HOW DOLLAR BECAME THE GLOBAL CURRENCY

The U.S. dollar's rise as the world's powerhouse currency reshaped global finance and power dynamics.

The U.S. dollar's journey to becoming the world's dominant currency is a story of historical turning points, strategic economic decisions, and geopolitical transformations. From its marginal status in the early 20th century to its central role in the post-World War II monetary system and its ongoing influence today, the dollar's rise reflects the evolution of global power dynamics and financial systems.

The story unfolds across three critical periods: the "prehistory" of the dollar before World War II, the establishment and subsequent collapse of the Bretton Woods system, and the post-Bretton Woods era, including the Jamaica monetary system. Each phase demonstrates how global crises, economic policies, and international cooperation have shaped the dollar's role.

BEFORE 1944

The gold standard and the early 20th century

Before World War I, the global monetary system revolved around the gold standard, which tied currencies to a fixed amount of gold. The British pound sterling was the dominant international currency, reflecting Britain's global trade dominance and vast colonial empire. The U.S. dollar, meanwhile, was largely peripheral, with its influence limited to neighboring Canada and parts of Latin America.

The situation began to change with the advent of World War I. European powers suspended gold convertibility to finance the war, while the United States maintained the gold standard. The war marked a turning point for the U.S. economy, as it became a key supplier of food, materials, and armaments to the Allies. By 1919, the U.S. had amassed nearly two-thirds of the world's gold reserves, transitioning from a net debtor to a net creditor nation.

The interwar period and dollar's ascendancy