The United States dollar is the world’s reserve currency. A majority of the countries around the world base the value of their assets in dollars. Commodities in trade like oil, are transacted & purchased in dollars. After World War 2, the United States replaced the English Pound as the world currency. This was due to a strong United States military and a dominant economy during the industrial production. The dollar was also backed and based by gold. This made it a secure currency.
Since President Nixon’s Administration when he removed the gold standard from our currency, the United States dollar is only as strong as the confidence that people, country’s governments, and corporations believe it is. In the end not even our military will be able to continue to protect it’s dominance as it has done post 9/11 The gold standard has gone away and allowed inflation to appear. It’s not widely understood that a majority of the money printed in circulation from quantitative easing and the other Fed tools, are not just in America, but a majority of it is in circulation globally. There is always a risk that the rest of the world becomes tired of using our dollars, and prefer transacting business in other currencies like China’s Reniminbi (Yuan). Or the IMF declares a global currency reset. If events like that ever were to occur, there would be an extreme decrease in demand for U.S. dollars, because more people would want the Yuan. This causes hyperinflation. A terrible situation for anyone who holds a majority of their assets in U.S. dollars.
How many people do you hear talk about this risk?
This is a very big risk in the geopolitical spectrum of the world. The world is changing. Other countries, like China & India, economy’s are growing. They are demanding more say as to what happens in the world. A lot of conflict is centered around the continued use of the U.S. dollar. In the very least you should at least understand the risk at play if you are to be successful at hedging or preparing against it.