Why Does The US Dollar's Reserve Currency Status Benefit Property Investors?

Chris at Hauseit (https://www.hauseit.com) explains how the US Dollar's reserve currency status helps US real estate investors, and why having the world's reserve currency is such an "exorbitant privilege."

Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://www.hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Established 2014.
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Why does the US Dollar's reserve currency status benefit property investors? Well there's a term called the "Petrodollar" which I'm sure you've heard of before. It essentially refers to key commodities such as oil and really commodities in general, typically being traded in dollars. After all, commodities must be traded in one currency and thus it might as well be the reserve currency. Ostensibly this was set up post-1944 with the Bretton Woods agreement to make trading internationally easier by being denominated primarily in the currency of the world's hegemon, the United States, with a separate trading system of course for the Soviet Bloc at the time.

This is a key benefit for the country that issues a reserve currency because it can never face a crisis of imported inflation, meaning if it needs to import commodities it can never suffer an inflationary depression from a devaluing currency because it can always print more of the same currency. It controls that currency and any imports it needs are denominated in its own currency. This helps keep inflation low in the country issuing the reserve currency and this is why having the world's reserve currency is referred to as an especially exorbitant privilege.

Now what does this have to do with real estate? Well, because people need to keep US dollars to trade commodities throughout the world, it arguably makes sense to keep reserves of US Dollars. This is exactly what countries and central banks around the world do. For example, large though declining percentages of central bank reserves are still denominated in US Dollars and other minor reserve currencies such as the Euro and Yen.

As a corollary to that investors will also want other US assets besides US treasuries, for example US real estate. And thus US real estate attracts foreign investment inflows and thus helps keep the price high and this is why having the world's reserve currency is ultimately good for property owners in the United States.
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Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://www.hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Established 2014.

Hauseit Group LLC, Licensed Real Estate Broker
Tel: +1 (888) 494-8258
Email: [email protected]
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