> What actually maintains the value of the US dollar is the long dick of the US government through the Fed obviously but also the US government itself. It's the ability to project military power anywhere on the planet. It's the nuclear arsenal.
It seems fashionable among libertarians to attribute the US dollar’s value to the US military, but that is at best a tangential reason, not the root reason.
The root reason for the US dollar’s value is that the robust and innovative US economy ensures enough consistent productivity, wealth creation, and economic growth for the tax base to service the interest on US Treasuries, which back the USD since Nixon took it off the gold standard in the 70s.
That’s it - the world trusts that it can hold US Treasuries, benefit from the interest they pay, and that US won’t default on them - the risk-free rate of return, almost as risk-free as gold but with a more consistent and predictable return (as long as the USD doesn’t undergo hyperinflation).
A strong military is a side effect of a strong economy, not a cause of it. China is probably the best recent demonstration of that.
You may argue the US economy depends on foreign oil and hence a military capable of guaranteeing that supply, but that’s not entirely true either. In recent years the US vacilates between net importer and exporter of oil [1], and could be a solid net importer with enough political will and impetus.
US economic and military strength probably has something like a 0.9 correlation. At that point, I think it’s ok to just substitute one for another in those kind of discussion without trying to figure out the causation link between the two (which probably isn’t a one way effect anyways)
Even if petrodollars ends, USD will still be one of the three or four most valuable currencies, alongside the Euro, Yen and maybe Pound, for the foreseeable future. China isn't trusted enough yet, and their impending invasion of Taiwan will make them even less so. The most stable and trusted remaining currencies are those four.
It seems fashionable among libertarians to attribute the US dollar’s value to the US military, but that is at best a tangential reason, not the root reason.
The root reason for the US dollar’s value is that the robust and innovative US economy ensures enough consistent productivity, wealth creation, and economic growth for the tax base to service the interest on US Treasuries, which back the USD since Nixon took it off the gold standard in the 70s.
That’s it - the world trusts that it can hold US Treasuries, benefit from the interest they pay, and that US won’t default on them - the risk-free rate of return, almost as risk-free as gold but with a more consistent and predictable return (as long as the USD doesn’t undergo hyperinflation).
A strong military is a side effect of a strong economy, not a cause of it. China is probably the best recent demonstration of that.
You may argue the US economy depends on foreign oil and hence a military capable of guaranteeing that supply, but that’s not entirely true either. In recent years the US vacilates between net importer and exporter of oil [1], and could be a solid net importer with enough political will and impetus.
[1]:https://ycharts.com/indicators/us_oil_net_imports