The U.S. dollar holds a unique position in the world of finance and trade, serving as a cornerstone of the global economy

Its status as the primary international reserve currency, medium of exchange, and unit of account for a vast range of transactions has far-reaching implications for governments, businesses, and individuals alike.

In this lesson, we’ll learn the key aspects of the dollar’s global role.

In addition, we will explore the factors that contribute to its enduring appeal.

Historical Foundation: The Bretton Woods System

The origins of the U.S. dollar’s global dominance can be traced back to the 1944 Bretton Woods Conference.

Bretton Woods aimed to establish a new monetary system to promote international trade and economic stability after World War II.

The United States controlled two-thirds of the world’s gold reserves at the time.

So the U.S. dollar became the anchor currency for the Bretton Woods system.

Uncle Sam was basically the greedy leprechaun hoarding all the world’s gold in his pot.

Consequently, countries pegged their currencies to the dollar.

The dollar was itself convertible to gold, making it the primary medium of exchange for international payments.