In today's global economy, there is one word without which trade, import-export or international transactions cannot be imagined, and that word is the US dollar. Today, the dollar is used in about 90 percent of the world's trade, and approximately 6.6 trillion dollars in transactions take place every day. In such a situation, every country has to keep dollar reserve. With the help of the dollar's strength, America directly or indirectly influences the economy of the whole world.
In India, the value of the rupee has been continuously falling against the dollar for some time now. There was a time when one dollar fetched 30 rupees, today the same dollar has crossed 90 rupees. In such circumstances, a question arises in the mind of a common man. Will the rupee weaken further? And most importantly, will this cyclical hegemony of the dollar ever end?
How is the value of a currency determined?
The value of any currency depends on its demand and supply in the market. The currency that is in higher demand automatically increases in value. The demand for dollars is the highest these days as global trade is mostly done in dollars. Because of this, the dollar has become not only a currency, but a symbol of economic power.
But this was not always the case. There was a time when world trade and exchange was mainly based on gold. The more gold a country had, the stronger its currency was considered to be.
There was a time when India and China were at the center of the world economy
About 200 years ago, if we look at global economic history, the picture was quite different. In the early 19th century, India accounted for about 23 percent of the world's total GDP. India and China were the two countries from which the whole world imported goods.
But by the end of the 18th century, the British Empire enslaved many countries in Asia, Africa and America. As Britain's power grew, its currency, the pound sterling, also became the main medium of global trade. There was a time when the pound sterling accounted for 60 percent of global trade.
World War I and the Fall of Britain
The First World War that started in 1914 shook the economy of the whole world. Before the war, Britain had a debt of just 0.5 billion pounds, but by 1920 that debt had risen to 7.8 billion pounds, which was 25 percent of its GDP.
During the war, the gold reserves of European countries began to be depleted due to arms, import and military spending. As a result the pound sterling lost its credibility.
In the early 19th century, India accounted for 23% of global GDP, and countries around the world imported from China and India. However, by the end of the 18th century, Britain had enslaved many countries in Asia, Africa and the Americas. As Britain grew in power, so did its currency, the pound sterling, which became the currency of trade and exchange. Soon, the world economy revolved around Britain, which enslaved these countries like India and China. At the height of the British Empire, Britain's currency, the pound sterling, accounted for 60% of global trade. Britain achieved this through industrialisation. When various industries were established in Britain and the products produced by them began to be sold to its slave countries, its economy grew.
In this way, Britain gained control of half of the world's economy. This continued for about 100 years, but then, suddenly, the entire economy collapsed. The reason was the First World War. When World War I began in 1914, Britain's debt was just 0.5 billion pounds. However, by 1920, Britain was under strain as this debt had increased 14-fold to 7.8 billion pounds, which was 25% of Britain's total GDP. This situation was not limited to Britain, but also to other countries that took part in the war. During the First World War, weapons were produced on a large scale, these countries imported large quantities of weapons, and money was spent like water, causing their economies to collapse.
In this way the economy of these countries was on the verge of collapse. Britain's gold reserves were on the verge of exhaustion, meaning its global currency had lost its value. However, one country proved wise in this war. This country was the United States. America did not participate in World War I at all. It joined the war very late, but it was indirectly involved in this war. It was selling essential goods like arms and supplies to warring countries. Clearly, American trade was growing, and with it, the US dollar, which began to circulate around the world.
Gradually, the US dollar began to gain a foothold in world trade. Britain may have won the First World War, but its hold on the world was broken. By the start of World War I, America realized that it had the best chance of establishing control over the global economy. However, reforms were necessary for this purpose. America still lacked a central bank. There were numerous restrictions and restrictions on trade. This isolated America from the rest of the world. However, after World War I, America changed its image in a way that surprised everyone. He reduced trade restrictions, established a central bank, created gold reserves to further expand trade, and improved his economic condition. Thus, America, enslaved by the European nations, emerged as the savior of the European nations.
How did America recognize the opportunity?
This was the one country throughout the period that was not directly involved in warfare. United States of America. America was selling weapons, food and other essentials to warring countries. Hence the American economy started to strengthen and the dollar started to circulate in the world.
World War II made the dollar a superpower
During World War II, America once again followed the same strategy. During the war he accumulated about 22,000 tons of gold through loans and exports, which was about 70 percent of the world's total gold reserves.
After the war, powerful economies like Germany, Italy and Britain were left in ruins. The British Empire collapsed and colonies like Indo-China gained independence. By this time the dollar had become the strongest currency in the world.
The Bretton Woods Agreement: Basis of Dollar Power
In 1944, before the end of World War II, 44 countries met at Bretton Woods in America. Here it was decided that all countries would do international trade only in US dollars.
America promised to give one ounce of gold for every 35 dollars. The meeting also established the IMF and the World Bank, which was dominated by the US from the start.
The Politics of the Petrodollar
After World War II the need for oil increased to keep industries going. An agreement was reached between the US and Saudi Arabia that Saudi Arabia would only sell oil in dollars. This established a close relationship between the dollar and oil, which we know today as the petrodollar system.
By the late 1960s, America had printed more dollars than it had gold. Seeing the situation deteriorating, President Richard Nixon announced on 15 August 1971 that the dollar would no longer be pegged to gold. This made the dollar more powerful because oil and global trade depended on it.
SWIFT, the IMF and the invisible strength of the dollar
Even today America has powerful weapons like IMF, World Bank and SWIFT network. If a country is kicked out of SWIFT, its global trade becomes almost impossible.
Is the dollar really getting challenged?
The term de-dollarization has been in the news for the past few years. For example, there was an agreement between India and Russia. However, such attempts have been made many times before, and each time everyone reverts to the dollar. That is why it is said that the dollar is almost impossible to challenge today.
Even though there was an 8-member drafting committee for the Constitution of India, only Dr. Why Ambedkar is called “Father of Indian Constitution” – this is the reason
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