The main cause why a country's currency can dominate, of course number one is its economic strength. In the past, the basis of his assessment was how much gold was available, The greater the Gross Domestic Product (GDP) of a country and the volume of cross-border transactions, the greater the demand for its currency.
2. Military Superpower Countries
Military strength, both in terms of personnel, weaponry and intelligence of the United States is difficult to find a match. Throughout the history of mankind, especially in the era of colonialism and world war, a series of events in which a stronger currency was accompanied by a dominant military force was not just one or two.
3. Prestige of Foreign Diplomacy
Every country tends to conduct trade and financial transactions with other countries with whom they have good relations. This is one of the strongest reasons why the dollar is the world's currency. The strength of US diplomacy outperforms other countries, even compared to those who have the economic and military power almost able to compete. This is because the prestige of diplomacy is not about how many countries are "scared", but rather how capable the diplomat team lobbied, made friends, and expanded the network.
4. Stability and credibility, accepted everywhere
If you want to go shopping at the mall, then of course you will make sure that in the wallet there is money that applies legally (not counterfeit money) or a debit / credit card from a bona fide bank, can be accepted at many merchants. As well as, the perpetrators of transactions between countries will ensure that the currency used is credible and will be accepted by the counterparty. Many countries make the US dollar the main currency of its foreign exchange reserves for this reason.
When we speak of the "patron currency", we speak first and foremost of a strategic design of world power that protects it, interactive and totalized, which is concretized through an infinite network of associations and communicating vessels between financial, industrial and service capital that turns countries and governments into enclave management.
The United States, the first world economy, Europe, the second world economy (as a bloc) and China, the third world economy, carry out most of their trade in dollars.
If the U.S. currency collapsed, the U.S., the European Union and China (the world's largest sellers and buyers), which together account for more than half of the world economy, would collapse.
The transnational corporations and financial groups that control the speculative financial systems and the productive economic systems on a world scale (above governments) mostly carry out their business volumes, investments and profits in dollars.
In the fabric of the globalized capitalist system, the U.S. currency serves as a world reserve, supports most currencies, intervenes in most commercial transactions and financial operations, and acts as an international means of payment.
At the center of the globalized imperial-economic capitalist model, and as central protagonists, are the United States and the European Union (the main world buyers), and China (the main world seller), whose intertwined economies are projected as keys and dominant in the functioning of the entire capitalist system on a global scale. Transactions are mostly carried out with the dollar as the transaction currency. In addition, China has 70% of its reserves in US Treasury securities.
In this scenario, its fall would mean the end of the dollar pattern, and would generate a globalization of the crisis in which no capitalist state could survive. If the US and the dollar were to fall, it would be like a nuclear bomb exploding in the economy and in the capitalist system and no one could escape alive from the radiation that would be unleashed on a planetary scale.
The eight main reasons
There are eight main reasons why no power (central or emerging) could "decouple" from the current functional model of the capitalist system structured around the dollar as the patron currency and the hegemony of the US as the first imperial power:
1) The dollar is the currency of exchange and international reserve, and the countries of all continents (Europe, Asia, Latin America, Australia and Africa) use it in their commercial transactions and have most of their reserves in dollars, so the end of the dollar would imply a generalized global collapse of the capitalist system from which no country would be safe.
2) More than 70% of the world's reserves are in dollars, compared to 25% in euros for the European Union, which also uses the dollar. China, the third world economy, after the USA and the EU, has its reserves in dollars, according to the World Bank and the IMF.
3) The dollar is involved in 86% of daily currency transactions in the world, often as an intermediate step in the exchange of two other currencies, according to the Bank for International Settlements. Although this is a decrease from the 90% it represented in 2001, no currency comes close to it.
4) Almost two thirds of the world's central bank reserves are denominated in dollars, despite fears of a massive exodus of the currency. According to the Bank for International Settlements, the central bank of central banks, the dollar continues to be the "central banks' favorite currency" and accounts for 55% of their assets and liabilities in foreign currency.
5) 80% of international transactions, 70% of world imports and almost all oil trade are made in dollars, according to the World Bank and the U.S. Department of Commerce.
6) The international speculative financial system is "dollarized", and international money exchanges and markets operate mostly with the US currency through stocks and bonds scattered on a global scale by the large banks and investment funds that have their headquarters operating in Wall Street, USA. The New York Stock Exchange, or NYSE, is the largest money market in the world and concentrates the largest volume of financial operations in dollars carried out by transnational companies listed on a global scale. The main transnational companies of the USA and the world are listed on the New York stock exchange, and if the dollar collapsed as a currency, Wall Street would explode and it would drag with it all the money markets on a global scale.
7) Emerging countries and developed economic powers generate more than 75% of world GDP in dollars (the rest is generated in euros and other currencies), according to the World Bank. For countries heavily dependent on exports of raw materials such as oil, the figures may be even higher. The dollar is also deeply rooted in world trade. Companies reduce their transaction costs by using a common currency.
8) Transnational corporations and financial groups that control speculative financial systems and productive economic systems on a global scale (above governments) mostly carry out their business volumes, investments and profits in dollars, so a terminal collapse of the US currency (as advocates of the "decoupling" theory predict) would produce a paralysis of global economic activity in a matter of hours.
In this scenario, a hypothetical fall of the dollar pattern would generate a globalization of the crisis in which no capitalist state could survive. If the US and the dollar were to fall, it would be as if a nuclear bomb would explode in the economy and in the capitalist system and no one could escape alive from the radiation that would be unleashed on a planetary scale.
