Understanding U.S. Currency

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U.S. currency is all of the cash and liabilities that the United States owes to other people. It is consider the preeminent currency in the world. Find out how the Euro and the Yen are in competition with the U.S. dollar with information from a financial consultant in this free video on currency.

Part of the Video Series: Currency Trading Guide
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Video Transcript

I'm Roger Groh and we're here to talk about what is U.S. currency. Well, U.S. currency is all of the cash and liabilities that the United States has that they owe to other people, pretty simply. Now, what would cause the price of the stock to go up or down, well, you know, in some businesses, the government or the controlling company sets the price. Not here. The reason is, you and I own a lot more currency, in dollars, than the government does. So, we set it. And it's strictly an auction market. It's very volatile. Lose tremendously in any minute or day and, um, but it is a pure auction based market. Now, why would anybody hold U.S. currency? Well, today, the United States is about a third of all the growth in the world. We're about 33% of GDP. So, other countries need dollars in order to settle with us, things that they buy from us. So, if you think about it, if we sell a product to China, the Chinese then have to come back and settle with us in dollars. On the other hand, if we buy something from China, we have to settle in RMB or Yuan with them. So, the U.S. currency, being the preeminent currency in the world, is the most sought after. It's viewed as not being volatile, politically. It might go up or down in price but it's not volatile politically. And it's, it's viewed as being the next best thing to gold. An awful lot more reliable and easier to settle. The U.S. currency, though, um, at times, has taken on characteristics of risk-less. Meaning, people have bought it in order to eliminate the risk that they might have with owning another currency in a country that's marginal, let's say, Ecuador, as an example. And, and the problem when they do that is, of course, that you can't only own one currency. The U.S. is only one-third of the world's growth. It's huge but we're only a third of the world's growth. That means that you have to own francs, Euros.You have to own yen. You have to own pesos. You have to own all of these other currencies to exist in the world in order to settle accounts. Anyway, the U.S. is viewed as the preeminent currency. The Euro would very much like to be the preeminent currency and we're in a little bit of competition with the Euro, only they're more screwed up than we are, economically. The yen would also like to be in competition with the dollar, and they play in Europe, uh, in, uh, Asia, uh, a little bit, but not completely. Still, the dollar's the place to be. So, I'm Roger Groh and that's a little bit of understanding U.S. currency.

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