Boycott? Or the end of a hegemony?
-We are seeing in the news the movements of some important countries in relation to the “boycott” of the dollar in their commercial transactions. Countries like Brazil, China and India can start doing business with each other in their respective currencies.
-Here are some questions that need to be answered:
a) Who is this type of arrangement good for? For the strongest or the weakest?
b) Will the country that adopts this attitude of trading in its own currency actually benefit? And if the answer is yes, for how long? Short, medium or long term?
-Perhaps the answer is in the text below, in the brief summary where I explore the birth and rise of the dollar!
THE BIRTH OF THE DOLLAR, A BRIEF SUMMARY
-The US dollar was created as a monetary unit in 1792 after the United States Congress used the “Act of Currency” as a reference.
-Before the creation of the dollar, commercial transactions were mostly made through the “Real de a Ocho”, a currency minted by the Spanish Empire and which “dominated” the region.
-With the dominance of the Real de a Ocho currency in local commerce, the Currency Act was created by the British Empire in 1764 to prohibit the American colonies from minting money, or, from trading with the “Spanish” currency, in order to protect the English creditors and merchants from being paid in depreciated coins.
HOW DOLLAR EMERGED AMONG OTHER CURRENCIES?
-The role of the dollar today began after the end of the Second World War, which took place between 1939 and 1945, where the USA, accompanied by its allies, achieved victory. This marked the US as the main power at the time, as Europe was completely devastated.
-As the main economy of the post-War, the “assistance” of the USA in the “reconstruction” of the destroyed countries made the nation gain worldwide notoriety through its products and services. Therefore, the American currency began to be demanded in commercial transactions and gained more space on the world stage.
-Before the end of the war and with the aim of transforming the dollar into the only global trade currency, the US convened the Bretton Woods Conference in 1944. This conference brought together 45 nations to define the monetary bases of the international financial system and establish the currency Americana as a reference for other currencies and for international trade, linking the value of the dollar to gold. The World Bank and the IMF were also created at this conference.
-The “restoration” of Europe took place through US loans and aid programs, known as the “Marshal Plan”. However, with this “little help”, an important currency that dominated the commercial scenes before the dollar, the pound sterling, was replaced so quickly that England, as the largest creditor of the USA, became the largest debtor.
-A few decades after the end of the war and with the US “usurp” the other countries (offering products, “aid” and loans, which today China does with the poorest countries, “usurp”), maintaining this pattern was almost unsustainable and, soon, the Bretton Woods system came to an end, in 1971, when Richard Nixon unlinked the value of the dollar with that of gold, putting an end to the well-known “gold-dollar standard”.
-With the end of the gold-dollar standard in 1971, today we live under the “printers” standard. As the printers are almost limitless, if you're short of money just print a little more!
-Like what happened with the Bretton Woods system, becoming unsustainable to maintain it over time, will the dollar lose its hegemony due to the end of the gold-dollar standard?
-We know that with the gold standard the printing of money was regulated by the amount of gold in reserve, however, with the current standard we do not have a regulation on the amount of money that a country can print!
-Today, the ballast of a fiduciary currency is the people, who pay their taxes. I will use an extremely simplistic logic to try to explain in a “dumb” way how a country manages to generate more money.
-I will cite two examples of ways for a country to have more money available (print): 1) Increase its production of value-added products, increasing its exports, which increases its reserve of value; 2) Resorting to raising taxes, sacrificing your people to keep printing money!
-Do your analysis and good business.
-Be Aware, If You Buy, Use Stop Loss!
-See below for other graphic reviews!
-Here are some questions that need to be answered:
a) Who is this type of arrangement good for? For the strongest or the weakest?
b) Will the country that adopts this attitude of trading in its own currency actually benefit? And if the answer is yes, for how long? Short, medium or long term?
-Perhaps the answer is in the text below, in the brief summary where I explore the birth and rise of the dollar!
THE BIRTH OF THE DOLLAR, A BRIEF SUMMARY
-The US dollar was created as a monetary unit in 1792 after the United States Congress used the “Act of Currency” as a reference.
-Before the creation of the dollar, commercial transactions were mostly made through the “Real de a Ocho”, a currency minted by the Spanish Empire and which “dominated” the region.
-With the dominance of the Real de a Ocho currency in local commerce, the Currency Act was created by the British Empire in 1764 to prohibit the American colonies from minting money, or, from trading with the “Spanish” currency, in order to protect the English creditors and merchants from being paid in depreciated coins.
HOW DOLLAR EMERGED AMONG OTHER CURRENCIES?
-The role of the dollar today began after the end of the Second World War, which took place between 1939 and 1945, where the USA, accompanied by its allies, achieved victory. This marked the US as the main power at the time, as Europe was completely devastated.
-As the main economy of the post-War, the “assistance” of the USA in the “reconstruction” of the destroyed countries made the nation gain worldwide notoriety through its products and services. Therefore, the American currency began to be demanded in commercial transactions and gained more space on the world stage.
-Before the end of the war and with the aim of transforming the dollar into the only global trade currency, the US convened the Bretton Woods Conference in 1944. This conference brought together 45 nations to define the monetary bases of the international financial system and establish the currency Americana as a reference for other currencies and for international trade, linking the value of the dollar to gold. The World Bank and the IMF were also created at this conference.
-The “restoration” of Europe took place through US loans and aid programs, known as the “Marshal Plan”. However, with this “little help”, an important currency that dominated the commercial scenes before the dollar, the pound sterling, was replaced so quickly that England, as the largest creditor of the USA, became the largest debtor.
-A few decades after the end of the war and with the US “usurp” the other countries (offering products, “aid” and loans, which today China does with the poorest countries, “usurp”), maintaining this pattern was almost unsustainable and, soon, the Bretton Woods system came to an end, in 1971, when Richard Nixon unlinked the value of the dollar with that of gold, putting an end to the well-known “gold-dollar standard”.
-With the end of the gold-dollar standard in 1971, today we live under the “printers” standard. As the printers are almost limitless, if you're short of money just print a little more!
-Like what happened with the Bretton Woods system, becoming unsustainable to maintain it over time, will the dollar lose its hegemony due to the end of the gold-dollar standard?
-We know that with the gold standard the printing of money was regulated by the amount of gold in reserve, however, with the current standard we do not have a regulation on the amount of money that a country can print!
-Today, the ballast of a fiduciary currency is the people, who pay their taxes. I will use an extremely simplistic logic to try to explain in a “dumb” way how a country manages to generate more money.
-I will cite two examples of ways for a country to have more money available (print): 1) Increase its production of value-added products, increasing its exports, which increases its reserve of value; 2) Resorting to raising taxes, sacrificing your people to keep printing money!
-Do your analysis and good business.
-Be Aware, If You Buy, Use Stop Loss!
-See below for other graphic reviews!
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