It tis believed that the strength of a nations currency is dependent on the nations economy. We can say that there are a few strong economies in the world and this countries are the United States of America, China, Singapore, Switzerland and a few other countries. The US economy still remains the strongest economy in the world till date.
The world held the gold standard for a very long time until the United States in 1971 decided to remove the dollar to gold standard. The world came together to choose the United States as the world's standard currency because it was equivalent to gold as at the time. The agreement was that countries would peg their currencies to the United Dollar and the Dollar would be pegged to the gold at $35 per ounce. This was the beginning of continuous unending printing of money. The government were able to print out money just to keep the economy afloat just like what happened with the bailouts of 2008 and the stimulus check distributed after the Covid-19 pandemic.
The removal of the gold standard led to the fiat currency which is a currency backed by nothing except for promises by the government. Its value is kept by trust and not backed by the government. Most fiat currency is backed by the US Dollars and when the Dollar is down, other countries try to balance their currency.
With government bonds, the government just keep borrowing money and selling bonds. In other to pay this debt, the government needs to print more money thereby reducing the value of the currency and causing inflation and reducing the purchasing power of a currency.
looks amazing! very Intresting 🥰😀😊💵
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This is really enlighten, I am not aware of this agreement before.