Photo by Adam Nir

I continually get people asking me questions and sending me articles about how the dollar might lose its status as the world’s reserve currency and then something horrible is supposed to happen. Neither part of this story makes much sense and treating the issue in this manner confuses what is at stake.

As I, and many others, have pointed out, there is not a unique reserve currency. Many currencies, including the euro, the yen, the English pound, the Chinese renminbi, and even the Swiss franc are held as reserves by central banks. The dollar is the predominant reserve currency, but not the only one. It accounts for around 60% of central bank reserves at present.

There is a similar story with the dollar being used as the medium of exchange in international transactions. Again, most international transactions take place in dollars, but only a bit more than half of all trade. Just about all the trade between European countries is conducted in euros.

One of the great myths that has formed the basis of endless conspiracy theories is that oil must currently be traded in dollars. A popular story of the rationale for overthrowing Saddam Hussein was that he was going to start........

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