Interview; A look at the financial market, The end of US dollar theories

As an inspiring figure from DUBAI, UAE,. Ammar opens up on the insights of the financial market and current theories.  

With a diverse background in business investment and, Finance and a founder of Ilyas, you have established yourself as a professional entrepreneur, can you share your insights about the end of reserve dollar as global reserve currency theory, and will it collapse?

Well, this is one of the most complicated questions and one of the most circulating theories., Iit’s similar to the end of fiat currency theory. First, a theory is vague, and we need to know the basics of the theory to evaluate it.

We are in the middle of the Ccoronavirus pandemic and the US has been  

issuing massive stimulus bills., Iin Mmarch 2020, the US passed the cares act with $2.2 trillion dollars in stimulus, and just last week they passed a new stimulus bill for $484 billion dollars.  in stimulus and Tthere are some discussions for a third package and that the Uunited Sstates don’t doesn’t have excess money coming into the budget.t so, Ttherefore, the Federal Reserve has to prints more money to send more us US dollars into the economy to generate growth and the general concern of inflation as result. There aree’s a lot of people out there with concerns over the stability of the US dollar;, I have been noticing a bunch of articles and videos been going around lately on social media, raising these issues. 

The currency market is the largest financial market in the world., The us US dollar makes up of 88% of the currency trade, which is by far the most used currency in the world following followed by EURur 32.30%, JPY 16.80%, and GBP 12.80%. Sso if you are going to hold money in your savings account, you are generally going to hold one of those four currencies because they are generally accepted as the most stable ones . Aan important feature when we discuss currencies are is that strategically, they are a zero-sum game; there’s always a winner and loser because you are always transferring from one currency to another., Ffor instance, if your savings account it needs to exist in some form of currency and if you want to get outchange from of US dollars, you will convert them to Eeuros or from Eeuros to Ppound Ssterling or some other currency. T so the question we are looking at is whether the US stimulus bills will make the US dollar unattractive. Let me ask you a question: Wwhich one of those their currencies are you going to transfer your us US dollars into? Tthere aren’t really that many great options, which is the answer to why many people around the world are holding us US dollars. Wwith that background how could a currency crisis happen with the US dollar,?  Nnow, there have been crises in the past in history thatwhich we know a little bit about and how they work. Currency is about confidence, so there would be a lack of confidence in the US’s ability to back their currency and we would see a massive flight from the U.S dollar into the other top three currencies. and thatAs such, there will be massive inflation in the United Sstates, so people will want to use other currencies to make transactions because they will be more stable. so Tthat brings us to our current situation with the Ccoronavirus. Tthe unique thing in this crisis is that it is global. Eevery country around the world is dealing with the same problem, so there’s is no incentive to move your currency from the U.S to England or anywhere else, as they are just as unattractive as the U.S dollar. So, from a currency standpoint they are even less attractive in a crisis that affects the entire globe., Iindividuals and companies would actually want more US dollars. A so all of this USs stimulus is being actually being paid for by demand fortowards  USus dollars around the world., Ppeople want to buy us US dollars., Ppeople want to buy us US debt because in comparison to other countries it is considered the safest and the most stable in its supply and demand. Federal Reserve is printing more money to supply the global demand for more us US dollars. Tthis is the benefit of being the reserve currency of the world as the world’s demands for us the US currency pays for the stimulus bills. The proof of all this is that if there was a loss of demand for the U.S dollar, we would see it in the currency markets and interest rates. However,, but we don’t see that; we see more demand for the US dollar. Even if there was a slight drop in demand, we would see it and the US would just change their policies to strengthen the U.S dollar. Tand that is the whole point of the federal reserve whom is to constitute of  they are a group of really smart people who just sit there and watch financial markets and they increase or decrease the supply of U.S dollars or decrease the supply to maintain the stable currency’s stability. That’s why the dollar is the reserve currency of the world ., Hence, I am not saying that the dollar could never suffer a currency crisis., Oof course, currencies could collapse but the current Ccoronavirus pandemic isn’t of one of the scenarios that lead to currency collapse because everyone is suffering the same fate. The real reason the U.S dollar is the most attractive currency in the world is that Americans work hard for really long hours and with very short vacations., the longest hours and the shortest vacations, Tthey make a lot of money and they spend that money in us US dollars. Tthere is a confidence that the American dollar will be able to work their way out.