The US has an enormous privilege by having the global reserve currency. Through our military and political influence we have also forced several commodities, specifically oil, to only be priced in USD. This has driven global demand for USD in order to pay for goods not exported by the US - everyone needs oil, and oil can only be purchased with USD, so everyone needs USD. This causes countries to export to the US at cheaper exchange rates, basically guaranteeing that US manufacturing is at a permanent disadvantage for low-complexity goods that don’t play into our research strengths.
This also allows us to run insanely high deficits, as we can print dollars more easily than other countries without reducing demand for further dollars.
However I think the reserve status of USD is under serious threat. I don’t think US citizens care for war and are much more isolationist than politicians want. I don’t think using our military to enforce reserve status will be palatable anymore, and threats from China and experimental currencies like bitcoin will undermine the reserve currency status.
The US has an enormous privilege by having the global reserve currency. Through our military and political influence we have also forced several commodities, specifically oil, to only be priced in USD. This has driven global demand for USD in order to pay for goods not exported by the US - everyone needs oil, and oil can only be purchased with USD, so everyone needs USD. This causes countries to export to the US at cheaper exchange rates, basically guaranteeing that US manufacturing is at a permanent disadvantage for low-complexity goods that don’t play into our research strengths.
This also allows us to run insanely high deficits, as we can print dollars more easily than other countries without reducing demand for further dollars.
However I think the reserve status of USD is under serious threat. I don’t think US citizens care for war and are much more isolationist than politicians want. I don’t think using our military to enforce reserve status will be palatable anymore, and threats from China and experimental currencies like bitcoin will undermine the reserve currency status.