Because:
1. Economic Power
The main cause why a country's currency can dominate, of course number one is its economic strength. In the past, the basis of his assessment was how much gold was available, The greater the Gross Domestic Product (GDP) of a country and the volume of cross-border transactions, the greater the demand for its currency.
2. Military Superpower Countries
Military strength, both in terms of personnel, weaponry and intelligence of the United States is difficult to find a match. Throughout the history of mankind, especially in the era of colonialism and world war, a series of events in which a stronger currency was accompanied by a dominant military force was not just one or two.
3. Prestige of Foreign Diplomacy
Every country tends to conduct trade and financial transactions with other countries with whom they have good relations. This is one of the strongest reasons why the dollar is the world's currency. The strength of US diplomacy outperforms other countries, even compared to those who have the economic and military power almost able to compete. This is because the prestige of diplomacy is not about how many countries are "scared", but rather how capable the diplomat team lobbied, made friends, and expanded the network.
4. Stability and credibility, accepted everywhere
If you want to go shopping at the mall, then of course you will make sure that in the wallet there is money that applies legally (not counterfeit money) or a debit / credit card from a bona fide bank, can be accepted at many merchants. As well as, the perpetrators of transactions between countries will ensure that the currency used is credible and will be accepted by the counterparty. Many countries make the US dollar the main currency of its foreign exchange reserves for this reason.
When we speak of the "patron currency", we speak first and foremost of a strategic design of world power that protects it, interactive and totalized, which is concretized through an infinite network of associations and communicating vessels between financial, industrial and service capital that turns countries and governments into enclave management.
The United States, the first world economy, Europe, the second world economy (as a bloc) and China, the third world economy, carry out most of their trade in dollars.
If the U.S. currency collapsed, the U.S., the European Union and China (the world's largest sellers and buyers), which together account for more than half of the world economy, would collapse.
The transnational corporations and financial groups that control the speculative financial systems and the productive economic systems on a world scale (above governments) mostly carry out their business volumes, investments and profits in dollars.
In the fabric of the globalized capitalist system, the U.S. currency serves as a world reserve, supports most currencies, intervenes in most commercial transactions and financial operations, and acts as an international means of payment.
At the center of the globalized imperial-economic capitalist model, and as central protagonists, are the United States and the European Union (the main world buyers), and China (the main world seller), whose intertwined economies are projected as keys and dominant in the functioning of the entire capitalist system on a global scale. Transactions are mostly carried out with the dollar as the transaction currency. In addition, China has 70% of its reserves in US Treasury securities.
In this scenario, its fall would mean the end of the dollar pattern, and would generate a globalization of the crisis in which no capitalist state could survive. If the US and the dollar were to fall, it would be like a nuclear bomb exploding in the economy and in the capitalist system and no one could escape alive from the radiation that would be unleashed on a planetary scale.
The eight main reasons
There are eight main reasons why no power (central or emerging) could "decouple" from the current functional model of the capitalist system structured around the dollar as the patron currency and the hegemony of the US as the first imperial power:
1) The dollar is the currency of exchange and international reserve, and the countries of all continents (Europe, Asia, Latin America, Australia and Africa) use it in their commercial transactions and have most of their reserves in dollars, so the end of the dollar would imply a generalized global collapse of the capitalist system from which no country would be safe.
2) More than 70% of the world's reserves are in dollars, compared to 25% in euros for the European Union, which also uses the dollar. China, the third world economy, after the USA and the EU, has its reserves in dollars, according to the World Bank and the IMF.
3) The dollar is involved in 86% of daily currency transactions in the world, often as an intermediate step in the exchange of two other currencies, according to the Bank for International Settlements. Although this is a decrease from the 90% it represented in 2001, no currency comes close to it.
4) Almost two thirds of the world's central bank reserves are denominated in dollars, despite fears of a massive exodus of the currency. According to the Bank for International Settlements, the central bank of central banks, the dollar continues to be the "central banks' favorite currency" and accounts for 55% of their assets and liabilities in foreign currency.
5) 80% of international transactions, 70% of world imports and almost all oil trade are made in dollars, according to the World Bank and the U.S. Department of Commerce.
6) The international speculative financial system is "dollarized", and international money exchanges and markets operate mostly with the US currency through stocks and bonds scattered on a global scale by the large banks and investment funds that have their headquarters operating in Wall Street, USA. The New York Stock Exchange, or NYSE, is the largest money market in the world and concentrates the largest volume of financial operations in dollars carried out by transnational companies listed on a global scale. The main transnational companies of the USA and the world are listed on the New York stock exchange, and if the dollar collapsed as a currency, Wall Street would explode and it would drag with it all the money markets on a global scale.
7) Emerging countries and developed economic powers generate more than 75% of world GDP in dollars (the rest is generated in euros and other currencies), according to the World Bank. For countries heavily dependent on exports of raw materials such as oil, the figures may be even higher. The dollar is also deeply rooted in world trade. Companies reduce their transaction costs by using a common currency.
8) Transnational corporations and financial groups that control speculative financial systems and productive economic systems on a global scale (above governments) mostly carry out their business volumes, investments and profits in dollars, so a terminal collapse of the US currency (as advocates of the "decoupling" theory predict) would produce a paralysis of global economic activity in a matter of hours.
In this scenario, a hypothetical fall of the dollar pattern would generate a globalization of the crisis in which no capitalist state could survive. If the US and the dollar were to fall, it would be as if a nuclear bomb would explode in the economy and in the capitalist system and no one could escape alive from the radiation that would be unleashed on a planetary scale.