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US Dollar is a Fiat Currency

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US Dollar is a Fiat Currency

The US dollar is a fiat currency. Fiat money derives its value from the government regulations and laws. The purchasing power of dollar notes depends on the state of the United States’ Laws and Regulations alone and depends on what it can purchase on the free markets.

Although the US dollar is a fiat currency and backed by nothing, many countries still consider it today as an important reserve currency. This means that other countries with own national currencies, must produce goods and services and sell them in US Dollar to get their needed US dollar notes. Only then, they can purchase the products and services sold in dollar. However, the US doesn't need to produce or sell anything to foreign countries to get US dollars. It has the exclusive legal right to print dollar notes at its discretion and buy the needed foreign products from foreign countries.

Petrodollar is an artificially created mechanism to propel the value of Dollar. For example when France would need to buy petrol from Saudi Arabia, it cannot do it by paying in Euro or Riyal, the local currency of those countries. It must convert Euros against US dollars through a banking system controlled by the US government before being able to pay the Saudis in US dollars. Various commodities are currently traded in US dollar.

Meanwhile China, Russia and the European Union are trying to establish new rules that enable them to exchange commodities in their local currencies, no more in US dollar.

Once alternative agreements are in place between producer and consumer countries, the need for currency conversion into US Dollar becomes obsolete. Furthermore, US Dollar is anticipated to lose its world reserve currency at the end of Grand Super Cycle degree subwave E around October 21, 2021. As a consequence, the US dollar valuation against other currencies should significantly drop due to excessive amount of US dollars in circulation.
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