The widespread use of the United States dollar (USD) as a global currency can be attributed to a combination of historical, economic, and geopolitical factors. The dollar’s dominance in international trade and finance has made it a symbol of global economic power.
This essay explores the reasons behind the dollar’s global prominence, shedding light on its historical evolution, economic stability, and the role of the United States in shaping the international financial system. Additionally, it delves into the benefits and challenges associated with the dollar’s hegemony, offering a comprehensive perspective on why the dollar is used all over the world.
Why is the US dollar so powerful, this question is usually created by all the people of the country, whose answer through this article will try to know in simple language. Because whoever happens to be an expert, he takes any subject to a limited scope to the root of that subject. At the same time, we will try to know this subject from all angles, then only this subject will be understood. Therefore, we will try to know what is the effect of change of dollar from A political point of view to any ordinary village of India.
History of US Dollar –
- 1690 – Paper currency began to be used for the first time in America, which was seen in the colonies of different countries of Europe, whose paper notes were used for military operations.
- 1739 – Natural currency is printed by Benjamin Franklin through the Philadelphia Printing Firm.
- 1775 – Continental currency This currency was brought to America by the Continental Congress.
- 1776 – 8 days before the independence of the United States, the $2 note is created, which is later included in the Bill of Credit.
- The “$” symbol was first accepted for the US dollar in 1785.
- 1791 – The Bank of the United States is founded by Alexander Hamilton as a private bank.
- 1792 – Coins were introduced to the market for the first time through the Mint Act and the decimal system began to be used in currency.
- 1861 – The $10 note is published by the US Federal Government, bearing a picture of Abraham Lincoln.
- 1861 – $ 5, $ 10, $ 20 notes began to be used in the US market under the name Greenback.
- 1862 – $1, $2, $5, $10, $20, $50, $100 This new currency was introduced in the US market in the name of United States Notes and the old demand note was abolished.
- 1869 – The portrait of George Washington was first taken for $1.
- 1890 Creation of Treasury Notes
- 1913 The Federal Reserve Bank was established as the central bank.
- 1929 – The size of all US banking notes was reduced through the Federal Reserve Bank.
- 1942 – Special Note for World War II was created.
- 1956 – The term “In God We Trust” began to be used on US banknotes.
- 1963 – Gold was discontinued for currency publication.
- 2015 – The website of the Federal Reserve Bank is established.
(Source – US Federal Reserve website)
Britton wood Monitory conference 1944 –
During the Second World War, this gathering is organized by the initiative of America, through this meeting the World Bank and the International Monetary Fund are created. The main objective of this meeting was that during the Second World War, the economic condition of the countries of Europe had deteriorated and there was a need to establish a new economic system around the world. Therefore 44 countries were represented in this assembly and the vassalism which had been proposed through England before that was about to come to an end.
In this Brittonwood meeting, the US currency was accepted as the currency for international trade and instead gold was kept in the Central Bank of America. Due to which every country started using US dollars for its international trade. In World War II, all the countries of Europe were completely financially ruined by the war and they needed the basis of a new economic system. During this war, war materials were sold on a large scale by America, due to which the American economy was the most profitable during this period. A superpower like England was completely ruined after this war.
The dominance of European countries and America through the World Bank and the International Monetary Fund was placed as a percentage of the share, which is seen today as a strategy to dominate the rest of the world economy. This arrangement lasted until 1971, but on the orders of Richard Nixon, this system was abolished and gold for currency publication was stopped. Due to this decision, the US dollar went down significantly in this period, but OPEC’s decision to replace the US dollar as the US dollar for trade was the reason for maintaining the importance of the US dollar till date.
Why is the US dollar powerful in the world? –
During the Second World, the atomic bomb on Japan was used by America and its political and technological influence was established on the whole world. The US dollar was adopted as the international currency in 44 countries through the Brittonwood Conference. In which the rest of the country had become financially bankrupt during the World War, the US economy was in great profit. For this the European country kept its gold in the US Central Bank and started using it for trading the US currency.
