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not even sure why our dollar is the base for trade, when its so overly inflated, its beyond stupid.. todays dollar value is same value of a Mexican penny.. worthless.. so why even use it for trading..
The US dollar is backed not just by gold, but by ALL of the real goods and services produced in the US economy. Since the US economy produces about 22% of everything that is produced anywhere in the world, and as it has long and deeply participated in international trade, the dollar is quite naturally valued around the globe as both a reserve and trade currency.
I've periodically made some decent money from currency arbitrage myself. But it was hardly relevant to use of the dollar as a reserve currency. That happens as the result of day-to-day transactions by millions of people.
The US remains the worlds largest client state, so any country selling to the US has a vested interest in keeping the US dollar strong.
I stand corrected. I looked up the term and it means something completely different. I meant the US imports more than any other country (though China is catching up), and is therefore an important customer.
In your next post you might explain that water is wet....or 2 plus 2 is 4. Oh wait, you covered that.
This has really gotten petty.
In Post #5 you said: "This will pretty much be my last post to you." I thought that was a good plan.
Putting out information in a thread is a good practice. The fact that one doesn't need the information provided doesn't give one license to pick at how "trivial" or irrelevant stuff i8s.
The bit about the "beauty contest" was a great analogy and not directed at anyone. It wasn't tangential the least little bit.
Pub-911's Post #4 was a great summary of what a reserve currency is and how one comes to be. There was nothing worth criticising in it.
The US dollar is backed not just by gold, but by ALL of the real goods and services produced in the US economy. Since the US economy produces about 22% of everything that is produced anywhere in the world, and as it has long and deeply participated in international trade, the dollar is quite naturally valued around the globe as both a reserve and trade currency.
USA official gold reserves 26.2 grams per capita which is worth the same as all the banknotes circulating except the $100 bill. Unfortunately most of the value of the circulating currency is in the $100 bill which is backed by the US economy.
I have argued that the currency supplies is being grown at a rate considerably faster than that of the US economy, so there may come a day when there is some concern about the "value" of US banknotes. Although the percentage increase is the same as many other countries, if the USD is going to be the world's reserve currency, we may want to step down production so it matches some outside metric (like GDP growth).
The Eurozone made the recent decision not to include the 500 Euro banknote in the new series of notes. While the older banknotes will remain valid forever, confidence in the notes has been reduced.
Nobody's bank notes have any intrinsic value at all. As a medium of exchange, they are however worth the real goods and services that they can be traded for, and the easier that exchange, the better. Actual currency meanwhile exists in response to transactional demand. There's your metric.
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