Dr. Abbas Kadhim Jasem Al-Daami, University of Karbala – College of Administration and Economics
Alia Thaer Mardan, University of Karbala – College of Administration and Economics
There is no doubt that the U.S. dollar represents the world’s primary currency due to the strength of the U.S. economy, and it is considered a safe-haven currency. The U.S. dollar gained a prominent position in the global economy following the Bretton Woods Agreement of 1944, replacing gold and the British pound as the main means of payment in international transactions. The dominance of the U.S. dollar did not occur overnight; it underwent a long journey, beginning with the introduction of the “greenback” when European settlers migrated to the U.S. in 1620.
However, the decisive moment for the dollar’s rise came with the 1944 Bretton Woods Agreement, where 44 member states established a global economic system led by the United States. This marked the official beginning of the U.S. dollar’s global dominance, transforming it from a local currency to a global one that dominated international trade in the new post-Bretton Woods financial system established by the U.S. and its greenback. The dollar became the main reference for determining other countries’ currencies, as the United States held 75% of the world’s gold reserves after World War II. At that time, the dollar was the only currency in the world backed by gold, while other countries abandoned the gold standard after experiencing inflation in their economies. This led many nations to accumulate U.S. dollars, replacing their gold reserves with dollars as a future reserve.
Many countries began using the dollar as a foreign currency reserve, and the Bretton Woods system-maintained exchange rates pegged to the dollar until 1971, when the U.S. stopped converting dollars to gold. Since then, demand for the dollar as a reserve currency and for international trade has grown due to its widespread use and the size of the U.S. market.
To answer the question: Can Iraq abandon its dollar reserves and replace them with gold and precious metals? We must first understand the historical importance of gold and precious metals in the global economy in general, and then focus on the Iraqi economy specifically, which can be explained as follows.
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