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● USA Today
2023 Best Financial Advisory Firms
usa today best financial advisory firms 2023 logo for wellspring financial

Award based on independent survey carried out by USA TODAY and Statista. Firms need to be nominated by a participant in the survey. No prior registration is required, and no costs are involved for the nomination. The recommendations for each firm are summarized and evaluated anonymously. 
In addition to the survey results, additional metrics (e.g., data in relation to assets under management (AUM)) will be included in the final analysis.

Am I Too Reserved for You?

Am I Too Reserved for You?

Most everyone has heard the phrase: “The United States dollar is the world’s reserve currency”. Now, with global conflicts and tariffs afoot there are various conversations about other countries or things (cryptocurrencies) being the world’s ‘reserve currency’.  All this commotion raises the topic… “What exactly is a reserve currency?” Does it work for or against a country to be the world’s reserve currency?  The question is not necessarily an esoteric one, as it directly or indirectly impacts your portfolio as well, so I’ll try to make you one of the smarter people at the next cocktail party by giving you a quick lesson in it.

It’s helpful to have some context first.  There are 197 countries on this planet, and there are 164 official national currencies circulating.  You have everything from the Afghanistan ‘afghani’ to the Zambian ‘kwacha’, with a number of different dollars (Australian, Canadian, Hong Kong, etc.), euros, krona’s, liras, and pesos thrown in the middle.  These national currencies have nicely evolved to accommodate the ease of transaction(s).  Historically, it was harder to accommodate trade when currencies were squirrel pelts (Russia), parmesan cheese wheels (Italy), tea bricks (China) or massive limestone discs (Rai Stones) up to 12-feet in diameter and weighing several tons (Micronesia)[i].  The USD (United States Dollar) was consensually established as the world’s reserve currency in 1944 following the devastation of European economies in World War II.  A result of what is known as the Bretton Woods Agreement, it not only established the USD in this role, but it gave central banks of the world the institutions and rules for establishing monetary global trade. The dollar was initially linked to gold (USD per Troy ounce) but since 1971 when the link to gold was eliminated it has remained the reserve currency.

The reason for a stable and mutually recognized reserve currency is evident in an example. Let’s imagine a Japanese grocery store wanted to buy tasty Brazilian coffee beans for its customers.  The Brazilian farmer would like to invoice for goods be paid in reals (the Brazilian national currency).  Conversely, the Japanese store would naturally rather pay for the beans in yen, staying self-consistent with how all their sushi is priced and what currency they pay their worker’s wages in.  Frankly, the Japanese store owners don’t care a-hill-of-beans about the real.  An impasse to trade is quickly encountered.  Looking for a solution to accommodate their mutual buy / sell needs, both sides creatively say, “Hey, let’s do this deal in dollars”.   Given the dominance of the USD as the reserve currency, the world is awash in financial intermediaries that convert Japanese yen to dollars, and dollars to Brazilian reals.

The reason this solution works is the USD is viewed as generally stable, and it is backed by
“the full faith and credit” of the United States government.  This viewpoint is why the following stunning statistics occur[ii]:

  1. The population of the United States is roughly 4% of the world population but…
  2. The U.S. dollar is on one side of 90% all foreign exchange transactions
  3. The USD accounted for 96% of all trade in the Americas, and 74% elsewhere in the world
  4. Globally, banks used the dollar for 60% of their non-domestic deposits and loans

Beyond the Copernican view of French politicians, it was former French President Valery Giscard ‘Estaing who once referred to the U.S. government’s ability to issue the global reserve currency as “an exorbitant privilege’.  The United States Treasury can repeatedly issue bonds that international governments and investors can readily access on any reputable exchange – and they have done so.

Having fundamentally set the stage for what defines a global reserve currency, what are the primary negatives and positives.  In a too abbreviated fashion, here they are, starting with the positives:

  1. We have an enormous consumer driven economy. By buying a lot of goods, and much of those products sourced internationally, the world has grown accustomed to dealing in dollars.  In the process, we have put a lot of dollars overseas and holders of those dollars would like to see stability remain in the United States to protect their ass[ets].
  2. Our annual Federal deficit is also enormous, and when you spend more than you make, you have to borrow money.  Finding buyers for your bonds is a lot easier – and the resulting cost of your debt – your interest rate – is somewhat cheaper when you are the world’s reserve currency.
  3. When you are the 800-pound gorilla in the room, you command attention. When the United States government puts ‘economic sanctions’ on a country, the move is made to penalize it through the curtailing of trade in the goods of that country.  However, you don’t have to be a genius to understand that you can only pull this penalty action off well when you control the primary currency of world trade.

Regardless of the above factors, to be fair in reporting I should say being the global reserve currency is not perfectly rosy. Here are some of the negatives offered on it:

  1. The demand for the USD stays high when you are the reserve currency.  If you have money in Angola that you want to protect (large investor or government), you feel a U.S.A. denominated IOU would be safer because it’s the global reserve currency.  That demand can cause a higher currency value of the USD than (say) the Chinese yuan.  The higher value of the dollar naturally stymies U.S.A. farmer exports if the bean counters in Japan had to pay more for their imported goods because the exchange rate works against them.
  2. Sooner or later…if you borrow too much money, you simply don’t look as stable or secure.  Just over this past month, there was a temporary meltdown in the Treasury auction and buyers of bonds demanded more return, or a higher interest rate.  When gold quit backing the USD in the 1980’s, the total amount of federal debt held by the public was 30%-40% of Gross Domestic Product.  At the end of 2024, that debt figure had ballooned to 120% of GDP[iii].   That increase in debt levels recently caused the credit rating agency Moody’s to strip the U.S of its triple-A rating.  If you look less ‘stable’, buyers will in return demand more compensation in the form of higher interest rates. A small 1% increase in borrowing would now cost the United States budget $360 BILLION dollars PER YEAR.  Other countries also issue debt each, but the United States is an outlier.  Of 41 ‘advanced economies’ tracked by the IMF, the United States has historically accounted for about half of the deficits run. With the current projected annual federal shortfalls of 6%-7% of GDP, from 2023-2030 the United States portion is projected to constitute two-thirds[iv].

In a world with constantly fluctuating national politics and instabilities, the demand to seek a reserve currency is logical and unending. There have been MANY others that want this reserve currency role, if nothing more than for status and ego. The BRICS + (Brazil, Russia, India, China and South Africa) wanted it, those in the Mideast who see oil dominantly priced in dollars wanted it (petrodollars), and cryptocurrency people want it (be it Bitcoin or other). Everyone wants it…but not everyone wants them…because of (for instance) currency manipulation in China, because of wars in the Mideast, because of the witnessed instability of cryptocurrencies, etc. etc.  Thus, the United States might be doing things to deserve NOT being the reserve currency of the world, but the blunt truth is the United States is likely not going to be replaced in the short term frankly, in spite of us.  Still, in my opinion, the positives of being in the pole position outweigh the negatives and we’d be wise to read the tea leaves of undesired implications if we lost that status.

It remains my deep and distinct honor to serve you well.

Patrick Zumbusch
Founder and CEO


[i] “List of currencies of the world” (Countries-of-the-world.com, May 25, 2025_

[ii] “De-Dollarization: What Would Happen if the Dollar Lost Reserve Currency Status?” (Wayne Duggan, U.S. News and World Report, April 15, 2025)

[iii] “Federal Debt: Total Public Debt as Percent of Gross Domestic Product” (FRED, Federal Reserve Bank of St. Louis, May 26, 2025)

[iv] “Bond Market Is Making Washington Pay” (Greg Ip, Wall Street Journal, May 24-25, 2025)