In theory, all currencies function as a measure of value, as a means of payment, and as
a store of value. However, reality shows that many currencies fail to meet one or several of these characteristics. And not only at the international level.
There are two conditions for a currency to be considered a global benchmark. The first is the size of the economy that issues it, and the second is the political stability of the country, as it reflects social stability itself. Some authors combine these arguments into current economic power and confidence in its future. Both are quantitative and qualitative factors that reinforce each other.
The dollar is the primary international reference currency. According to the IMF, more than 60 percent of central bank foreign exchange reserves are held in dollars, although this has decreased slightly in recent years. The U.S. currency is accepted as a means of payment in many countries, even in preference to their own national currencies. The dollar is also the primary currency of exchange in global trade and international financial markets. The advantages for U.S. authorities of this widespread use of their currency are enormous, although it also entails obligations. The Fed, for example, has seen its room for maneuver constrained when setting monetary policy. The traditional “what is good for the United States is also good for the global economy” has shifted to “what may be bad for international financial markets is also bad for the U.S. economy.” It is clear that the benefits of being the issuer of dollars far outweigh the costs.
