion

Because the US had two-third of the world’s gold reserves they had stronger bargaining power and as such other countries had no choice but to submit to the US dollar. As much as this gave the United State a major advantage over other countries it doesn’t necessary means there is no hope for others. There are currencies that are stronger than the United State. What matters is the economic health of your nation not the currency rate against the US dollar.

Let us know what your thoughts are about the enthronement of the US dollar. We will be looking at an interesting discussion next - The Black Wall Street.

References

Investopedia- How U.S Dollar became the World's reserve currency
Transfin- How U.S Dollar became the world strongest currency

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Comments

audu1986 19 Apr '21
So educative
darebee 16 Apr '21
This is educative
divinity102 16 Apr '21
This is educative
chosenboy 16 Apr '21
Who enthroned dollar
sussanah 16 Apr '21
well articulated, thanks for this insight!
ayakaterver01 16 Apr '21
Great work!
enipeace 16 Apr '21
Interesting
enipeace 16 Apr '21
Interesting
oyetayo 16 Apr '21
Great read
kelil 16 Apr '21
Great piece
osak 16 Apr '21
enlightening
tosyn 16 Apr '21
Insightful
oyindamola 15 Apr '21
So interesting
johnjummy1945 15 Apr '21
This is interesting
opeyemi22 15 Apr '21
Money making
adebayo 15 Apr '21
nice article
olaknight 15 Apr '21
This is so true
julies 15 Apr '21
Good to know
walex996 15 Apr '21
It's a nice, educative article. So basically, WW1 aided the US (in arms dealings) to push its currency to this level. Awesome.
aliwa 15 Apr '21
Dollar is my friend
dareakins 15 Apr '21
Nice article...
oladiti 15 Apr '21
Very insightful ..
ofure 15 Apr '21
Getting better n better
jstar 15 Apr '21
Kudos to u guys
ogundiran 15 Apr '21
Interesting to read
valentine1413 15 Apr '21
Educative article
bolsey01 15 Apr '21
Power is power
ajuluchukwu 15 Apr '21
Crestway surest way
omolejerome 15 Apr '21
Interesting.
ishola1706 15 Apr '21
Glad to be here
tonwee 15 Apr '21
That's cool to hear.
mamahilda 15 Apr '21
Better talk. Tnx
idowu_omohu0001 15 Apr '21
Enlightened
amodumujeeb 15 Apr '21
The article truly shed light on how dollar took over the world economy. US used the possession/selling of arms, Africans too should utilize what we have at least to improve our economy.
ayotunde 15 Apr '21
Dollars to naira nah God hand the thing dey..
evedyne 15 Apr '21
I wish nigerian leaders have the capacity to make naira stronger
ijebs 15 Apr '21
We need patriots to help Nigeria system work..
temi 15 Apr '21
Now I know
augustinemiracle 15 Apr '21
nigeria should try to regulate the naira - dollar exchange
mkumz01 15 Apr '21
Nice to know
maceke 15 Apr '21
The same thing here, if Nigeria can make her economy stronger, naira would be great.
umoh 15 Apr '21
Good information
thesecondson 15 Apr '21
Nice piece
nafsy 15 Apr '21
A great one
emmanuel 15 Apr '21
Interesting article... I always look forward to visiting this site this because i know have smthn new to learn everyday... Keep it up crestway! My financial intelligence is a +1 everyday...????
michael95 15 Apr '21
great information!!
bolurepublic 15 Apr '21
Great article
fagbohun 15 Apr '21
Interesting article.
ruqyatu 15 Apr '21
Wow this is great
necessity 15 Apr '21
Interesting article
smeg 15 Apr '21
The economic health of one's nation! Can we produce all what we need at a high desired standard and consume what we produce? Think about it!
enipeace 15 Apr '21
Very educative
samsono 15 Apr '21
Well how interesting to find out they have the highest gold reserve. I want to believe they have what it takes for their currency (USD) to subdue others. Believe me, their economy is really healthy. Gr8 article Crests✌
missgenius 15 Apr '21
Interesting
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