The world does most, if not all of its trade in US dollars. Gold and oil are quoted in $ per ounce and barrel, for instance? This is not because the almighty dollar is the "best", most stable currency in the world. Here's the historical reason behind the dollar's power

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In July 1944, 730 delegates from 44 US-allied countries met at Bretton Woods, somewhere in America. 3 weeks later they had formed the IMF & the International Bank of Reconstruction & Development, a.k.a the World Bank. But, this was not the most important thing to happen there

At this conference it was agreed that the US dollar would be fixed to the price of gold at $35. i.e if you had $35 and got tired of holding paper money and wanted gold instead, you could exchange it for an ounce of gold - guaranteed!

Another thing agreed on was that all global currencies were now to be held at a fixed exchange rate to the USD. N.B: the rest of the world's currencies were now 'pegged' not to gold, but to the USD. If they wanted to buy, even from each other, they would need to get dollars first

But why would all these nations on this planet agree to this madness? The short answer is the rest of they were assured that fixing the USD to gold meant that at anytime they wanted to leave this system, they could exchange their dollars for gold at a guaranteed fixed price

However, the biggest winner was still the United States, because this deal meant that there was to be a huge and automatic global demand for the US dollar as it was now the 'preferred' (read only) medium of exchange

This was good for the US because the creation of more dollars allowed for the inflation (increase in the price) of assets. But inflation is bad, right?! Not really, at least not here. Everyone who owns an asset wants its price to increase. Americans were getting plenty of this...

An increase in the global demand for dollars - because you know, everyone agreed they would buy from each other in US$$$ - meant regular increases in asset prices as more dollars were printed. Anyone who owned dollar-denominated assets would keep getting richer

However, this is not the biggest benefit to having more dollars. The biggest winner here is the US central bank, the US Federal Reserve (The Fed). The ever increasing global demand for US dollars gives The Fed the right to print more of them, because the world wants more

N.B: The Fed, is PRIVATELY OWNED and prints money, not for itself but to loan it to the US Government with interest. So, the more the world demands dollars the more the owners of The Fed print and charge interest. This is actually why the USD is called The Federal Reserve Note

The US Federal Reserve has a clear vested interest in maintaining global demand for U.S. dollars because they make them and then earn profit with interest rate levels they set themselves

It's important to also note that the USD was chosen as the trade currency of choice because by 1945, 80% of the world’s gold was stored in U.S. vaults, making the USD the official undisputed reserve currency of the world. That was until the Americans became reckless & wasteful

By 1971, 27 years after Bretton Woods, the U.S's trade deficit and debt had increased to unsustainable levels, domestic spending was out of control and the economic stability of Washington was being openly challenged by many countries

Countries around the world could see America was struggling under financial pressure. The US had spent $200B on the Vietnam war & were losing. This and other debt incurred through poor fiscal & monetary discipline meant the US's gluttony & overconsumption was becoming a problem

Because the dollar was exchangeable for gold as per agreement, many nations started calling for their gold stored in the US and giving America her paper back, but the US was running out of gold to give as they had printed money in excess of that gold. 'Murica was in trouble

When nations started queuing to get rid of paper dollars & wanting gold instead, it was game over for America. Continuing to give out gold in exchange for paper was not sustainable. They had to change. But having become used to the soft life, they were not about to stop spending

So on August 15, 1971, US President Richard Nixon's administration chose to maintain its reckless, gluttonous consumption and debt spending by unilaterally removing the USD's convertibility into gold

Overnight, the USD was no longer supported by gold, or anything for that matter. Now the U.S. Federal Reserve could print dollars at will without worrying about not having enough gold to back up the newly printed paper money. Freedom At Last!

Now the whole world was trading on dollars based on faith. America was borrowing money and instead of being able to say "I have the gold to back it up", the US was now saying "it's me, America. Trust me man, you know I'm good people"

But, with the dollar no longer convertible into gold, would countries still demand this new, naked currency? Would they still be willing to loan the US money even though these debts were now denominated in a fiat currency backed by nothing? They were, more than before! But why??