Have you ever wondered why the US dollar has become the king of currencies in the world? Whenever we talk about international transactions, we always use the US dollar as a benchmark. What makes the US dollar so special?

Researcher & Writer: Yosefani Oktavia

Illustrator: Helen Angelia

The US dollar came into existence in the world after the establishment of The Fed, the central bank of the United States.

This organization was founded due to the chaotic state of the US currency system, where individual banks were issuing their own paper money.

With the establishment of The Fed, the production of US dollars came under its jurisdiction, resulting in increased financial stability in the United States.

During that period, the US had the world's strongest economy. Despite the fact that international trade was predominantly concentrated in England and the majority of transactions were conducted using the pound sterling.

Many developed nations, England included, continued to rely on gold as a tool for stabilizing their currencies. The outbreak of World War I marked a turning point in the use of the gold standard, as paper currency became more prevalent.

This led to a decrease in the value of their respective currencies, ultimately requiring financial assistance in the form of loans. Despite prevailing trends, England remained steadfast in utilizing gold as a stabilizing factor.

Consequently, other nations were unable to reinstate the gold standard due to the exhaustion of their gold reserves. Finally, a meeting took place to discuss a fair system for managing global reserves.

Following deliberations, the decision was reached to establish the US dollar as the global currency, given its widespread reserve status across numerous nations. This agreement came to be known as the Bretton Woods Agreement.

The agreement also endorsed the establishment of central banks in each country, ensuring their ability to uphold the exchange rate of their national currency against the US dollar.

And that's the journey of how the US dollar emerged as the reigning currency in the world.

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