Dollars Domination In Global Economy


 A world currency is any money that can freely be used or exchanged for another currency inside or outside the borders of the country that issues it. It may also be called as Global currency. 

The Agreement of Bretton Woods

The United States supplied the Allies with materials and weaponry prior to entering World War II. By the end of the war, the U.S. had the majority of the gold reserves since most nations made their payments in gold. As nations exhausted their stockpiles, a restoration to the gold standard was unachievable.




In 1944, representatives from forty-four Allied nations convened in Bretton Wood, New Hampshire, to devise a framework for managing foreign exchange that would not put any nation at a disadvantage. The group determined that the world's currencies will now be fixed to the US dollar rather than gold.

The Bretton Woods Agreement, as it was referred as, established the power of central banks to uphold fixed exchange rates between different currencies and the US dollar. On demand, the US would then exchange US money for gold. When their currencies grew too strong or too weak in relation to the dollar, countries had some degree of control over their currency prices. They could control the money supply by buying or selling their currency.

 The Petrodollar: What Is It?

A 1945 agreement between the United States and Saudi Arabia led to the adoption of the US dollar as the main form of payment for oil around the world. The relationship between the dollar and oil started as a result of this arrangement, which led to other nations that exported oil accepting the dollar as payment for oil.



Some nations produced so much oil and amassed so much currency that they were unable to spend them all. When a nation that accepts US dollars as payment is unable to use them all, the dollars are effectively taken out of circulation. Petrodollars are the name given to the dollars that these nations were unable to spend.


 

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