You may have come across catastrophic headlines saying the US was about to lose its global reserve currency status.
It won’t.
Here’s why.
If you don’t know anything about money, read this article, written by yours truly.
What Makes a Currency Valuable?
A currency is as valuable as what you can buy with it.
…
Let me say that again.
A currency is as valuable as what you can buy with it.
Let’s take two examples:
- The Australian dollar
- The Venezuelan bolivar
What can you buy with an Australian dollar?
- Food
- Gas
- Oil
- Copper
- Coal
- A ticket to Melbourne zoo
- Whatever Australia produces (that is, a lot).
What can you buy with a Venezuelan bolivar?
- Not much. The country is under economic sanctions and Venezuela does not produce anything valuable (besides heavy oil).
The Australian dollar is valuable because you can buy lots of things with it (but not only, see below)