MOMENTUM – its high now

The US economy, with GDP of nearly $25 trillion vs. China’s $18.00 trillion, is the largest, most flexible, and open enough to accommodate large trade deficits caused by the dollar’s predominant status. Besides, being the most stable democratic system with rule of law, effective checks and balances, and free media, the U.S. stands out as the most reliable economy and the largest and vibrant financial market for domestic and foreign investors. Nearly 50 per cent of international trade is invoiced in dollars, and nearly the same per cent of all international loans and global debt securities are denominated in dollars. Currency trades in the foreign exchange markets involve the dollar nearly in 90 per cent of all transactions. It may be noted that there are approximately $1.74 trillion paper dollars in circulation of which overseas circulations are roughly estimated to be in the rage of 40 to 72 per cent.

It is estimated that more than 33 per cent of global GDP comes from countries that peg their currencies to the dollar. Seven among these countries have adopted dollar as their domestic currency and another 89 countries have been maintaining their currency in a narrow trading range relative to the dollar.

The dollar is just one of the world’s 185 currencies but most of the remaining 184 are used for domestic transactions. Historically, the dollar has been playing a unique role in U.S. balance of trade as being the top export. It makes the balance of trade tilted in U.S. favour like no other product. Thus the dollar reigned with little challenge so far and has greatly uplifted America’s geopolitical standings with privileges and prestige unattainable by other economies. What a power to have your printed paper buy all other countries physical goods and services and in turn they use the same paper currency to buy the same across the globe. Why would the dollar surrender so easily and so soon?