• Fahad Ezzi

Why does the US dollar never loses its value?

Since I was born 15 years ago, the value of the United States dollar has never changed significantly. Why does everybody treat the US dollar as a currency that will never lose value, regardless of the conditions? However, can it actually lose its value someday? Let us recall the Dollar bill’s value in 1913. The dollar has lost about 96% of its value since then. In other words, 1 USD nowadays is equivalent to only 4 cents in 1913. Inflation is high, and it is still rising. After knowing that piece of information, the million-dollar question remains: why do people worldwide still heavily rely on US dollars? Most multi-national businesses utilize dollars, and many people even exchange all their savings into dollar bills!

Let us keep that question till the end, though. Based on Bloomberg.com, “Against a broad set of currencies, and adjusted for inflation, the dollar is surprisingly stable." The United States has the highest number of COVID-19 cases; nonetheless, its effect on the dollar bill is minimal. The United States dollar bill is still viewed as a highly safe asset by investors. So how does the United States manage that as a country?

The best explanation lies in the highly stable political and economic state of the United States. “I take great responsibility that people use the dollar as the reserve currency of the world, and the dollar is quite strong,” United States Treasury Secretary Steven Mnuchin said. “The dollar is strong because of the United States economy and because people want to hold dollars and the safety of the United States dollar." One of the most crucial factors that affect the Dollar's value has just passed in the previous sentence. Demand. Simply, if people are still buying dollars, the famous bill will never fluctuate easily. However, there are other reasons why dollars are considered stable.

Second of all is the wide use of the United States dollar bill worldwide. As I said before, all businesses and common individuals are very familiar with the US dollar. More than $1.8 trillion is now circulating the world. It is estimated that one-third of every $100 is international, and more than half of every $50. Logically speaking, if people are using the currency internationally, the demand will continue to skyrocket. Although these are not the only reasons why the dollar bill is generally stable, these reasons are enough to stabilize any country at any state.

All in all, the most obvious reasons that keep the dollar stable are the demand, market, and treasury. Fortunately, the US has accomplished all the causes for a stable currency. Although the dollar bill lost 96% of its value since 1919, it still is not considered significant relative to other currencies. Based on Key Currency, the euro decreased by 0.30% during only 20 years. After unraveling clarity from the murky fog, we can say that the United States dollar bill is stable, nonetheless. Everyone from all different countries and reasons of travel is advised to travel with at least a hundred dollars in their bags.