Do you think the US$ will loose it's worlds reserve currency status if US stop waging wars?
If yes, how long?
- 1 decade agoFavorite Answer
Yes. Make no mistake about it. In 1971 President Nixon removed the gold standard, which backed our paper currency with gold in reserve. The dollar and most world currencies became a matter of alchemy, making something uselss valuable, backed merely by the trust in the power of the US govt. Most countires followed suit and replced gold with the US dollar in their reserves. The dollar was backed by the US govt and US production. In the 1970's OPEC agreed to sell oil in only US Dollars, substantially backing the dollar in real value and therefore the worlds #1 reserve note with oil.
The current Iraqi War was a result of Iraq's intention to break the OPEC pact and sell oil in Euros and not dollars in 2000 while it was selling most oil to Europe for the UN oil for food program. This occured at the same time (2000-2001) other countries began using the Euro as its reserve note. As more countries switched from the Dollar to the Euro as their reserve currency the US dollar has lost against the Euro steadily year after year. We invaded Iraq not for WMD or to be the good guys getting rid of Saddam, or to simply control Iraqi oil (The UN would never allow this) but we can and did install a puppet govt who while dependent on the US will sell oil in US dollars and thus prevent a rampant inflation. The war also disrupted a major producer of oil. Supply and demand folks, less oil with high demand (infact growing because of India and China's emergence) means the remaining oil being produced sold at higher rates for higher profits in....US dollars while the USA's oil reserves, the largest in the world, grew in value. This is why we can not simply leave Iraq.
The US dollar has lost value against the Euro, our real GDP, what we actually make and sell to the world is in deficit. If we were to loose oil backing AND reserve status the dollar would become worthless and rampant inflation would result as interest payments on our deficit would take effect. No one is going to force payment of deficits when their reserves are in US dollars, it would ruin the economies of all countries holding the US Dollar as its reserve, and other countires (ie Japan) holding substantial US Govt. bonds. The only way for the USA to maintain its current lifestyle and deficit is to hold onto oil as the true backing of the dollar.
this is why
1) an oil man was put in place as president in 2000
2) we invaded Iraq
3) we will not leave Iraq
4) other countries do not 'call' out payments on our outstanding debt
5) the US govt does not aggressively persue alternate energy sources
6) the UK remains our ardent ally, they refuse to adopt the Euro as their reserve
7) US govt policy is one of global military power and command, because we can no longer maintin our artificially inflated economic power.
8) the USA continues to add countries in far flung areas of the world into NATO, its global military arm when the EU brings in new member countries. It allows bases to operate from for support of the US Govt
We will see the ultimate decline of the dollar as reserve currency when European states withdraw from NATO and or Asian economies switch from the Dollar to another reserve.
Iraq was a warning to other countries that the USA can and will defend its false economy and standard of life through military means.
please see the links below for more infoSource(s): http://www.financialsense.com/fsu/editorials/schif... http://www.house.gov/paul/congrec/congrec2006/cr02... http://archives.cnn.com/2000/WORLD/meast/10/30/ira... http://economics.about.com/cs/money/a/gold_standar...
- 1 decade ago
On the contrary, waging wars and spending resources the US doesn't have while borrowing against the future only continues to weaken the dollar. The house of cards will collapse this century - the dollar is less attractive every day, and its only actual value is perceived. Baby boomers will overwhelm Social Security/Medicare, immigration, global outsourcing, worsening educaition, erosion of families, and the evaporation of the manufacturing backbone of the US economy are dragging the US towards third world status.
- berhowLv 43 years ago
If the U. S. "loses" their spot simply by fact the worldwide forex, it would desire to not have lots bring about any respect, different than we'd be extra inspired to persist with sound economic coverage with to blame reserves, as we'd desire to consistently have all alongside. FYI, they have been speaking approximately doing this lower back while Bush grew to become into President - the fee of the dollar crashed by practically FIFTY p.c. before Dems have been given the speaker chair in 2007. practically each concern we've could be blowback from this tragic and somewhat avoidable adventure.
- Anonymous1 decade ago
The US will keep reserve currency status as long as investment is attractive in the US.
Certainly, it won't last forever; just how coins with Caesar's face on them are not the reserve currency anymore.
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- 1 decade ago
yes. there is alot of money involved in war. the tax payers alone pay millions a year. even countries not waging war spend millions on preparations. if america stop waging war, im afraid that they will go from top to not in a few years. and the damage to theyr economy will e eriversable.
- Anonymous1 decade ago
NO! Why should it?