Recurring concerns about the collapse of the US dollar and its dominant position as a global currency are emerging these days. These fears sometimes stem from exaggerated perceptions of China's economic and financial strength, and at other times, they reflect anxiety about the weakness of the US economy and its chronic trade deficit. Finally, concerns about the dollar have arisen from legitimate worries regarding the growing burden of the US national debt. Of course, these problems exist, but the role of the dollar as a global medium of exchange and a store of wealth, which bankers and economists call the 'world reserve currency,' is a more complex issue. Even if the dollar were to lose its global standing, it would happen more slowly than these fears suggest, and it would take a long time, especially since the world does not have an alternative for it yet. When the dollar ascended to the throne of world currencies after World War II, the US economy was larger than that of any other country on Earth, and most of the world's wealth was located within the borders of this country. This is no longer the case, and it has not been for decades. Japan and Europe developed large economies with sophisticated financial systems long ago, and China has emerged from poverty at a staggering pace. Although the United States has become wealthier and more powerful, its relative status is no longer what it was. Despite all these changes, there is no currency in the world, whether the Japanese yen, the European euro, or the Chinese yuan, that can meet the requirements of a world reserve currency. The dollar remains alone in this regard, and this situation will not change in world trade or finance until there is a practical alternative to take its role. At the most basic level, the dollar has the advantage of convention and tradition. It has dominated for so long that world trade and finance have built solid institutions and practices around it. The euro may dominate trade within the European Union, and Beijing may push for the use of the yuan in many of its trade relations, especially within the framework of the Belt and Road Initiative. However, regardless of these details, the world still heavily relies on the dollar. According to statistics from Atlantic Council, about half of world trade is invoiced in dollars, whether the United States is a party to it or not. When compared to the world's three major currencies, we see that 30% of export contracts are invoiced in euros, most of it being trade within the EU. For the British pound, the figure is 4%, and the same applies to the Japanese yen or the Chinese yuan. Since China accounts for nearly 13% of world trade, these figures indicate that a large portion of its exports are invoiced in dollars. The dominance of the dollar is firmly entrenched in the patterns of currency trading that form the basis of international trade and finance. According to Atlantic Council statistics, the dollar is used in about 90% of currency transactions, wherever they take place. Because trading in dollars is easier and faster than in any other currency, it plays a role even when neither party to the transaction is American or has an interest in American products. For example, any Malaysian buyer who wants to buy Indonesian goods will convert the Malaysian ringgit to dollars, and then convert the dollars to the Indonesian rupiah needed for the purchase. Because the exchange between the ringgit and the rupiah is irregular and sometimes unreliable, the presence of the dollar as an intermediary makes the process easier, whether the exchange takes place in London, New York, Singapore, or anywhere else. To compete with the dollar's dominant position, other currencies would need to enhance their role in such exchanges. They still have a long way to go. Atlantic Council points out that the euro accounts for about 30% of world currency transactions, yet many of these are against the dollar. The Japanese yen, which accounts for only 17% of world currency transactions, is barely mentioned, and the Chinese yuan is of even lesser importance, accounting for only 9% of world currency transactions.
