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Old 23rd June 2008 | 23:39
  #28 (permalink)  
fdcg27
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World dollar float

It isn't just oil that is sold in dollars on world markets, but Airbuses, grain, salmon, and virtually every other product you might name.
The US dollar became the defacto world reserve currency simply because the US economy was (and is) so large. The Euro was (and is) an effort to create a second world reserve currency, by pooling the economies of the Euro zone states.
One of the features of dollar dominance is that the US is able to export its own inflation. We don't see this at the moment, largely because others have been far more inclined to preserve the values of their currencies, while our own Federal Reserve has allowed the dollar to depreciate sharply, as a way of staving off a serious recession. So far, this tactic has worked, with the resulting low US dollar interest rates causing the dollar to lose value against most other currencies, ranging from the Euro to the Canadian dollar, while preventing serious economic decline in the US.
The result has been, however, that the US has suffered a greater increase in nominal local currency fuel prices than has the Euro zone, or, indeed, Canada or the UK.
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