I have a question that strikes me as probably better suited to this forum that to AFT.

Internationally, commodities are generally bought and sold in USD. What are the advantages of this for U.S. residents and what are the drawbacks?

Common sense suggests that it means that consumers in the U.S. are shielded from currency fluctuations and that there is a saving on transaction costs - but that it also means that vast quantities of dollars are at any time tied up in international trade and that traders have to hold large stocks of the currency, which would boost the value of the currency and in turn would make American exports more expensive than they would otherwise be.

Have I got that part right? Even if so, I don't imagine it's anything like the full story.

I'd welcome comments - and of course answers (and no, I'm not doing some academic course and hoping for help with an assignment).

Living in Ontario, Canada our trade is closely tied to the American Dollar. Here is an article from our provincial government on that topic:
http://www.mri.gov.on.ca/obr/2012/05/the-canadian-dollar-the-effect-on-ontario-and-its-businesses
Here is another paper written by our Federal Government on that topic: http://www.parl.gc.ca/content/sen/committee/372/fore/rep/rep06nov03-e.htm

I think you may be on to something, but on the flipside, our dollar may not "fluctuate" per se, but to convert our currency to others does fluctuate. I've seen the British pound at near $2/£1, and also at $1.30/£1 (I think it is currently about $1.60/£1).

It just depends on what that commodity costs at any given time.

This is exactly the type of thing to make my eyes glaze over. I wish I had a better understanding of economics, but I always fail at making sense of it.

Thanks for your comments, but I was thinking about the overall effect on the U.S. economy. (Obviously, I know that for the ordinary consumer it's the 'end price' (retail price) that matters).

Ah, trident. When I was younger the British economy seemed to be for ever lurching from one crisis to another (c. 1964-83/4 later). We had seemingly unending Sterling crises - dockers' strikes under Wilson, the 1967 devaluation (after which we were only allowed to take £50 (!!) abroad with us/change £50 into foreign currency in any one year - till 1970, when the limit was raised). There were two very damaging miners' strikes under Edward Heath (in 1972 and 1974, with regular blackouts by rota in '72 and a three-day working week in '74) and inflation reaching 26%(!) in 1976. Then in the early Thatcher years we had another miners' strike, at the end of which the Pound (GBP) fell to an all-time low of USD1.04* ... Anyone wanting to follow current affairs simply had to get to grips with basic economics.


*These are just some of the key crises. There were many other, minor ones; and yes, I'm aware that it wasn't and isn't a good advertisement for the U.K.

You have to know why the federal government spends the way it does, without any fear of consequences.

The US Dollar is the world's reserve currency, and what the nations trade in for oil.

The United States is VERY concerned with maintaining the dollar's status as the reserve currency.

Their prediction is as long as the FED takes aggressive measures to protect against undesireable financial cycles and the military industrial complex asserts military dominion over any state that irritates the reserve currency status, that they will spend indefinitely, as long as they make the rules.

And so far they have been making the rules.

But that won't always be the case.

In time, trouble comes for the Dollar and Jackpot for the Yuan.

Kennedy tried to strengthen the foundations of the dollar in 1963 with an executive order replacing the Federal Reserve (a private company from what I can find) with the silver standard for the dollar. It operated for five months until the president was assassinated and according to this site was never repealed, so could have been continued ever since. Something is definitely going on behind the scenes with this, and previous attempts for Iran to stop trading oil in dollars also went pear shaped but they haven't given up, now with the support of Russia which may do the job.

I've never really understood the subtler significance of trading in dollars besides convenience, but the total chaos caused when a few countries have tried to leave show it's far more important to them than that.

Kennedy order

Current plans to replace dollar

Well the Kennedy order was controversial to the bankers because it operated outside the FED oversight. It represented a game change to the debt based system of the US. So that was one reason he was killed.

FED operates independently of congressional oversight and is really just a private corporation.