Forex Is Sexy
The story of why the USD is King
Not only is forex the cornerstone to financial trading, forex is sexy. After knowing a little of what impacts the value of a currency, you’ll never see the news in the same way again.
Each currency has a story to tell. The British pound was the reserve currency of the world prior to WW2. The Euro is the newest currency but the second most traded.
The Russian Ruble and the Chinese yuan are trying to create a new world reserve currency.
But the main story today, The US dollar is king. It represents 85% of all currency trade volumes. It’s considered the world’s reserve currency. It’s what most countries hold their wealth in. It’s what all commodities are traded in.
But it wasn’t always that way. After World War II the old-world economies were in shambles.
After WWII the US emerged as a true superpower and global leaders decided the US Dollar would become the reserve currency of the world. The plan was simple. The US government would maintain and be held accountable to a list of criteria. The US dollar would be valued based on its gold reserves.
In 1944, the United States was granted unprecedented privilege. It could now buy the world’s commodities using its own currency. Even better… Everyone else also had to purchase commodities using the US dollar. For example, France wants to buy oil. The currency in France is the Euro. France can’t just go to Canada and use its Euros to buy oil. France must convert their Euro to USD and then buy the oil from Canada. And the same can be said for all global commodities, all global products.
This agreement was working fine until the late 60s. Then cracks in the plan began to appear.
That’s when foreign banks realized they were holding $14 billion dollars in reserves. But the US only had just over 13 billion in gold. That spooked many foreign banks. Especially France.
In 1971, France sent a warship to America, filled with US dollars to exchange into gold. They wanted gold instead of paper. But as the ship got closer, President Nixon was holding a secret meeting. On August 15, 1971, and on live national TV, he announced the suspension of the dollar to gold conversion. This decision changed the world. The world moved into a new system called the Fiat system. The value of a country’s currency is no longer based on gold. It’s based on the people’s confidence.
Even though The US dollar was no longer tied to gold, it was now more important than ever to maintain its standing against the list of criteria set back in 1944. Stable democracy, military superpower, largest world economy and the largest most liquid financial markets. And this explains a lot. For the last 78 years, the US has fought, maneuvered and imposed its will to keep its privileges.
Knowing this, you will never see the nightly news in the same way. Open war, false flags, regional conflicts, trade wars, regime changes and more. The country does these things to defend its privileges as the world’s reserve currency, right or wrong.
The US is a massive war machine. It is a warring nation of 330 million strong. It has the largest military spending in the world. Larger than the next 30 countries combined, of which most are allies. The largest air force in the world is the US Air Force. The second largest air force in the world is the US Navy. It’s federal law that there must always be at least eleven operational aircraft carriers. It operates 19 at any given time with a few in reserve. It has over 800 military bases in over 70 countries. 1.2 million actively serving personnel. With over 18 million combat ready veterans. And that’s what makes it a superpower.
Now, let’s talk about the economy. GDP of over $20 trillion, with a labor workforce of over 161 million. California alone is the 6th largest economy in the world, ahead of the UK and just behind India. It’s not only the largest consumer of oil, it’s the largest producer of oil. It’s home to the world’s largest tech companies which control most of the world’s data.
This is what makes forex sexy. Every currency has a story, and you will never watch the news the same way again. When you see something shocking in the news and it affects the United States, take note, it will affect you. Eventually. The US dollar is king. When the United States economy sneezes. The rest of the world catches a cold.