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That's not so simple and has a significant cost. The reason why USD are used so much is multi-factorial: a) a huge float so massive currency exchanges don't mo
by refurb 4y ago
That's not so simple and has a significant cost.
The reason why USD are used so much is multi-factorial: a) a huge float so massive currency exchanges don't move the price much [unlike say Dubai's currency], b) predictable US government monetary policy [so no sudden changes in value], c) no capital controls so you can move it anywhere in the world easily [unlike China], d) widespread use because of a,b,c.
China's entire economy is dependent on undervaluing the currency to goose exports, so they have very strict currency controls otherwise the value would rapidly increase.
And what people don't realize is that it's not exactly going to hurt the US if suddenly some other currency becomes more dominant. GBPs, CHFs, SGDs are all strong, stable currencies that aren't a global reserve currency and those countries do just fine.
- jags 4y agoI don't think anyone can deny the benefits of having USD as a default currency for global trade as of today but just think once from the perspective of a country against whom USD is used as a political/economic weapon. Iran/Russia won't care much about the points you mentioned. They would come up with some workaround/compromise instead just to keep things going. USA has a great currency but they use it as a tool of bullying others way too often. Other countries have started noticing and are now taking concrete steps to come up with an alternate/backup plan. And it may not have a direct effect on US economy if some other currency becomes dominant but they would certainly lose out on their political dominance (they would no longer be able to strongly impose economic sanctions and coarse others to do as they please) and that could have snowball effect on its economy.