Imagine a world where everyone spoke the same language. What impact would that have? We have to admit that for those of us who have the privilege of living in an English first country don't have to worry about this. Many others however have to spend time learning a second language in order to be able to do business on an international scale. In this very real scenario, there is a clear advantage to being born in a country where the English language is the first language.
I wasn't born in the United States so this dynamic was the reality for me and my family growing up. The impact was felt most by those who had to learn English at a later age, like my parents and grandparents some of whom never lost their accent and still have a limited vocabulary even after living in the states for over two decades.
I start with language only to offer up an example that can be understood by many of us who have been forced to learn a new one, not out of want but out of necessity. If we want to operate a global business in the 21st Century we need to have a good grasp of the English language. The de facto first and second language for a majority of nation-states.
Similar to sharing a common language, many of the same benefits apply if we were to think about nation states sharing a common currency. Just as English has become the dominant language, the US dollar has become the dominant currency. If a seller lives in Tokyo and a buyer lives in London, selling in Japanese Yen and then converting to the British Pound isn't necessarily difficult but it does add unneeded complexity. Converting both the seller and buyer's currency to US dollars first allows both parties to transact on a level playing field. This is how the majority of large transactions happen today.
Unlike speaking a common language, transacting in a common currency, i.e. the US dollar has faults that can't be ignored. The US dollar, like any nation-state currency was created by a governmental decree and since 1971 when it was decoupled from Gold, has not been backed by anything tangible or scarce. In order to maintain its current value, we expect that the US economy and all the risks thereof to be in healthy working order.
While the United States has held its place as the world's dominant economy over the last century, its dominance over the next century is not a sure bet. Unlike in previous decades, the United States is now second, behind China in terms of gross domestic product. China also boasts the worlds largest population and so an argument can be made that the world reserve currency be denominated in Chinese Yen instead of the US dollar. These are just a few examples.
More importantly is the advancement of technology and the inevitable growth of e-commerce. The ability to build and scale an economy sustained by an internet connection could not have been predicted back in 1971. Today we find ourselves at a precipice where a system backed by governmental decree alone can not withstand the constant evolution of a technology-enabled financial system. It is for this reason that we begin to see El Salvador and Central African Republic officially adopt Bitcoin as a legal tender. Over the next decade expect more countries to adopt this sensible policy, which in turn will create a snowball effect forcing the United States and its counterparts to do the same.