The US dollar is the global reserve and one of the most powerful currencies in the world. It is a benchmark for fixing the costs of goods in international transactions, and many nations have pegged their local currencies to it for economic growth.

Kavan Choksi– why did the US dollar become so famous?  

Kavan Choksi is a reputable business and finance expert with valuable knowledge in stocks, investments, and cryptocurrencies. The history of the US dollar dates back to 1914, when the first currency bill was printed in America. Before it became the reserve currency of the world, international trade was conducted in gold and silver.

The effects of the Second World War 

The Second World War depleted the gold reserves of several nations, and it was the USA that had the majority of gold during that time. It entered the War after the combat started, but unlike its peers like Germany and Japan, it did not face adverse economic effects after the War ended.

Delegates attend The Bretton Woods Conference to choose the USD as the global reserve

In 1944, delegates from 44 allied nations held a meeting at Bretton Woods in New Hampshire to unanimously agree to a fixed rate of foreign exchange for maintaining international trade. This meant that gold would no longer be the reserve currency, and the US dollar would take its place.

Why were the US dollar chosen and no other currency? 

As mentioned above, the national economy of America remained unaffected due to the Second World War. It was at this time that the value of the US dollar was $35 per ounce of gold. Since the USA was the owner of the majority of gold across the world, it became the natural choice for making the US dollar the reserve currency. Moreover, the USA became the hub for international trade and commerce after the dollar was declared the global reserve.

The role of the dollar in the world 

50% of the economic output of the world was owned by America after the War. This is the time when it started its ancient interventionist policy for foreign relationships across the globe with a mission to re-establish Europe.

Unfortunately, the Second World War had devastated the economy of many countries, and the USA did not want the occurrence of another third world war. Most of the nations in the world suffered from political instability after the War.

According to business and finance expert Kavan Choksi, nations that were regarded as modern fell prey to chaos or were dominated as a country by communists. Therefore, The Marshall Plan was introduced with the goal of rebuilding the countries in Europe.

At this time, the USA maintained a robust military presence to deter the Soviet Union in the region. All of the assets denominated by the USD remained safe during this period. However, the political scenario was not good for several nations after the War as they were crumbling due to political instability in the region. The reserve currency fixed the rate of foreign exchange in the world and started to be used for international trade and commerce successfully.