The United States (US) has a very strong mixed economy, a world-leading industrial sector, and is the reserve bank of the world’s most popular currency. Leading the world in technological innovations and industrial output has made the American economy a force to be reckoned with since the end of the 19th century.
The dollar’s role as the undisputed reserve currency of the world allows the US to impose unilateral sanctions against actions performed between other countries. Additionally, the US dollar is said to have “reserve-currency status”, making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact.
The central banking system of The United States of America is known as the Federal Reserve System, or The Fed for short. It was enacted in 1914 with a piece of legislature known as The Federal Reserve Act, and it gave central bank powers to a conglomerate of private financial institutions both domestic and private. This move was disguised as a bill to alleviate financial crisis after the same private financial institutions caused a currency scare a few years earlier. The Fed is now regulated by Congress via a board of approved Federal Reserve Governors but remains the pillar on which America’s financial system is built. This article will cover the financial system of the United States, as well as a range of market information covering currency, futures, and stocks.show more
America is home to the world’s top two largest stock exchanges on the globe, namely the National Association of Securities Dealers Automated Quotations (NASDAQ) and the New York Stock Exchange (NYSE). Together their market cap is over $30 trillion, larger than the next nine stock markets added together. It’s no wonder that the economy of United States is arguably one of the most stable and fastest growing in the world.
The NYSE is the more valuable of the US stock markets with over $20 trillion in market capitalization. The regulations to list companies on this exchange can be rather rigorous; and being one of the roughly 2,800 businesses who are listed, is considered a privilege. While the NASDAQ is worthy of some notoriety, it is not quite as strict as the NYSE, and thus, not as highly regarded.
The United States plays a central, pivotal role in the global foreign exchange market. The United States Dollar (USD) is the central reserve currency of the world, meaning that all financial transactions are first converted into dollars. This does not mean that the US dollar is considered a safe-haven currency, but rather, an alternate option when traders are willing to accept a bit more risk in their portfolios. In fact, the US dollar usually has an inverse relationship with the price of gold, the most popular “safe-haven commodity” of all time. Other well-regarded safe-haven assets include the Japanese yen (JPY) and Swiss franc (CHF).
Unsurprisingly, the US Dollar makes up a clear majority of the liquidity in the foreign exchange market totaling some 85% of the market’s entire value. In forex trading, the four major currency pairs: EUR/USD, GBP/USD, USD/JPY and USD/CHF are the most popular, with the USD making up half of the four most liquid currency pairs on the market. It is worth noting that currency movements in the American market are strong enough to make waves throughout currency exchanges around the world.
The currency of America and its territories is known as the United States Dollar; often denoted as $, USD, or abbreviated as US$. As one of the strongest currencies in the world and also the most popular, the US dollar can be further subdivided into 100 cents. As of 2018, there is roughly $1.6 trillion dollars in circulation and it is recognized as the central reserve currency of financial transactions the world over. Other popular names for the US dollar include the Buck or Greenback.
Originally, the dollar was valued by its convertibility into precious metals, usually gold. However, as of the 1970’s, the dollar’s value was untethered from precious metal value and was independently maintained by The Federal Reserve. Today, the board of The Federal Reserve maintains the dollar’s value by means of quantitative easing and tightening against inflation and economic recession as they see fit.
The two well-known American stock exchanges, NASDAQ and NYSE, offer access to some 4,000 companies via major exchanges but additionally another 15,000 companies are traded over the counter (OTC). America’s economy allows for strong diversity in trader portfolios as their stock options are virtually limitless in many sectors. Blue-chip and growth oriented small cap stocks alike are traded fairly with great volume during the markets’ open.
Comprising over 100 of the largest companies listed on the NASDAQ, the NASDAQ100 is the exchange’s most widely known index and is frequently monitored by large institutional investors, brokers, financial experts and the media as a means to measure overall stock market performance. Based on the top 500 large cap companies listed on either the NASDAQ or NYSE, another popular American stock market index with investors is the Standard & Poor’s 500 (S&P500).
America has many highly rated aspects to its economy including the world’s largest industrial sector. The great nation also fields the second largest manufacturing sector in the world, after China. In addition to the world’s largest economy, the United States also has the second largest wealth of natural resources when ranked by dollar value; including the 3rd largest producer of oil and natural gas. Perhaps its most felt economic presence is its representation of 20% of total global manufacturing output. It is safe to say that American stocks, in particular those listed on the NYSE and NASDAQ, are the most profitable in the world.