By 1971, France asked for its gold back from America, which the US President refused to give. All the countries of this conference gradually started to understand this politics of America, due to which this agreement was canceled by America. This was the period when Israel had defeated 6 Middle East Asian countries in the war and these countries needed the base of a powerful country politically. In this period, it was proposed by the US to use the US currency for international oil trade.
By politically dominating the Middle East Asian countries, the US has again and in a better way replaced the US dollar as an international currency. We have seen political crisis for the last few decades on whichever countries of Middle East Asian countries tried to oppose it. After 1980, America did not depend only on oil trade, but developed rapidly in technology, in today’s era the whole world is dependent on their modification which makes the US dollar more powerful.
US Dollar & Euro Comparative Analysis –
40% of the world’s debt is given through the US dollar, and 65% of the published currency is used by other countries as foreign currency. 90% of trading through the US Central Bank is done through US dollars. Euro is used as the most powerful currency after the US dollar in the whole world, which countries all over Europe use this currency for trade within themselves. The purpose of the British House is to keep the influence of Europe and America on the whole world economically and politically.
After the Second World, the purpose of establishing democracy by ending the monarchy in the whole world from time to time was kept by the United Nations Organization, which today has more than 190 countries as its members. At the time of 1944, the influence of the colonization of Europe is seen on many countries of Africa and Asia, which has been an important factor in the economic development of Europe. Therefore, in the Second World War, mainly for the interest of the European country, the whole world was involved in this war. Talking about India, being a British colony, it automatically became a part of the world war.
The influence of Europe and America is seen on the World Bank of the United Nations and the International Monetary Fund. Therefore, today, if there is a decision by Asian and African countries in opposition to the interest of European countries, then seeing it politically, it was customary to ban it. The creation of terrorism is seen in a way due to economic interest and America and Europe are to be blamed for this. If we look at the number of developed countries, then they are mainly to be seen in the countries of American and European countries.
Indian Rupee and US Dollar –
In 1947, India’s rupee and US dollar were at par, but in July 2022, it has reached one dollar at 80 rupees. What happens with this? If this is to be understood, then our imports are expensive and inflation increases in the country. From atomic power to industrialization and from computer to android mobile, India has to depend completely on this technology. That’s why we see that India’s rupee faces constant devaluation.
The US dollar is used by the whole world as an international currency, due to which we have to keep US dollars as security to buy something from outside. SWIFT for international trade This digital system is used for international trade, which is under the influence of the US Central Bank. Whenever any problems arise in political matters, such countries are economically isolated from the world as a form of economic sanctions.
During the Russia-Ukraine war, the US currency, of Russia was frozen, for which other countries of Asia have also been tried to pressure from European and American countries. Therefore, after 2009, it was proposed by Russia and China to create another currency without keeping the US dollar as the international currency. Therefore, in July 2022, we saw the order given by the Reserve Bank of India to use this currency for trading outside India.
Any country that struggles to weaken the US dollar pays its price, we have seen it with the Middle Eastern countries and we will have to see the consequences of this courageous decision of India in the future. India is not as weak as this Middle Eastern country and is maintaining a separate existence in the politics of the world, so it is not easy for America either.
US Currency Policy & World Trade –
America is a country established by European merchants, where citizens of such countries are originally found in European, African and Asian countries. The country whose original capitalist system is, together with the European country, has always been trying to keep its economic and political influence of Asian and African countries. From the scientific revolution to the era of technology, it has been dependent on the country of America and Europe and this country have been a major center for the world for modern education. That’s why in World War II we saw America has emerged as the most powerful country in the world.
From the World Bank to the International Monetary Fund, we have to see the influence of America, in which the loans given are mainly given in the form of US dollars. From 1944 to 1973, the gold of all member countries was kept with the Central Bank of America and in return it was given to the US dollar. This US dollar and other countries continued to use this currency for international trade, which was discontinued in 1973. After 1973, we see that the US prepared to use the US dollar for international trade by establishing control over OPEC.
