Why is USD the societal “standard” for currency?

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I understand the United States’ role in the global economy, with the Intranet origin being a US Govt. project. But still, why is this the standard? Is it just culture being the answer?

(100% willing to accept DMs that are not ELI5ed)

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10 Answers

Anonymous 0 Comments

Because the US has the largest economy, is the largest importer, a diverse economy, a history of low inflation, a history of stable economic and monetary policy.

Anonymous 0 Comments

I am not quite sure where you get the idea of a societal standard from?

If your Browse American news sites and visit US based e-commerce units they will show things in USD. Some globally operating sites will show you values in your local currency by default.

If you visit tourist locations where a lot of Americans visit they will also naturally take USD.

Anonymous 0 Comments

What do you mean by societal standard? Which society or societies? In what way is it a standard?

I’m not American and USD is not at all relevant in my life unless I’m maybe buying shares in US companies (and even then it’s mostly relevant for me to convert to local currency)

USD is a very common reserve currency and the most widely circulated on the planet I think but that’s mostly just because the US is and has been an economic superpower for quite a long time now. It’s mostly the relative stability and reliability of a currency that might make others use it for some things and the world’s biggest economy with no signs of any sudden sharp decline is of course going to be most popular for that. But there is no standard and USD is only most common for these things.

Anonymous 0 Comments

The US has been the biggest and strongest economy after WW2. The US funded a lot of recovery efforts in Europe and Japan (and elsewhere). Since it was the most stable and highly traded with economy, it is easy to understand why the USD price became the reference price for many international trade.

Imagine if you sold your goods internationally and many of the customers are from the US. If someone from another country wanted to purchase your goods, you’d use the price charged to the US customers as a reference. Gradually this became true for all major traded commodities.

Post WW2, the US banking system and currency became the center of financial transactions and currency exchanges (since it was funding the recovery). This meant that many countries pegged or referred to the price of their currency against the USD. So if someone with Japanese Yen wanted to buy German Marks, in a sense, they would convert the Yen to USD then the USD to German Marks. This is still the case with many smaller currencies.

Because of all this, it has become a somewhat standard practice that when comparing values across countries and regions, it is usual to normalize it to the USD. Otherwise the comparisons are more difficult and the statistics become less easy to interpret. Within a local region or country, though the official statistics are almost always quoted in terms of the local currency and a USD equivalent might be provided as a courtesy.

Anonymous 0 Comments

It’s not. USD is one of the largest global trade currencies, but it’s not a “standard” nor is there one. However, given the size of the US economy, trade flows and importantly petrodollars paid for mostly Middle Eastern oil, there’s just a lot of dollars around. But if you are in say Germany, Poland or Bosnia, your reference global currency will the the EUR, if you trade a lot with China you’ll want to know what your local exchange rate with RMB is, and if you are building a foreign currency reserve you’d want to add JPY, GBP and CHF in the mix too.

Anonymous 0 Comments

Well it may not always be. The reasons why are a bit complex but to get to the meat and potatoes it goes back to the English empire. This spread the English language across the earth to where it is now as almost a universal language. Most any nation of economic importance will see a shocking number of English speakers even in ones where that isn’t the every day language. This is a strong benefit to native English speakers such as seen in the USA. Further during the world wars the USA played a massive support roll economically in the beginning of both intertwining it’s own dollar into the different nations of Europe. For those keeping track, that is effectively every nation with modern technology at the time. The USA also has strong trade ties to China, in an attempt to combat the communism seen there, which the main manufacturing nation on the planet. These factors spread the use of the USA dollar just as much as the English spread their language. Understand I way simplified this and this explanation is missing a lot of info and to properly address those missing points would take quite the history lesson.

As for why the USA dollar may no longer be the reserve currency of the world, it again has to do with China and policy in the USA. The USA has recently largely inflated its dollar making confidence in it decline. China has economic ties to many nations and not just the USA making it possible that their currency may, in time, be found preferable to the USA currency. Understand the currency people use is all about how many obstacles to trade it creates. Many will accept the USA dollar but probably won’t accept the currency of some random nation, say the Egyptian pound for example, because others don’t accept it as is. If you don’t have to swap between 100 different currencies for international trade why would you?

Anonymous 0 Comments

Two reasons, mainly:

1. The US is big and old and powerful so people are broadly confident that the value of the dollar isn’t going to have wild fluctuations.

2. Petrodollar recycling. When the US buys oil, it pays in dollars, which means that whoever they just bought that oil from now has to buy things from people who take US dollars. This ought to apply to other currencies as well but kinda doesn’t for weird Henry Kissinger-related reasons, so the dollar is what’s getting handled in large quantities even by non-American governments. Who knows, maybe that’ll change as China does more belt and road stuff.

Anonymous 0 Comments

Basically after WWII when most of the gold reserves were fucked up, the USD was the only stable currency and flooded European markets. Rather than sort out who’s gold was where, the west pegged their currency on the USD, which until the 70s was pegged on the gold standard.

By the 90s the west+US was about half of not more than half of the entire world economy, so it was easier for even rivals of the US to use the USD.

Anonymous 0 Comments

If you’re talking about websites, they check your IP/location and show the proper currency. Not sure what you mean by USD being “standard”.

As a European I rarely see anything in USD.

Anonymous 0 Comments

If a price is not in your own currency, you have to calculate with the exchange rate, how much it is in your country.

Some people can do this simple math, some cannot.

So it is most convinient for all to use the currency of thouse, that cannot do the simple math, so everyone can still understand the price.