I have always wonder why its so much stronger ? when you go to Japan, everything is cheaper in a sense and the U.S dollar means more in Japan. Why is that ?
In: Economics
The dumbest thing you are going to hear is something about how yen are worth less than dollars and that makes things different somehow. It doesn’t. Exchange rates are just a thing you multiply to find value – a coefficient. It doesn’t make any difference if a Big Mac costs 10 of your currency or 20,000. What matters is changes over time in those exchange rates and in how many goods and services they buy.
And the US is unusual there.
In the 20th century, the US won or came out ahead in about four world wars while sustaining essentially no losses on its home continent (The Spanish-American war, WW1, WW2, and the Cold War) and emerged as a military and trade empire with no equal in the world, forming advantageous agreements with most of the world, becoming everybody’s banker or corporate partner, inventing container shipping and the oil industry and the automobile and early-modern mass production.
We insisted on conducting most of this trade in terms of nominal dollars, especially the oil trade through our proxies in the Middle East. While retaining the ability to print more dollars in theory, we have obsessed over dollar value stability, repeatedly crashing our economy to maintain it.
When other countries or companies or dictators or drug lords want to put away some funds because they don’t trust their own way of storing assets or don’t trust their own currency, they have for many decades now bought primarily dollars (or dollar denominated assets within our economy). When they trade with each other or loan each other money, it often comes in the form of a dollar value exchange. The US Dollar became the “anchor currency” and intermediary for most global trade in the second half of the 20th century, both benefitting from its stability and contributing to its stability by being seated in so many unrelated and uncorrelated economic activities.. Today US Dollar-based “financial clearing/settlement networks” represent some of the infrastructure that allows countries and companies with different currencies to trade in goods & services..
That status is slowly fading as the Euro and the Renminbi rise to prominence.
The Bretton Woods Agreement and the Petrodollar. But we’ve gone off the gold standard, and now the BRICS nations are moving away from the petrodollar, and the USA is going to be FUCKED soon. The dollar is now worth 97% less than it was originally, and once the masses of asses realize this, and lose faith in the dollar, the real shit happens. Your politicians and wall street and media have lied to you for years, and the chickens are coming home to roost.
The people who took over the land that is known known as the US set the whole system up for extracting as much money as possible from the people who worked for them. Sometimes paying them 0.00 (Slaves). If they could not get away with paying people literally nothing they paid them very much under what was needed to survive. This made a set of people alot of money. They could then get certain political favors ie let’s go kill nicaraguans and take over their banana plantations. Coincidentally the same thing was being done by alot of other states. In every country there was people who were against this concentration of wealth. It just so happens the US did imperialism the best and basically became a hyper power. Now why would the people who literally built that whole system of exploitation suddenly over value the currency of other countries. The point is literally to pay them as little as possible and I’m sure there are plenty of people who would be willing to go back to paying their workers 0.00 if it meant they got immensely rich.
1. Lots of People Want Dollars: Imagine if everyone in your class wanted to trade their toys for your favorite toy. Since everyone wants it, your favorite toy becomes more valuable. Similarly, lots of people around the world want to use American dollars because they are useful for buying things from other countries. So, the dollar becomes stronger because many people want it.
2. America Has a Big and Strong Economy: Just like some kids are really good at playing games, America is really good at making and selling things. They have a big and strong economy, which means they make lots of money. When a country’s economy is doing well, people think their money is valuable. So, the American dollar becomes strong because America’s economy is strong.
3. People Trust the American Dollar: Trust is like when you know you can count on your best friend to keep a secret. People all over the world trust the American dollar because they know they can use it to buy things and it will always be worth something. This makes the dollar a popular choice for people who want to keep their money safe.
4. America Is Good at Investing: Investing is like planting seeds in a garden and waiting for them to grow. America is good at investing its money and making it grow. When other countries see that America is good at making money, they want to invest in American businesses and buy American products. This makes the dollar even stronger.
5. America Is Known for Being Stable: Stability means things stay the same and don’t change too much. Just like you know your parents will take care of you every day, people know that America is a stable country. This stability makes people feel safe about using the American dollar, so they want to use it in their own countries too.
Because since 1972 the US Dollar was “staked” to energy which means no matter how many dollars you have you can, in theory, go to Saudi Arabia and buy oil by the barrel with it no questions asked.
This is in contast to the US Dollar being tied to Gold, after the US government spent the 1950s and 60s printing dollars to lend to Europe, and then to fight a war in Korea, and then Vietnam, while also printing money for the space race which was part of a larger spending context, the cold war and all of it’s technology races…. And when the US *didn’t* have all the gold in Fort Knox that it said it had to back up all the dollars, the dollar itself went into a spiral. The Petrodollar was conceived to remedy this problem *quietly* on the world stage, while very very publicly easing political tensions on the brink of war in the middle east.
I’ve wondered if Japan has been a test bed for wild CIA experimental economic theories the way that Latin America have been though.
It’s because the US works hard to keep its currency stable, and because the US has the largest and most diversified economy in the world.
The Euro is the second most stable currency in the world because the Euro’s economic union is the second largest and most diversified economy after the US.
The Pound is also relatively stable, but because the British economy is smaller, it is more prone to fluctuations. Canada is in the same boat, with a smaller population and an economy that is not nearly as diversified as the US economy is, which causes its value to fluctuate more.
Meanwhile the Yuan is not viewed as a reserve currency because its price is too heavily manipulated by the PRC government, which no one considers trustworthy. The Yuan used to be pegged to the USD, and is no longer ostensibly pegged… but it’s widely viewed as still being heavily manipulated.
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