In this video I want to talk about Supply and Demand as it relates to the Dollar … focusing on two key events in modern history.
The first event is the Bretton Woods Agreement of 1944 which made the Dollar the World Reserve Currency. This measure automatically raised the demand for the Dollar throughout the world.
Then the second event was the Petro-Dollar System which came into being in 1973 as a result of the Nixon Shock of 1971 whereby President Ricard Nixon had taken the Dollar off the Gold Standard. So basically, the Oil Standard replaced the Gold Standard … Another way to put this is to say is oil acted as a substitute for Gold to back the Dollar.
The implementation of the Petro-Dollar System meant that anyone wanting to buy oil would have to use Dollars to do so. So, this measure too automatically raised the demand for the Dollar throughout the world.
I’ve done videos about both these things as part of my Jigsaw Puzzle series if anyone is interesting in finding out a little more.
Both these things have had an incalculable impact on the US and the rest of the world, pushing up demand for the Dollar and artificially raising the value of the Dollar as compared to other currencies.
These two things have ensured that the US has been in a very privileged position ever since the end of World War II. At least up until recent times.
However, things are changing. The world has been de-Dollarising. The dominance of the Dollar is on the wane.
The Dollar is in the process of losing its World Reserve Currency status. Slowly but surely countries are moving away from using the Dollar.
As evidence of this we can see that the share of global foreign exchange reserves has fallen from above 70% in 1999 to 59% today – so a two decade decline.
Moreover, the Petro-Dollar System came to an end in October of this year when President Xi of China went over to Saudi Arabia and did a deal with the Saudis. Although there has been no official recognition of this in the Western world … certainly not from the US. Be that as it may, more and more counties are doing bilateral agreements for purchases of oil thus by-passing the Dollar.
In any event … What does this mean in terms of Supply and Demand as it relates to the Dollar?
There are presently an awful lot of Dollars in the world.
And the Supply keeps on increasing as the US administration borrows more money from the FED.
So, we can say that there’s not only already an oversupply, but Supply is increasing and will probably do so at an exponential rate.
So, that’s the Supply side of things.
Let’s consider the Demand side of things.
A huge amount of Dollars have been printed ever since 1945 in order to meet the rise in demand across the globe. But Demand has been dropping because fewer companies and countries are using the Dollars for international trade or whatever.
So, we can say that there’s an oversupply along with an ever-increasing Supply and in conjunction with dropping demand.
If we consider
