THE IMPORTANCE OF SAVING IN DOLLARS – PART 3
So the price of the US dollar is extremely well protected by the Federal Reserve, the central bank of the United States. To understand this further, it is necessary to say that central banks exist throughout the world. The mission of the central bank of a country is focused on assisting it when its commercial prices begin to fall on stock exchanges.
If for some reason the price of currencies does not compensate for the prices demanded by other markets, then the country agrees to make massive purchases of that currency to have support in paying the imbalance that the currency is undergoing.
This is something that happens with certain frequency in economies that are not quite stable as are Mexico, Colombia or Venezuela, among others. As the dollar declines, its trade relations with other countries become more expensive, so that the Central Banks intervene injected good sums of money to offset the evident depreciation of the local currency.
Beyond Protecting a Currency
However, in addition to this, in the United States, the Federal Reserve System was created to protect the capital of banks. If for some reason a bank gets robbed, bombed or suffers the consequences of a fire, then the Federal Reserve System has to cover the losses and provide security over the money of the individual account owners.
That is exactly what happens with the dollar as a high-impact American currency in the international market. The sums of money collected by the Central Bank of all the banks that exist in the country, or abroad, are used as an economic defense system.
That is why many of the myths and prejudices that exist around the dollar as a currency that can be depreciated are mostly obsolete and devoid of depth. The United States of America is a country that, given its military policies, is always alert to prevent an international confrontation that may reduce its high economic activity. It already has measures ensured in the case of that occurring, however.
What if a Country Ends Its Commercial Relations with the United States?
This is one of the most interesting examples when it comes to explaining why the value of the dollar has so much impact on the market. Given this circumstance, when ending commercial relations with a country, the US dollar would undoubtedly begin to lose value, and from then on the sector of the national economy would have to focus on itself to get ahead.
However, the US dollar, as a currency, continues to be backed by the economy of the United States. If you take the wad of dollars that you have saved in your hands, and you go to another country, you will soon see the reality that its commercial value is still equal to the currency of your own country.
This is what happens in the world of the forex market, better known as Forex: a topic that needs to be studied if you want to understand the importance of saving in dollars.