Due to which the US currency started to be used as 65% of the international currency. We see the dominance of American companies on technology, so 90% of international trade are done through SWIFT this digital technology which is done by the US Central Bank. Which is used as diplomacy by Europe and America. During the war between Russia and Ukraine, India was stopped to trade with Russia, but Europe itself has been buying gas from Russia. Therefore, it is seen that America uses its currency as a form of diplomacy.
US Dollar Features –
- After the establishment of the independent United States of America in 1776, the capitalist system was created in a country founded by European traders.
- The economic condition of European countries deteriorated in the Second World War, the same American economy got a boost due to the trade of war materials, in return America got a large amount of gold.
- In 1944, the World Bank and IMF were established in the US through the Brittonwood Monetary and the US dollar was established as the international currency.
- At the Brittonwood Conference, the member countries of 44 countries gave the gold they had to the Central Bank of America and bought US dollars which was to be used for international trade in the future.
- The economic condition of the countries of Europe had deteriorated due to the Second World War and with the help of America, they wanted to secure their economic prosperity, in return they made America the economic power of the world.
- He agreed to accept the US dollar as an international currency, keeping his political and economic influence on Asia and African countries.
- SWIFT Through this digital system, US dollars are used for international trade, for which about 190 countries of the world behave.
- The US dollar has been used as the international currency since 1973 through the Association of Middle East Asian Oil Companies.
- The US dollar is used for 90% of trade worldwide.
- 65% of the US dollar is used as an international currency through the rest of the world.
- A large amount of US dollars has been accumulated by China and its expertise has been increased in America in large quantities.
- Due to more imports in India, the rupee has gone down against the US dollar, which has reached 80 rupees.
The more powerful the American rupee, the more expensive the import for India. As a result, inflation in the country increases further.
- During the Russia-Ukraine war, the money kept in the US Central Bank of Russia was frozen, learning from this, India and China have started using their currency for international trade.
Critical Analysis of US Dollar –
Before the Second World War, Britain had established its domination over half the world through vassalism. Looking at the politics under European, we saw the political struggle through Hitler and even though Britain was successful in this war, it lost its economic and political power. In World War II, the world saw almost all the European countries being financially ruined, but through America, these countries made America a superpower to save themselves.
In return, European countries got the opportunity to dominate Asia and African countries economically and politically by America. The US dollar was established as an international currency through the Brettonwood Convention. In this, the dollar was strengthened through these 44 countries by placing gold in lieu of the US dollar in the Central Bank of America. In this behavior, America got a double benefit from both sides and it became the world’s superpower.
In the Cold War between Russia and America, America was made more powerful by weakening the socialist political system. It has always been beneficial to keep the dominance of America and Europe strong, keeping the Asian superpower China, Russia and India always separate from each other. The US dollar has played an important role in this. In the 1990s, India accepted the capitalist system due to the economic crisis. Political relations between China and India have been a win-win for the US to maintain its supremacy in Asia. Good relations with Russia in India’s diplomacy has been a cause of headache for America.
In this way we have seen that the importance of the US dollar is seen on the economy of the whole world. In the field of technology, we have seen that America has kept other countries dependent through its dominance over the entire economy. We have seen this strategy for the last seventy years to strengthen the US dollar by dominating the economy of other countries under diplomacy. Gradually, many countries have started understanding this diplomacy in view of their own benefits.
India, Russia and China have started doing foreign trade through their country’s currency, this decision is not going to be so easy for India because India’s import is more and there is still enough for India to become financially self-reliant. There are difficulties. SWIFT: Through this digital system, the central Bank of America controls the economic trade of the world. The European currency Euro is the second most powerful currency in the world after the US dollar, which is used for trade within European countries.
Through this article, we saw how the US dollar was made the international currency and what has been the interest of European countries in it. This we have tried to know through this article, US dollar as a foreign currency has been a powerful currency at three levels. In which after the Second World War, the US dollar was made the international currency through 44 countries through the Brettonwood Conference. After 1973, the US dollar was used as the international currency through OPEC. In the last phase, the US dollar was strengthened by dominating technology.