The US economy is the world's largest economy in gross value, is the largest or one of the largest trade partners of much of the world, and has very limited policies on capital control or other monetary restrictions. This means that there is going to be more depth on trading pairs via USD and even small currencies than you would likely have with other countries, you would have very little counterparty risk holding USD, and much trade will end up being denominated in USD anyways. So you'd be a bloody fool not to hold USD.
Magically blinking away the US military would not change any of the above consideration one iota.
So let me flip the question around: why do you believe that the US military is essential to its role as a major reserve currency?
> why do you believe that the US military is essential to its role as a major reserve currency?
Because it's the final backstop that compels people to pay taxes, and taxes are essential to that role.
If you refuse to pay taxes, they send a policeman to arrest you. If you evade the policeman's arrest, they send more policemen. If you somehow evade all the policemen, they send the military.
If the US had no armed federal agents, then people wouldn't pay taxes and the government would shrivel up and die, because governments can't survive on zero revenue.
In this way, the US dollar's value is reliant on the threat of physical force - or in a broad sense, a military.
jcranmer|3 years ago
The US economy is the world's largest economy in gross value, is the largest or one of the largest trade partners of much of the world, and has very limited policies on capital control or other monetary restrictions. This means that there is going to be more depth on trading pairs via USD and even small currencies than you would likely have with other countries, you would have very little counterparty risk holding USD, and much trade will end up being denominated in USD anyways. So you'd be a bloody fool not to hold USD.
Magically blinking away the US military would not change any of the above consideration one iota.
So let me flip the question around: why do you believe that the US military is essential to its role as a major reserve currency?
everfree|3 years ago
Because it's the final backstop that compels people to pay taxes, and taxes are essential to that role.
If you refuse to pay taxes, they send a policeman to arrest you. If you evade the policeman's arrest, they send more policemen. If you somehow evade all the policemen, they send the military.
If the US had no armed federal agents, then people wouldn't pay taxes and the government would shrivel up and die, because governments can't survive on zero revenue.
In this way, the US dollar's value is reliant on the threat of physical force - or in a broad sense, a military.
alfiedotwtf|3 years ago
Let's flip the question around: what happens when oil producing countries try to sell in non-USD? US military has entered the chat