Interesting material and visualization of the fate of gold and foreign exchange reserves of the world’s central banks from 1899 to 2022 appeared on the Visual Capitalist website.

In this visualization, you can see how the dollar went from being an unknown small-town currency to the world’s main reserve currency and what events influenced it.

In the late nineteenth and early twentieth centuries, the most powerful country in the world was Great Britain. An unshakable empire over which the sun never sets, the world’s main trading partner, a country with the most powerful navy and the most advanced technologies. It is not surprising that most central banks preferred the pound sterling (by the way, the British currency is called sterling, the pound is simply the basic unit of this currency). In 1899, the pound sterling accounted for 62.8% of the world’s foreign exchange reserves. The French franc had 16.9%, and the German gold mark had 14.6%. The dollar was hiding somewhere among other currencies in the balance of 5.7%.

The status quo lasted until the spring of 1918, when Americans stopped staying at home and finally entered World War I. The American Expeditionary Corps arrived in Europe in the summer of 1918. The end of self-isolation and entry into the war helped spread confidence in the American currency, which remained stable against the backdrop of postwar inflation in Europe. American goods and culture began to make their way to Europe and other countries.

By the end of 1920, the dollar accounted for more than 35% of the foreign exchange reserves of other countries. In 1924 – almost 60%. In 1926 – 75%!

Then the United Kingdom recovered from the war and increased its share, and in the late 1920s, the Great Depression began, which hit the United States hardest, so the dollar began to lose ground, returning to 30% of reserves, and after the outbreak of World War II, it fell to less than 20%. The pound sterling again became the main reserve currency, accounting for 83% of the world’s gold and foreign exchange reserves in mid-1946.

And then Great Britain began to lose its colonies and its place as a world leader, and the US economy soared, switching from military to civilian rails. As early as 1968, the dollar accounted for 80% of central banks’ foreign exchange reserves. In the early 1970s, this share rose to 84.7%. And then came the 1973 oil crisis, which again hit the United States hard.

The dollar began to lose, but it was not the British pound that benefited, but the German mark, the Japanese yen, and… the ecu, the new European monetary unit, the predecessor of the euro, which was in effect from 1979 to 1998. In 1988, the dollar’s share of foreign exchange reserves fell below 50%.

After the collapse of the USSR (by the way, no one outside the USSR/Russia ever kept money in rubles, at least not much money), the dollar began to strengthen and in 1999 again took up 70% of foreign exchange reserves.

Since the early 2000s, the dollar’s share has been gradually declining, and central banks’ currency baskets have become more diverse. As of December 2022, the US dollar accounted for 58.4% of the world’s foreign exchange reserves, the lowest level in 25 years. The euro is now the second most important reserve currency, with 20.5%, and the Japanese yen is third with 5.5%. Next is the pound sterling with 5%, the Chinese yuan, which is actively growing, with 2.7%, the Canadian dollar with 2.4%, the Australian dollar with 2%, and the Swiss franc with 0.2%. Other currencies of the world are hidden in the balance of 3.5%.

Economics is an interesting thing, and it is always connected to politics. Moreover, economics is politics, one of many components. The ups and downs of the dollar over the course of the twentieth century only emphasize this.