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The euro is already pulling ahead of the dollar, but I believe the global demand for oil (bought and sold in dollars) will prevent a Venezuelan type inflation s

The euro is already pulling ahead of the dollar, but I believe the global demand for oil (bought and sold in dollars) will prevent a Venezuelan type inflation situation from occurring. The US participates in the world economy on a level that makes it hard to imagine greenbacks devaluing against other foreign currencies in a highly disproportionate way. That said, I could be totally wrong.

JumpCrisscross 6y ago
> global demand for oil (bought and sold in dollars) Oil trading is a negligible component of dollar demand [1]. The petrodollar hypothesis is a debunked myth. [1] https://en.wikipedia.org/wiki/Petrodollar_recycling https://en.wikipedia.org/wiki/Petrodollar_recycling
- tmountain 6y ago
  Then what is the basis for the dollar being the world's reserve currency? (honest question, not arguing)
  - JumpCrisscross 6y ago
    > what is the basis for the dollar being the world's reserve currency? The origin is Bretton Woods [1]. This was the international system set at the end of World War II, when the U.S. was a global nuclear hegemon and the largest developed country with a homeland unmarred by conflict. It retains the role due to a confluence of the America's relative political stability (as in no revolutions), commitment to open financial markets, deep and complex financial markets and, most critically, massive consumer base. American consumers spend dollars globally. That leaves U.S. dollar scattered in various merchants' accounts. They can swap those dollars to their local currency, which incurs a fee. Or they can hold it to spend later. If they're holding it, they--or their bank--will invest it to produce yield. That creates demand for dollar-denominated investments, which, in turn, makes it easier to raise capital in dollars. That confluence underwrites a financial system that offers more products, for cheaper, and in more variety, in U.S. dollars than in any other currency. Plainly put, America's post-war position put the U.S. dollar in the lead just as computing advances increased the global financial system's connectivity and complexity. It's a story of network effects. [1] https://google.com/search?hl=en&q=breton%20woods https://google.com/search?hl=en&q=breton%20woods

JumpCrisscross 6y ago

> global demand for oil (bought and sold in dollars) Oil trading is a negligible component of dollar demand [1]. The petrodollar hypothesis is a debunked myth. [1] https://en.wikipedia.org/wiki/Petrodollar_recycling https://en.wikipedia.org/wiki/Petrodollar_recycling

tmountain 6y ago
Then what is the basis for the dollar being the world's reserve currency? (honest question, not arguing)
- JumpCrisscross 6y ago
  > what is the basis for the dollar being the world's reserve currency? The origin is Bretton Woods [1]. This was the international system set at the end of World War II, when the U.S. was a global nuclear hegemon and the largest developed country with a homeland unmarred by conflict. It retains the role due to a confluence of the America's relative political stability (as in no revolutions), commitment to open financial markets, deep and complex financial markets and, most critically, massive consumer base. American consumers spend dollars globally. That leaves U.S. dollar scattered in various merchants' accounts. They can swap those dollars to their local currency, which incurs a fee. Or they can hold it to spend later. If they're holding it, they--or their bank--will invest it to produce yield. That creates demand for dollar-denominated investments, which, in turn, makes it easier to raise capital in dollars. That confluence underwrites a financial system that offers more products, for cheaper, and in more variety, in U.S. dollars than in any other currency. Plainly put, America's post-war position put the U.S. dollar in the lead just as computing advances increased the global financial system's connectivity and complexity. It's a story of network effects. [1] https://google.com/search?hl=en&q=breton%20woods https://google.com/search?hl=en&q=breton%20woods