Essay On The Dollar

The US dollar the world’s reserve currency

In 1941, the United States of America entered World War 2. That year also marked the end of the financial and economic severe crisis that swept America, the Great Depression. During that time, Americans and British begin to discuss the management of the post-war world, particularly monetary and financial system. Then begin three years of ruthless negotiations: each military support from Washington to London is exchanged against a political concession on the relationship between the pound and the dollar. The hegemony of the dollar starts with war loans, which are in US dollars. Although nothing has been explicitly agreed, the British Treasury could not negotiate.

In early 1942, two monetary reform plans oppose each other: the plan of the American Harry Dexter White, Assistant Secretary of the U.S. Treasury, and the plan of the famous British economist, John Maynard Keynes. White’s monetary plan suggests exchanging all foreign currencies to the dollar while pegging the value of the dollar to a fixed price for gold. Keynes meanwhile suggests to create a supranational central bank beyond both the gold standard that the hegemony of one currency. The international currency, defined by gold, would have been called “bancor”.

Keynes 's plan is obviously not well perceived in the United States while for Keynes, the monetary plan of White gives too much power to the US dollar and thus to United States of America. But Britain did not have the means to resist. Despite the reluctance of the British hostile to negotiations that would dethrone the pound in favor of the dollar, the United States organized a conference in Bretton Woods in July 1944 in the presence of 700 delegates. The 3rd day of the con...

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... for the dollar, not even the euro, as a result of the lack of autonomy of the EU economical system. In addition, an American depression would lead to the collapse of the global economy as the United States issue the world’s reserve currency. The establishment of a supranational currency is not ready to enter into force, although China has officially relaunched this idea shortly before the G20 summit in London. The IMF has yet to take the Chinese proposal very seriously, but this would be in a long-term perspective. The United States are determined to stay the world’s reserve currency, China still needs to buy dollars to keep high prices and to maintain its own export capacity . The falling of US dollar does not seem imminent. However, we now find ourselves in the strange situation where investors are forced to buy the dollar because there are no other alternatives.