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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Being the world’s currency reserve is a lot of work. As minimum, you must have valuable things people can purchase with their dollars.
In the 70s, the US figured out that everyone needed oil and made a deal with OPEC that they should only sell oil in USD. This is known as the petrodollar and because oil is burned every single day, every country must maintain a healthy USD reserve; they then asked for dollars for their exports and the cycle keeps going.
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