The Collapse of the US Dollar

Today, people live lives on their own terms, and don’t really care much for others. The same goes for governments/nations. Governments try to do what’s right for their own, and try to block everything else. However, that is impossible to do, especially in today’s economy, where a nation can not run without a trade market that connects them to the fate of other nations. In today’s trade nations created a currency which helps them trade easily, and that currency is the US dollar (USD). In today's economy, the value of the dollar is affected more by the situation in other regions than it is by the United States. As a result, the fate of the United States lies upon other countries/nations.

As one of the most developed countries in the world, the United States has one of the highest GDP per capita of any country. But the United States also is one of the highest debtors in the world. According to the World Bank, in 2013 the government debt of the United States had a 96.1% of GDP, while China had no debt, and Switzerland had less than 24% of GDP. This means that in the United States, the Gross Domestic Product (GDP) which is $16.77 trillion, 96.1% of that, is equal to the debt the US has to other countries. Because of the debt that the US has to other countries, the dollar is losing its value. The currency is not as valuable because the government/currency is “working” for the debt. If other countries were high debtors, like the United States, then the value of the dollar, would not be at risk. According to the World Bank, in 2006 Switzerland had a debt of 33.7% of GDP, while the United States had a debt of 55.3% of GDP, the debts are not the same, but as years passed, Switzerland decreased its debt while the United States debt went through the roof. The situation becoming better for other countries, meant the situation becoming worse for the United States.

The US Dollar (USD)  is held in significant quantities by governments and institutions as part of their foreign exchange reserves. This makes the dollar the most important currency in the world. Many situations are happening across the world, which is causing doubts about the USD being the reserve currency, and the International Monetary Fund (IMF) to think about the options they have, if they have to remove the USD as the reserve currency. According to Forbes, "If every nation sold their supply of dollars at the same time, the market would be flooded with dollars, which could cause its value to plummet. This would cause inflation to spike.” The USD can keep being the strongest currency, as long as other nations don’t think about themselves, but think about the USD, and that is very unlikely because every nations wants to survive and thrive. The USD will fall when, other nations get involved, and sell their supply of the USD, causing the value of the USD to crash.

Until 1971, the USD was a currency that was backed up by gold. That meant that every penny that the US owned, there was an amount of gold equal to that penny. Which made it a strong currency, and one of the reasons it was chosen as a reserve currency. According to International Monetary Fund (IMF), the USD is the top currency circulating in the trade market, and the Euro coming close second. As other nations are realizing the debt and value of the dollar, and how it is not backed up by gold, they will soon try to sell their supply of USD and the USD will crash. Realizing that the Euro and the Yen are rising above the USD, will cause the USD to plummet. An article written by The Voice of Reason about the USD says, “The whole world knows that we are much worse off than Greece as the planet’s largest debtor.” Greece is in a lot of debt, that accumulated over years, and the way money was spent for the Greek government led to Greece coming to default. Economists say that it will never be able to get out of debt. If the situation is really bad in Greece, then the United States will fall even harder, if other nations like China, Switzerland, Great Britain, and many others grow and improve their economy.

Most downfalls come from own mistakes, but some downfalls come from the rise of power in others. That is the case, that the USD might face. Although the United States has one of the greatest and most powerful economies and currencies that has ever existed, the downfall of it’s economy will come from other nations and other economies.

Work Cited

Forbes. Forbes Magazine. Web. 29 Sept. 2015. <http://www.forbes.com/sites/mikepatton/2015/07/24/is-the-dollar-about-to-collapse/>.

"Central Government Debt, Total (% of GDP)." Central Government Debt, Total (% of GDP). Web. 29 Sept. 2015. <http://data.worldbank.org/indicator/GC.DOD.TOTL.GD.ZS/countries/CN-US-CH-RU-GB?display=graph>.

"IMF Data." IMF Data. Web. 29 Sept. 2015. <http://www.imf.org/data>.