Bretton Woods

 Was thinking back to a recent shopping experience I had with

Amazon. I don't use the service that often, but on reflection, it is a

way for me to shop in China from Canada. For specific things, like a missing

computer extension, a particular kind of sport clothing, a table mat

with a solid backing...

Years ago, used to shop quite a bit at the Bay. But then I stopped; they 

started to have goods of lesser quality. So they changed again and became pricey, 

everything had to be marketed as a luxury. It wasn't me anymore...

Getting back to Amazon. It is not a universal store, doesn't carry well-known brands.

It's full of Barbie-like models in oversized shirts and comfortable shoes.There can be quite a 

bit of scrolling to find something. But after one chooses, the magic happens. I buy in 

Canadian dollars and they deliver, predictably and on time. It is almost embarassing: 

a smiling delivery person shows up with that thing I wanted. What did I ever do to 

command such service??

Amazon handles all the complexity of an international trade. They are American and

the US dollar is the universl benchmark. I don't need to buy yuans to buy my thing,

or maybe I do... Who knows, maybe slippers are now traded like oil, all in US dollars.

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COPILOT:

How did the US dollar come to replace gold as a standard in trade exchanges?

The transition from gold to the U.S. dollar as the standard in trade exchanges was largely shaped by the Bretton Woods Conference in 1944. This conference established the Bretton Woods system, where the U.S. dollar was pegged to gold at a fixed rate of $35 per ounce, and other currencies were pegged to the dollar. This made the dollar the dominant reserve currency for international trade.

The system worked well initially, but by the 1960s, the U.S. faced economic challenges, including inflation and a growing trade deficit. These issues strained the dollar's link to gold. In 1971, President Richard Nixon ended the dollar's convertibility to gold, effectively dismantling the Bretton Woods system and transitioning to a fiat currency system.

This shift allowed the U.S. dollar to maintain its role as the global reserve currency, supported by the size and strength of the U.S. economy. It also gave governments more flexibility in managing their monetary policies. Fascinating how a single decision reshaped global trade, isn't it?

Is it the case that the US dollar is the currency in which oil is traded?

Yes, that's correct! Oil is predominantly traded in U.S. dollars, a system often referred to as the "petrodollar." This practice emerged in the 1970s when major oil-producing countries, primarily those in OPEC (Organization of the Petroleum Exporting Countries), agreed to price their oil exclusively in dollars. This arrangement was supported by agreements between the United States and Saudi Arabia, where the U.S. provided military and economic support in exchange for oil being traded in dollars.

This dollar-denominated oil trade reinforces the U.S. dollar's status as the world's reserve currency. Countries purchasing oil need to hold dollars in their reserves, which increases global demand for the currency. While some discussions and initiatives have explored trading oil in other currencies, such as the euro, yen, or even digital currencies, the U.S. dollar remains the dominant currency for oil trading today.

It's an interesting aspect of how global economics and politics intertwine, isn't it?