Why is growing $

    I noticed that many have a misconception about the principles of functioning of the world economy in general, and the monetary system in particular. I would like to shed light on this issue.

    A bit of history.

    Well, a lot has been said about the Bretton Woods system, so I won’t go into details, I’ll tell you briefly. The Bretton Woods system was adopted by the Allied countries in World War II, and its essence was as follows: the dollar is the world currency. The dollar is secured by gold. All other currencies are provided with the dollar.
    This system existed until the mid-seventies, when the value of the currency began to be determined on the basis of market mechanisms, on the principles of free conversion (hard currency - an abbreviation familiar to dashing nineties everyone)

    Since then, in fact, currencies have become a common commodity, the price of which is determined by the balance of supply and demand.

    Some statistics
    According to this site, you can get the following picture of the dynamics of the dollar against other currencies over the past 4 months (just grab the start of the crisis):

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    Dollar / Euro
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    Dollar / Pound
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    Dollar / Brazilian Real
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    Dollar / Indian Rupee
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    Apparently the dollar is growing against all of these currencies. And only with respect to the Yen, the dollar is constantly falling:

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    Dollar / Yen
    _____________________

    The basic dynamics are clear. Despite the global crisis in the United States, the currency of this country is growing in relation to most other world currencies.

    So why is the dollar rising?

    It is incorrect to say that the level of the country's economy does not affect the exchange rate of this country. It also affects how. Only now not directly, but indirectly. The law that the amount of money should correspond to the amount of goods that can be bought with this money has changed a little. Now the amount of goods that can be bought with the same money is inconsistent, and depends on the exchange rate. And the rate is determined on the exchange. And the economy of the country, the issuer, affects the rate indirectly, along with a number of other factors.

    It would seem that the US has a crisis, unemployment, bankruptcy, a huge budget deficit, and the dollar has been growing against most currencies over the past three months, just during the crisis. Paradox? No, if you understand the reasons for this growth.

    Yes, the US economy is falling, and this drop is affecting the exchange rate. If, under the same conditions, the US economy would still grow - the dollar would skyrocket. But besides the economy, there are other factors, and the most important of them are now 2:
    1. The economies of all other countries whose currencies are traded on exchanges are also falling.
    2. The price of oil is falling.

    As we have already said, the price of hard currency is determined on the basis of the balance of supply and demand. If the price of a currency rises, then there is a demand for it. Due to the crisis, oil consumption in the USA and the world has decreased, which has led to a drop in oil prices. In the past few years, oil has been an interesting investment target. It invariably and very quickly grew in price, which attracted investors. But due to the decrease in oil consumption in the USA, the price for it began to fall and investments in it became not so interesting. By that time, the dollar had already fallen quite strongly (it had been falling steadily over the last year), and immediately attracted the attention of investors. The dollar is a commodity, and since oil has become less attractive, they began to buy dollars. Why not the euro? And what's the difference if both the US economy and the European economy fall? But the euro is a young currency, and the dollar has centuries of trust, the US economy, despite the fall, it remains the strongest in the world, and the huge external debt of the states ensures that lenders break into a cake, but do not let the states go bankrupt. Demand for the dollar has grown, and the price of this currency is growing.

    What's next?

    And the dog knows him! No one can predict with sufficient accuracy what will happen to the price of the dollar in the medium term, because it depends on many factors. It is clear that the price of oil will not be able to fall forever, it is clear that OPEC will do everything to increase the price of oil, and then oil will again become an interesting commodity, and demand for it will increase, and demand for the dollar will fall. It will probably be so. And the expensive dollar is unprofitable for the States themselves, and they will do something to lower it.

    But all this is just speculation, and what will happen in reality - time will tell.

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