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Answer to Question #68981 in Other Economics for Briona

Question #68981




In 1944, finance specialists and bankers from around the world met to discuss what the post-WWII monetary system would be. Given the instability of the pre-war period, the goal was to create a new system. The outcome of this was the Bretton Woods system, which had the U.S. dollar as the world reserve currency linked to gold at $35 an ounce. All other currencies were tied to the dollar with limits on how much they could appreciate or depreciate. The system lasted until the 1970s, when the United States decided to move away from gold convertibility. The modern system is based on supply and demand for currency and a managed float. Discuss the following in your main post:

The U.S. dollar remains the world's reserve currency. Is this good for the United States, and if so, why?

•People usually think a "strong" dollar is good. Is this true for U.S. businesses, and does it help or hurt the U.S. balance of payments?
Expert's answer
The post-Bretton Woods system is one of floating exchange rates. The U.S. dollar has still remained the reserve currency even after the end of the Bretton Woods system. Unlike many other countries, the U.S. dollar has never been devalued, and its notes have never been invalidated. This is one of the reasons why the U.S. dollar maintains a favored status.
Reference:
Investopedia http://www.investopedia.com/articles/investing/090715/us-will-remain-worlds-reserve-currency.asp#ixzz4kgF3rQRW

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