Military and Political Stability:
Fact: The US has unmatched military power and geopolitical influence, with a relatively stable democratic system.
Why: This reduces risk of sudden regime changes or currency collapse, unlike smaller or less stable nations. The US can project power to protect economic interests (e.g., trade routes).
Impact: Confidence in US governance bolsters trust in the dollar.
Federal Reserve Credibility:
Fact: The Fed targets ~2% inflation and has a track record of managing crises (e.g., 2008, 2020).
Why: Compared to central banks in emerging markets, the Fed’s independence and transparency inspire trust. Even during high inflation (e.g., 9% in 2022), the USD remained strong globally.
Impact: Predictable policy prevents wild swings in value.