How Will Modern Monetary Theory (MMT), Reserve Currency Status And Central Bank Digital Currency Impact You

Modern Monetary Theory (MMT) relies on the U.S. Dollar continuing as the world reserve currency. The reserve currency status could be challenged by the rise of the Central Bank Digital Currency.

A reserve currency is a foreign currency held in significant quantities by most world governments via their respective central banks.

Besides trade, the reserve currency forms a significant part of the countries’ foreign exchange reserves to service debt obligations.

The International Monetary Fund (IMF) was established to monitor exchange rates and lend reserve currencies to nations with balance-of-payments deficits.

How Did The U.S. Dollar Become The Reserve Currency

The discovery of oil in the Middle East resulted in another strategic advantage for the United States. Saudi Arabia agreed to price its oil sales exclusively in U.S. dollars.

In the last few years, there has been more talk about the U.S. dollar losing its status as the reserve currency.

In 1960, the U.S. represented about 40% of the world economy, but that has shrunk to less than a quarter.

What Is Modern Monetary Theory (MMT) Having the U.S. Dollar as the world’s reserve currency has significant benefits to both the U.S. government and the U.S. consumer.

MMT is a significant departure from conventional economic theory. Although American economist Warren Mosler developed MMT in the 1970s, it has recently been in the news due to some vocal voices.

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