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Trouble for the U.S. Dollar
How freezing Russian assets could trigger accelerated decline
The U.S. dollar has essentially been the world’s reserve currency since the 1944 Bretton Woods Conference in New Hampshire, which was attended by delegates from 44 Allied nations. Held towards the end of WWII, the conference established the IMF (International Monetary Fund) and also established American financial and economic dominance.
Prior to this, in real terms, the U.S. dollar had surpassed the U.K. pound sterling in the 1920s as the world’s dominant currency.
During Bretton Woods, since the United States controlled two-thirds of the world’s gold at the time, it was able to insist that the world’s monetary system would be based on both gold and the U.S. dollar. Only the Soviet Union refused to ratify this.
Then in 1971, President Nixon closed the gold window, officially cementing U.S. dollar hegemony.
Since then, countries have been using the U.S. dollar as the world currency and also as an international reserve currency:
- Of the $2 trillion dollars in circulation in 2020, half were used outside of America
- In FOREX (foreign exchange) markets, dollars are involved in about 90% of transactions
- Internationally…
