Many explanations I read come down to “almost everyone uses the dollar in international trade”, ” almost all energy is invoiced and paid in dollars” and “almost all international financial flows go through NY one way or the other”, but that just seems a restatement of the fact that the dollar is the reserve currency of the world. My question is: why? How did it end up that way?
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The US was poised to be the world’s greatest superpower after world war 2. Because America was half a world away from the front lines, America explained less devastation in comparison. Others mentioned the Bretton Woods agreement where world powers decided to use the dollar that way.
America earned a lot of good will with other countries during world war 2. The lend lease act, like the one used for Ukraine now, helped to provide weapons and material support for America’s allies. There’s the promise that beneficiaries will return weapons and such and pay back after they win the war. But the majority of the cost was forgiven. After the Bretton woods agreement the US helped to rebuild western Europe through the Marshall plan; it gave massive amounts of money to help countries recover economically from the war.
There are countries that have bad inflation problems from printing too much money which causes devaluation of their currency. In Venezuela the dollar is now the de facto currency because of its stability. Saudi Arabia used to exclusively use dollars for their oil because of good relations with America. Now they’re willing to accept China’s currency. Many large countries are part of Brics, an organization that attempts to reduce reliance on the dollar. Brazil, Russia, India and China are some of the world’s largest and most powerful nations.
China in particular has many economic agreements for building infrastructure with other countries. The silk road was a series of trade routes that allowed for trade between Europe and Asia. Now China has a belt road for global trade. But because of corruption, many countries regret their unfair agreements with China.
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