Why is the DOLLAR the World’s RESERVE CURRENCY? – VisualPolitik EN


You’ve heard this a thousand times: the
American dollar is the World’s reserve currency,
the hegemonic
currency in the world today.
And we all have that “smartass” friend
who thinks he knows everything about
geopolitics and says that the dollar supremacy
is… the cornerstone of the so called New
World Order.
The
illuminati, the Bildelberg club and George
Soros are ready to do anything to keep this
supremacy… at any
cost…
OK, OK, so if you wanna throw one of these
self proclaimed pundits off, you just need
to ask him or her
this question: what does it really mean that
the dollar is the hegemonic currency?
I mean… how does the
United States benefit from having a currency
that is being used for the international trade?
Is it really
that important?
Really?
And the most important question of all…
Could the American Dollar lose its
status?
Could it be replaced by other currencies like
the EURO or the Chinese YUAN?
Today we are going to
answer all of these questions but before we
do… let’s take a look back at history.
If you’ve been following VisualPolitik for
a long time, you already know that Argentina
is in dire
Straits and they need to ask for Money loans
from International investors.
In these cases, the usual
procedure is to print what we call a DEBT
BOND.
This is a piece of paper that says ‘If you
give me THIS
amount of money, I will give it back to you
in, say, 10 years, with interest’.
So far, so good.
But
imagine this situation.
Let’s say that you lend 3000 Argentinian
pesos to the Argentinian Government.
In
the moment we do this video, summer 2018,
those 3000 pesos equal 100 American dollars.
But…
What would
happen in the year 2028?
We don’t know!
But chances are, the Argentinian currency
will have been devalued
more and more.
By then, maybe those 3000 pesos wouldn’t
even buy a bag of ‘Doritos’
This is why, international investors, smart
as they are, say to Argentina ‘Wait, wait
a minute, dude…
OK,
I will lend you that money, don’t worry…
BUT you will denominate that debt in Dollars…
American dollars!
This way, I give you 300 bucks and you will
pay me back 300 bucks plus interest…
Understood, man?’
Yes, my dear viewers, this is how an investor
protects himself from would-be devaluations.
But hold on just a second because we aren’t
just talking about Argentina!
In fact, most of the World’s
countries choose the greenback as the currency
in which they issue their notes.
And this is why, you can
read headlines like this one in every financial
newspaper.
https://www.gob.mx/shcp/documentos/el-gobierno-federal-emite-nuevo-bono-global-en-dolares-a-plazo-de-10-
anos
EL GOBIERNO FEDERAL (Mexicano) EMITE NUEVO
BONO GLOBAL EN DÓLARES A PLAZO DE 10 AÑOS
The Mexican Government will issue debt bonds
denominated in dollars to be paid in 10 years.
As you can imagine, we are not just talking
about governments here.
For example, anytime ARAMCO, the
Saudi Arabian oil company wants to sell their
dinosaur juice to, say, India, they say ‘Wait,
wait a
moment, dude… what are you doing with those…
coins I don’t even know how much they’re
worth… no way dude,
you are paying in dollars, American dollars,
because this is a currency I trust’
This explains why 60% of the foreign reserve
currencies held at the central Banks are dollars.
In the
world, there over 1.67 TRILLION dollars in
circulation and more than half of them are
outside US.
There
is no international law that says the dollar
must be the global reference.
But most people trust this
currency for international trade.
And here it comes the real question…
WHAT-IS-THIS-USE-FOR?
I mean, how does America benefit from having
their currency circulating all over the place?
Well… it depends.
If you are a company or a regular
citizen… this is completely irrelevant to
you.
Arguably, we could say it’s worse.
BUT, if you are the American Government…
oh boy!
Having the hegemonic currency is like a gift
from
heaven…
Why?
We’re gonna tell you straight ahead!
A FISTFUL OF DOLLARS
We told you a thousand times here at VisualPolitik…
the worst thing that can happen to a country
is
HYPERINFLATION.
This means that all of a sudden, prices go
sky high.
But how is hyperinflation created?
You also know the answer… in most of the
cases, this is a 100% monetary phenomenon.
If a Central Bank
starts printing money like there’s no tomorrow,
the currency devalues.
But why?
What’s the connection between printing money
and losing the value of that money?
You see… when
we talk about currency, we have to consider
it as just another product.
Yes, you heard that right.
Currencies work under the same principles
as oil, oranges or mobile phones: supply and
demand.
For
example, the Venezuelan Bolivar has very little
demand.
Only Venezuelans use it.
So, when the Central
Bank of Venezuela prints a lot of Bolivars,
this is, expands the Currency supply, the
price is going to
fall.
This means, the currency will devalue.
Nonetheless, American dollar’s demand can’t
stop growing.
Everybody, around the globe, uses it for
international trade.
This means that the Federal Reserve has a
big margin to print money without risking
devaluation.
And now you might wonder…
Why would the Federal Reserve want to print
more money?
Well… let’s look at an
example.
Imagine you’ve lent 100 dollars to the American
Government.
And now you want them to pay you
back.
So you go there and they tell you: ‘Suuuure
man!!!
How much is it…? 100 bucks!
No prob, dude!
Just
go to that building next to this one, the
one where it says ‘FE-DE-RAL RE-SERVE’
and tell them to print
you those 100 bucks in just a second!!!’.
This practice is called ‘MONETIZING DEBT’.
And yes, when you tell things like this to
your friend, the
smartass, the one who thinks he is an expert
in geopolitics, he will have no idea of what
you are talking
about.
