2023-07-02 14:00:15
Under the title “How does the dollar control the global financial system?”, Al-Hurra TV published a lengthy report, which stated:
Did it occur to you to ask what does the word “dollar” mean? The most important question may be: How does he control the world economy?
Of course, Saudi Arabia’s agreement with the United States to price and sell oil in US dollars, which created the term “petrodollar” in the 1970s, was a factor that contributed to the strength of this currency. But he is not the only one.
If we go back a little, the US President, Richard Nixon, was tired of the consequences of linking the dollar to gold, so he signed a divorce between the US currency and gold in 1971. This divorce is important in the language of money.
Returning to the first question, the meaning of the word “dollar”, as it is the English version of the German word “taler”, and the story began in the town of “Jachimov” in the “Bohemia” region, which is now known as the Czech Republic.
Interesting facts about the US dollar, explaining the secret of the strength of this currency, which is expected to remain dominant in the world economy, and a “common language”, without which countries cannot communicate financially.
Something from the valley
Between the sixteenth and nineteenth centuries, the dominance of the silver Spanish dollar was used in many countries and in international commercial transactions, according to a report by the National Interest magazine, and in 1792 the US Congress passed the Coinage Act, to start issuing the US dollar, which was linked to silver at the time.
In the nineteenth century, the shift began from linking the dollar to silver to become equivalent to a certain amount of gold, after which interest in the Spanish dollar began to fade in transactions. It was not replaced by the pound sterling at the time, but what became popular is the US dollar.
The origin of the word “dollar” is that it is the English version of the German word “taler”, which is an abbreviated version of the German root “tal”, meaning valley, and “taler”, its literal translation is “a person or something from the valley”, according to the website of the “Czech Museum”. in Houston.”
The dollar and the global financial system
Although there are about 180 currencies around the world, a limited number of them are widely used in international transactions, led by the US dollar, and to a lesser extent other currencies such as the euro, the Japanese yen and the pound sterling, according to international data.
The dollar “dominates the global financial system and global trade,” while it is likely to continue to retain “dominance as a foreign reserve currency” in various countries around the world, according to data published by an International Monetary Fund study.
The roots of the US dollar’s dominance in the global financial system go back to the Bretton Woods Agreement of 1944.
The Bretton Woods Agreement, at the initiative of 44 countries, came to regulate global trade and achieve a kind of international financial stability. It stipulated at the time the adoption of the US dollar as the main currency for determining the prices of other countries’ currencies, and the dollar was then linked to gold at a price of $ 35 an ounce.
And many countries are fixing the exchange rate of their currency against the dollar, according to a report published by the “NPR” website.
In the sixties of the last century, the United States began to face a deficit and depletion of its gold reserves, which meant that keeping its promise to link the dollar to gold became difficult, which prompted former US President Richard Nixon to conduct a “divorce between the dollar and gold” in 1971. “.
At that time, Nixon made an arrangement that determined the value of the dollar, depending on a combination of “indicators, forces, and political and economic factors.” Despite this, the dollar remained dominant and was considered the first currency for foreign reserves in countries.
historical dominance
The Iraqi economic academic, Abd al-Rahman Najm al-Mashhadani, said that the dollar before the seventies of the last century was able to impose itself as a “global” currency, as about 70 to 80 commercial exchanges were conducted with it. In the early 1970s, the “gold-pegged bubble” appeared, as the existing dollars were many times what the United States possessed in gold reserves, after which the link with gold was disengaged, and “the dollar was considered a leading currency … and gold as a commodity,” according to Nixon’s statements at the time.
The Lebanese economist, Sami Nader, a professor of economics and international relations, said in an interview with Al-Hurra that “the dollar managed to remain as the dominant currency in the global system despite the existence of a paradox in it, with the presence of a syndrome in the American economy, with a deficit in the balance of payments, and a deficit in the American budget.” As these factors constitute enormous pressure factors on the economy of any country other than the United States.
The economist explained that so far no currency has appeared capable of replacing the dollar in the world, for example, “the Japanese yen and even the European euro are unable to match the US dollar, for many reasons, including what is related to the Ukrainian war and others related to the absence of growth or sustainable recession in Europe”.
Nader added that even the Chinese currency, the yuan, could not provide an alternative to the dollar, as many “transactions and trade exchanges are still conducted in dollars.”
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