Date of Award

2020

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Khemraj, Tarron

Area of Concentration

Economics

Abstract

This paper is intended to explain the value of the US Dollar. In order to do this, I will begin by developing a theory of money in general before moving on to discuss the unique aspects which set the dollar apart. Before I can explore the value of the US Dollar, I must clearly articulate the concepts of value and money. Value is a wholly subjective concept. Changes in value therefore can be completely explained by changes in the sentiment of individual market actors. I contend that monetary theory often puts too much emphasis on the differences between different forms of money. I attempt then to flesh out a practical theory of money, not an aesthetic one. What makes a money is in its use, not in its form. The scope in which I apply monetary theory to the case of the Dollar will be limited so as to allow for greater focus on what sets it apart from other modern fiat currencies. The US Dollar behaves in a unique fashion relative to other currencies. The value, for example, of the Dollar is far less susceptible in my view to depreciation as a result of an increase in the money supply than a currency such as the Argentine Peso. The difference in my view is not random or a coincidence; there is good reason for the Dollar’s relative price stability. To this end, much of the paper is dedicated to unraveling the nature of the global demand for the US Dollar and what a unique position the Dollar occupies in the global economy. It is this unique position which allows the United States Federal Reserve to increase the supply of Dollars so substantially while having relatively little impact on the value of the Dollar compared to the impacts similar programs carried out by other central banks may have on the currencies they issue.

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