But the truth is that this hegemonic currency
is what allows America to issue more and more
debt, more
easily than any other country.
And this is why it is so normal to find headlines
like this one.
America’s debt crisis is coming — interest
payments will hit a trillion dollars a year
Having such a big debt is not really great
news for American taxpayers.
In this other video we told you
why.
But hold on just a second because I know what
you are thinking… is America as irresponsible
with its
monetary policy as Argentina or Venezuela?
And the answer is… of course not!
You see, all the Central
Banks print new bills year after year.
And not only print but generate more money
electronically.
The
difference is on the proportions.
On this chart you can see the increase of
the monetary supply, what we call the M2 indicator
of the
American Federal Reserve.
As you can see, the number of dollars grows
year after year.
But… what happens
if we compare it with the Argentinian PESO?
… well, you can see the difference… and
what happens when we
compare it with the Venezuelan Bolivar?
I guess there’s no need to comment.
In just 9 years, Venezuela
has multiplied their monetary supply by 100…
By 100! while America has not even doubled
it.
Bonus fact: while making this chart, we decided
not to include the year 2018 because otherwise,
the
yellow part would cover everything.
This year, the Central Bank of Venezuela has
multiplied their
monetary supply by 4000.
And… this is one of the reasons why the
American Dollar is the most used currency
on the planet: because
it is stable.
While other Central Banks print money like
crazy, the Federal Reserve is pretty responsible.
And now you might wonder…
What happens with other currencies like the
Swiss Franc or the Sterling Pound?
If there is one stable currency in the world,
it’s the Swiss Franc, right?
Well… you are right.
In fact,
pay attention to this part of the video because
this is going to surprise you.
Despite the dollar’s
importance, it is not the only reserve currency
on the planet.
Far from it!
Check this out!
A MULTICURRENCY WORLD
We said it at the beginning of the video:
60% of the foreign currency reserves are held
on greenbacks.
But what happens with the other 40%?
The second most used currency is the EURO,
which represents 20% of the reserves.
After that we have the
Japanese Yen and the Sterling Pound.
But these are not the only ones!
Many central banks have reserves
denominated in Australian dollars or even
Swiss Francs.
Despite not being that common, everybody
appreciates these coins for their stability.
But the question here is… if what you need
for a currency to have a high demand is to
be stable… why
don’t we use Swiss Francs as much as dollars?
The answer is that there are many less Swiss
francs on the
market.
Think about it, Switzerland has 8.5 million
inhabitants.
The United States has 300.
This means that the
Swiss National Bank doesn’t need to issue
as many bills.
Remember how I said the World has 1.67 trillion
dollars?
Well, the Swiss Franc doesn’t even have
1
trillion.
This means that it is harder to find francs
than dollars for a transaction.
On the other hand,
America is the World’s biggest market.
This means that thousands of companies from
all over the World
sell their products here.
So imagine you are an Australian company and
you are selling mobile phones in New York.
How do they pay
you?
With American dollars, of course!
Then what do you do with those greenbacks?
You change them to your
local currency.
So now who will have the American cash?
Of course, that would be the Australian bank
where you made the exchange.
In other words, the more America trades with
the World, the more dollars will circulate
around the globe.
This is a currency that is stable, abundant
and supported by the biggest economy.
Decades ago, no other
currency could be a match for the greenback.
But, as you know, the World is changing.
At this point, I guess you can see where I’m
going with this.
At the beginning of this video, I asked
you…
Is it possible that the dollar will lose that
hegemony?
Or, at least, be less important than it is
Today?
The answer is… yes.
As U.S. Trumpets ‘America First,’ Rest
of the World Is Moving On
We have been telling you week after week here,
at VisualPolitik…
Donald Trump wants to Protect America
from international trade.
His first move was to cancel free trade agreements
with EU and Asia.
After
this, he introduced tariffs to steel so companies
like Harley Davidson are leaving the country.
Trump has
also announced that he was to end NAFTA, which
is the trade agreement between US, Canada
and Mexico.
In
other words, Trump’s America wants to isolate
itself from the international market…
So what does this
mean?
Well… it means the other countries will
have less dollars.
Add to this other news… like this one.
Europe’s central banks are starting to replace
dollar reserves with the yuan
Or… this other one…
Russia Plans Yuan Bond Sale With Sanctions
Threat Nearing
But don’t get so excited, yet!
It is true, the Chinese YUAN, also known as
RENMINBI, used to be an almost
unknown currency in the international market.
It was only used inside of China.
Nonetheless, in recent
years, some Central Banks are starting to
buy it.
But, of course, this doesn’t mean that banks
will start
changing all their dollars to yuans overnight.
In fact, there are many things we don’t
know about the Chinese renminbi.
Things that your friend, the
smartass, probably won’t know about.
But don’t worry because in the following
weeks there is going to be
a continuation to this video!
So don’t forget to subscribe to VisualPolitik,
and click on the bell icon
so you don’t miss any posts.
Meanwhile, here are some questions…
Do you think the dollar can maintain its hegemony
in the following
decades?
If not…
What other currency could be a substitute?
The Yuan, the Euro… maybe the BitCoin?
Please, leave your answer in the comment section
below.
And please, don’t forget to visit our friends
from RECONSIDER MEDIA, the podcast that provided
the vocals
in this episode that are not mine.
If you like this video, give us a thumbs up
and, as always, I’ll see you next time.

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