Question

The US dollar has been used for decades as a medium of exchange, worldwide. Before the US dollar was so highly regarded, international commerce used the British pound sterling.

What causes world powers to choose to trade in one specific currency?

What does that mean for the world economy?

Why do the standard currencies change?

Do you see any changes in currency coming?

PLEASE ANSWER IN YOUR OWN WORDS NO PLAGIARISM!!!!!!

Answer 1

Before the first world war Britain had a huge colonial empire and its trade was also huge so due to its colonial empire and vastness of it trade .International trade took place through British pound sterling and gold standard exchange system was followed but after world war Britain had a huge setback it had lost its many colonies and had to suffer economic loss in war meanwhile united states of America emerged as a global super power .During the war US exported weapons in exchange of gold and till the end of war it had hue gold reserve .In 1944, delegates belonging to 44 Allied countries held a meeting in Bretton Wood, New Hampshire, to find out a system to manage foreign exchange that would not prove to be disadvantageous to any country. It was mutually decided that the world’s currencies which are so many couldn’t be directly pegged or linked to gold, but they could be linked to the U.S. dollar, which was pegged to gold ($35 per ounce of gold). The arrangement, which came to be known as the Bretton Woods Agreement, established that the various countries would maintain fixed exchange rates between their currencies and the dollar. In turn, the United States would redeem U.S. dollars for gold on demand. Countries followed this system because US had most gold reserves, more than 65% of the world's monetary gold reserve was with US at that time .

.For the world economy it was now more convenient to trade then trading through gold exchange system .Standard currency change for intentional trade take place either if it is inconvenient to trade like for gold or if it is a currency of a particular country and that country becomes weak and makes default in its payment then changes can come .

In near future no change is going to come since US dollar is very strong and most countries have a trade relation with US and Euro could have been a substitute for American dollar but Brexit which is going to happen in 2019 is a setback for it.

Before the first world war Britain had a huge colonial empire and its trade was also huge so due to its colonial empire and vastness of it trade .International trade took place through British pound sterling and gold standard exchange system was followed but after world war Britain had a huge setback it had lost its many colonies and had to suffer economic loss in war meanwhile united states of America emerged as a global super power .During the war US exported weapons in exchange of gold and till the end of war it had hue gold reserve .In 1944, delegates belonging to 44 Allied countries held a meeting in Bretton Wood, New Hampshire, to find out a system to manage foreign exchange that would not prove to be disadvantageous to any country. It was mutually decided that the world’s currencies which are so many couldn’t be directly pegged or linked to gold, but they could be linked to the U.S. dollar, which was pegged to gold ($35 per ounce of gold). The arrangement, which came to be known as the Bretton Woods Agreement, established that the various countries would maintain fixed exchange rates between their currencies and the dollar. In turn, the United States would redeem U.S. dollars for gold on demand. Countries followed this system because US had most gold reserves, more than 65% of the world's monetary gold reserve was with US at that time .

.For the world economy it was now more convenient to trade then trading through gold exchange system .Standard currency change for intentional trade take place either if it is inconvenient to trade like for gold or if it is a currency of a particular country and that country becomes weak and makes default in its payment then changes can come .

In near future no change is going to come since US dollar is very strong and most countries have a trade relation with US and Euro could have been a substitute for American dollar but Brexit which is going to happen in 2019 is a setback for it.