Did you know that foreign countries need to buy imported goods with the U.S. dollar? Here’s a short video and written blog to give you some of the basics.
The Dollar Was “as good as gold”:
During World War II, much of Europe was getting bombarded and blown up. In the summer of 1944, an economic conference was scheduled in Bretton Woods, New Hampshire to discuss the challenges with the global economy and international trade. Representatives from the allied countries in Europe, South America, all over the globe, came to New Hampshire and created the Bretton Woods Agreement which established the U.S dollar as the world’s reserve currency.
So, what does it mean for the dollar to be the world’s reserve currency? Anytime countries want to have international trade with other countries, they must convert their currency into U.S. dollars in order to buy goods from those other countries. Countries like France, Spain, and others sent us their gold to store safely in Fort Knox and the US dollar was backed by this gold. That is where the phrase “the dollar is as good as gold” came from.
While the dollar is still the global reserve currency, it has not been backed by gold since 1971.
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