The most powerful currency in the world today is the US dollar. The US dollar is used as the main reserve currency around the world. About ninety percent of the world's total economic transactions are done through the US dollar. The US dollar is almost essential for international trade. There is no alternative or equivalent to the American dollar. It will be discussed about how the power of the US dollar was created in the world economic system?
Currency can generally be divided into three categories. Commodity currency, representative currency and fiat currency. Commodity currency is money that has no intrinsic value. Like gold or silver has its own value. Gold and silver were used as direct medium of exchange since ancient times. Even if the gold coin or silver coin is melted, its value does not decrease. That is why gold coins or silver coins are commodity money. Gold, silver, copper or tobacco leaves have been used as commodity currencies for economic transactions throughout much of human history. But later the journey of representative currency started as an alternative to real valuables.
Paper currency has no intrinsic value. Practically they are nothing but pieces of paper. But in this paper coins are related to any precious metal especially gold. The value of paper currency depends on the gold reserves of a country. Paper notes were first introduced in China. But since the introduction of paper currency in Europe, it gradually spread to other parts of the world. In the nineteenth century, most developed countries in the world adopted the gold standard. In this system the value of gold was fixed and at any given time a fixed amount of gold was available instead of a fixed amount of paper currency. Until then there was no problem with the value of money. But trouble arises when fiat currencies emerge. This currency is also circulated through paper notes.
But this note has nothing to do with any precious metal or gold in reality. In case of fiat money, the central bank of a country can control the economy by printing money as per their demand. Most modern currencies today are fiat currencies. Even starting from the much talked about American dollar to Bangladeshi taka, almost everything is fiat currency. In the nineteenth century Britain was the world's leading economic power. Their gold reserves were the largest and London was the center of world banking. For this British currency pound sterling was the most powerful currency of that time. So the British pound was widely used in world trade. In the 1870s, the United States became the world's largest economy. Then in the 20th century, when the First World War started, European countries including Britain started printing money at will to cover the cost of the war.
They were printing more notes than they could have based on their gold reserves. On the other hand, the United States refrained from participating in the war for the first three years of the war. At that time they made the American economy more prosperous by selling arms and war supplies to European countries. After World War I, most countries, including Britain, were forced to abandon their gold standard. Because then the value of their money was not dependent on the gold value of the country's reserves. In this situation, the monetary system of countries becomes dependent on demand and supply. And since then, fiat currency or currency with no real value has spread widely. Despite the changes in the European financial system, the US dollar has not yet become a fiat currency. Until then the American dollar was in full alignment with the gold standard. Countries that had introduced fiat standards. They failed to restore the true value of the currency by increasing their gold reserves. On the other hand, America was the largest economic country in the world at that time. And the US banking system was the most reliable.
That's why the US dollar is preferred over the British pound in international trade. Considering the US dollar as more reliable, various countries started saving dollars as their reserve currency. At one point, the US dollar became widely popular as a global currency due to its greater use. As a result, the United States began to increase their gold reserves. The United States then refused to accept anything other than gold in exchange for their exported goods. As a result, the gold reserves of the United States began to increase. On the contrary, the gold reserves of other countries continue to decrease. Then when the Second World War started, many of the events of the First World War were repeated. For the first two and a half years the United States refrained from participating in the war. And sold a lot of military equipment to warring countries. As usual at this time, the United States refused to accept anything other than gold in exchange for its exported goods. Due to this policy, their gold reserves swelled. Even in 1947 America had seventy percent of the world's total gold reserves.
World War II came to be a kind of blessing for America. This world war changed America's position in the world forever. After the war, superpowers like Britain and France were economically crippled. Because their main source of income was their colonies becoming independent one by one. Then only America was saved from the economic disaster after World War II. During the World War, other countries realized that the United States would control the global economy after the war. In 1944, representatives of forty-four Allied nations met at Beaton Woods, a resort in New Hampshire, USA, to discuss ways to stabilize the post-war economy. Representatives of the countries signed an agreement. Which is known as Bitone Woods Agreement. This agreement became the backbone of the world economy. Through the Bitone Woods agreement, the US dollar was officially adopted as the reserve currency, bypassing gold. At this time it was decided that the link with the US dollar would be maintained and the US dollar could be converted into gold at will without any hindrance. The World Bank and the International Monetary Fund (IMF) were established as a result of the Bitone Woods Agreement. These two international organizations play a major role in creating America's global sphere of influence. In the 1950s and 1960s, Western European countries and Japan were able to overcome the suffering of World War. Then they started buying gold again from the US in exchange for their stored US dollars. As a result, US gold reserves continue to decrease. At that time, America spent a lot of money behind the Vietnam war. Also, in nineteen sixty-five, US President Lyndon Johnson took a special project called the Great Society. The purpose of which was to make extensive development in America's education, civil rights, health sector and underdeveloped areas. The US government started printing huge amounts of money to cover the cost of this project. As a result, it is no longer possible to keep the balance of gold with the US dollar. In 1971, US President Richard Nixon gave a big shock to the world economy. That is known as the Nixon shock. He announced that from now on there is no connection of gold with the US dollar. That is, from now on, any country will not be able to buy gold in exchange for US dollars. That means the US dollar then becomes a fiat currency like the currencies of other countries in the world. Why didn't other countries abandon the US dollar when the US dollar became a fiat currency? Why is the dollar still being used as a means of international transactions? The reason for this is that a new reserve currency was needed to sustain the economic system by abandoning the US dollar. But when the Nixon shock took effect, the United States was still the world's leading political and economic superpower. At that time there was no other country to challenge the political and economic influence of the United States. As a result, the value of the US dollar fell, but their dominance did not face any obstacles. Since then, the United States has been using the dollar as a weapon against its rival countries. The United States has imposed economic sanctions on Iran, China, Russia, North Korea at different times. As a result, it has become very difficult for countries to participate in international trade. To stop this American monopoly, many people are proposing to adopt the triple currency as a global currency. Saturated currency is a type of digital currency. Which does not control the government of any country.
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