Thank you for the very thoughtfull answer. I’m not an economist - I don’t really understand the intracisies of the financial world.
Can I ask a couple more questions based on your answers?
“The US has had the greatest, but not the only advantage from this. The Pound, Yen and Deutsche Mark also served this purpose - simply to a lesser extent - for the past 60 years as well. The Euro is simply taking a larger slice of the pie.”
If the euro is, or will be, taking a larger slice of the pie, then logically, does it not follow that the dollar will have a smaller slice? If that is so, well I don’t believe the conspiracy aspects of this that it will lead to immediate US military intervention on a global scale, but at the same time its hardly likely to be something the US government is going to be happy about!
“The link to oil in this article is simply a political slight of hand. The only thing that denominating oil in Euros means is that Europeans will no longer need dollars to purchase oil. It potentially weakens the US currency, but also makes US exports more attractive and investments in US assets cheaper.”
I see what you mean, but as the article points out, this is dependent on the US being able to make and sell products and investments that the rest of the world wants. It seems to me that the US (and in fact most of the rest of the western world) is in a financial mess primarily because we are simply living beyond our means. The exact system used - socialist, capitalist, whatever - is largely irrelevant compared to the simple fact that any nation, just like any individual, that consistently buys more than it earns is ultimately going to be in trouble.
“The only reason people are willing to keep dollars is that the US has never, ever refused to recognize he value of its currency.”
What about the assertion in the article about the US refusing to buy back dollars for gold?
I only saw one question mark, but I think you asked two questions.
The first was about military intervention. The very idea that a military intervention could force someone to put trust in a given country’s currency is just absurd. The whole point of the dollar as a reserve currency is that it is the currency that is least likely to lose value and is issued by the country most likely to honor its debts. A country that devalues or goes to war to that end would give up that idea.
The issue of honoring the currency with Gold has two flaws. The first is that capitalism postulates that there is an infinite amount of wealth that can be created. To base an economic system on this theory requires a currency that can grow with that wealth. However, there is a finite amount of Gold which would either limit the amount of currency available or make the cost of Gold so high as to make its price inifite and /or eliminate all uses of Gold (and there are some) which are not linked to matching the currency.
You should also keep in mind that Gold as a preserver of value is certainly established, but not based on much other than tradition and the fact that it is pretty. Gold is mostly used in jewelry and once again you cannot eat it or burn it. It is just the oldest-accepted easily transportable holder of value.
In terms of your balancing the budget comments it is only partially true. Assuming continuous economic growth the important thing is the percentage of a deficit in respect to the overall size an economy. If the budget deficit grows slower than the economy than it will, as a percentage shrink. Of late it has been growing faster which is very, very bad. But, unlike a private individual, debtors to the US cannot come and confiscate assets. All they can really do is refrain from lending more money and/or charge higher fees (interest) for lending that money. All that really does is constrain economic growth.