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 U.S. dollar became the world’s primary reserve currency due to several factors, including the size and stability of the U.S. economy, the depth and liquidity of U.S. financial markets, and the trust in the U.S. government and its ability to meet its financial obligations. The Bretton Woods Agreement in 1944 also played a significant role, as it established fixed exchange rates with the dollar backed by gold. While the gold standard ended in 1971, the dollar’s dominance as a reserve currency persists due to the continued strength of the U.S. economy and the widespread use of the dollar in international trade and finance.
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