[gatleon]

> Most international trade was historically priced in dollars for two reasons. The second was, until recently, the unique speed and breadth of the Fedwire system.

> The first is the American consumer. When Americans buy, we spend dollars. This puts dollars in vendors’ hands. Those dollars can be reused for trade or invested, the latter supporting dollar financial markets. Both support dollar hegemony, which in turn drives its dominance in global trade and finance.

That has certainly not been my takeaway from history (though those could be more minor and related points)

My understanding is that most international trade was historically priced in dollars because the dollar became the world's reserve currency after Bretton Woods. Why it became the international currency is more complex, but to the best of my knowledge it is because:

1. The US was in strong monetary shape compared to the rest of the world after WWII

2. The US held many foreign assets after that war (was a creditor to the world)

3. The US held most of the world's gold after that war

(edited for formatting)

[yxhuvud]

4 The USA was the biggest economy, with something like 40% of total global GDP. That drove everything else.

Now it is down to 20ish % if I recall correctly and hence the motivation to diversify reserves is a lot bigger.

[llampx]

15% recently from the authors article, and falling from my calculations.

[sytelus]

I'd add that US political system is much more stable and trustworthy unlike countries without democracies and/or corruption perceptions. Presidential powers are far more limited, well scrutinized and things can easily be challenged in courts. If I held US dollars today I would be relatively more certain that it will retain value than other currencies. If all else fails one can count on US to exercise its military might to protect the dollar.

[dhosek]

Although the US's reputation for stability has taken a severe hit over the last three years.

[ntsplnkv2]

That seems to be changing though.

The US's war-might is limited. Look how poorly Afghanistan and Iraq went - the US's last two tests were seemingly ineffective. Syria was another trainwreck.

Internal polarization seems to be very high. Trump has eliminated or not replaced key diplomatic positions. The secretary of the navy was never confirmed and has just resigned. The defense secretary stepped down. A captain of a capital ship was ousted publicly to cheers of support from his crew.

NATO is a trainwreck. France and Germany have expressed desires to move away from US dependence while Trump demands more money.

The US's soft and hard power, to me, is just not fully there anymore.

[pishpash]

1-3 are the same thing. The US held most of the world's assets (was a creditor during the war), so became the world's most well capitalized bank. In that capacity, the bank's notes, i.e. dollars, became the world's currency.

Despite a run on the "bank" in the 70's, this arrangement remained.