Quote:
Originally Posted by KUchief25
Well you tell me why the US kills anyone who threatens to change the standard then. There is a reason.
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I provided clear, precise, and logical explanations for why the US dollar is the world's reserve currency without resorting to some shady conspiracy about it. The US dollar is the world's reserve currency because 1) the US economy is the strongest and has the best track record and 2) it is safer to conduct trade in one currency to reduce currency risk, and the US dollar is the safest currency. If you disagree with my reasoning, then you can tell me where I got it wrong.
To respond to this post, I will say that people designate to trade in dollars because the US dollar is the safest currency, which reflects the high global confidence in the strength of the US economy. Investors, foreign governments, corporations, and other entities are not forced to trade in dollars, rather they trade in dollars because it is in THEIR interests to avoid currency risk. If investors, foreign governments, and corporations see the euro as the safest currency, then they will want to have euros in their forex reserves. After all, 60% of forex reserves are in US dollars, and around 20% are in euros. This makes sense because the EU is a new creation and people still doubt whether such a union can work. The EU is politically fragmented and its economy is pretty stagnant. This is why the euro hasn't replaced the US dollar. Not because the US government prevents it, but because global confidence in the EU economy isn't as high as it is for the US economy.
Moreover, no one can threaten to "change the standard." The "standard" is decided by which currency most people, corporations, and governments around the world want to have in their forex reserves. If one government wants to denominate most of their forex reserves in euros, then it doesn't follow that others will. And it also doesn't follow that the US will come after them. People, corporations, and governments are risk averse. The fact that 60% of the forex reserves are in US dollars means that most people, corporations, and governments have more confidence in the US economy than any other economy. Sure, part of that confidence arises from the fact that the US has the most powerful military on the planet which it can use to protect its economic interests. But the US government doesn't go around the world demanding that everyone trade in dollars. People, corporations, and governments see it as conventional wisdom that the awesome might of the US translates into high confidence for the US economy, hence they want to have mostly dollars in their forex reserves. It is people, corporations, and foreign governments that "decide" what is the standard, not the US government.
As you can see, I was repetitive. I did it on purpose to let it sink in your head.
If you take my points and think them out, you will see that it is a sufficient reason for why the US dollar is the world's reserve currency. You don't need to resort to shady conspiracy theories about it. Simple logic with basic understanding of economics is sufficient to explain it. It might not sound as interesting or as dramatic as some of the conspiracy theories, but the world doesn't go by interesting or dramatic.
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