It doesn’t really make sense for countries or unions (e.g. EU) to decide to base their trade of the USD and keep a lot of their foreign reserves as the USD if it isn’t backed by gold. Wouldn’t this just mean that a lot political power is given to the US because they have the ability to arbitrarily set the value of trading currency if it isn’t based of a real-world resource like gold ?
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The USD started being gold backed and that’s originally what got everyone on board. It was later pulled off the standard, but was still one of the more stable currencies. Countries currently still us it because of stability, it shrinks in value over time less than other currencies and the few other countries that tried to create a gold back currency were… liberated.
USD is, like almost all other currencies in the world, a fiat currency. It is valuable because it can be traded for other things of value, by decree of the government. If you look on a US dollar bill you will see the phrase ‘This note is legal tender for all debts, public and private”. This means that if you owe a debt to someone you can satisfy it in the eyes of the US government by paying US dollars. That speaks to the core of why fiat currencies are valuable.
It is also nonsense to think that gold is somehow intrinsically valuable in any meaningful way. If you had a pound of gold what use would that be to you? Only that you could trade it for something else of value, exactly like a fiat currency.
The US doesn’t just “decide” how much the USD is valued at in trading. That is determined by the free market, by how much people are willing to trade in exchange for USD. Many people want USD because it is a very stable currency, a reliable store of value, and many places in the world desire to obtain it in trade. If you pay someone in USD they will probably be happy because they want other things from people who will also accept USD. The United States is so influential on the global economic stage that the USD is used as the global reserve currency. Most oil trade is also performed in USD which feeds the desire for USD.
All that does give the United States a lot of political influence, but it wouldn’t be aided by being backed by gold. In fact it would make it weaker as someone finding a bunch of gold could crash the value of everyone’s reserved dollars!
It was not the gold standard. It was global trade negotiation, and while British genius economist John Maynard Keynes was sick and busy, the American Harry Dexter White presented a “filler term” for the to-be-decided central currency which another assumed would be easier to say dollar, then he pushed a fast consensus that left the dollar winning.
[https://www.npr.org/sections/money/2014/07/16/331743569/episode-552-the-dollar-at-the-center-of-the-world](https://www.npr.org/sections/money/2014/07/16/331743569/episode-552-the-dollar-at-the-center-of-the-world)
>Wouldn’t this just mean that a lot political power is given to the US because they have the ability to arbitrarily set the value of trading currency if it isn’t based of a real-world resource like gold ?
It’s the other way around. The US dollar is used for global trade because the US already has a lot of political power, and people don’t believe it’s going to lose it all too quickly any time soon.
Because Iraq briefly made moves to switch to trading in Euros and shortly afterwards found itself “liberated” by B52s and cruise missiles
forget what the “experts” tell you the dollar is backed by the army is the only thing that matters, the clearest example is the war in russia and ukraine, which raised the value of the ruble
The US doesn’t set the value of the dollar. Think about it. Let’s say you have two hundred dollar bills and I want to buy them from you. The price for that exchange is something you and I agree between us. I’ll probably ask a handful different sellers and find out who’s selling at the lowest price, and then buy their dollars. The US government can’t really dictate how much you or I sell *anything* for.
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