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the US dollar dominates global trade in 2019 some 88% of international transactions involved US dollars no other currencies came close that gives the u.s. extraordinary power over nearly anyone who imports or exports anything anywhere commodities like oil gold and coffee are all priced in dollars regardless of where they come from but this cloud has long frustrated America's rivals making them vulnerable to US trade sanctions here's how the global economy runs on the US dollar and why some countries are developing alternative systems that could chip away at the dollars dominance the dollar came to dominate trade after World War two the US was the biggest economy in the world other countries were trying to rebuild and the dollar it was stable and plentiful in 1944 a conference of 44 nations agreed to peg their currencies to the US dollar while the dollar itself was pegged to gold as global trade grew so did the use of the dollar to conduct the world's business even after the United States abandoned the gold standard in 1971 the dollar remained the world's currency of choice the world has gotten used to doing business in dollars because it's just easier than doing business in any other currency the dollar is incredibly liquid meaning it's easy to buy and sell things all over the world the US banking system is very efficient and those things combine to make it cheaper for businesses to buy and sell in dollars here's how a typical international transaction works in u.s. dollars a Canadian lumber company sells boards to a French home builder the buyers bank in France and the sellers bank in Canada settled a payment in dollars via correspondent banks in the United States these correspondent banks have accounts at the United States Federal Reserve the money is transferred seamlessly between these banks Fed accounts because their status as correspondent banks means they are seen as safe counterparties the United States says the use of these correspondent banks means every transaction technically touches US soil giving it legal jurisdiction and compelling foreign countries to abide by its laws on money laundering in corruption after 9/11 the u.s. used the power of the dollar to advance its foreign policy goals the idea was to cut out the sources of funding for terror organizations the u.s. used its control of the dollar to increase surveillance of global money flows and curb financing toward bad actors it did this by imposing sanctions on its rivals under the system if a business or country tries to trade with a sanctioned entity in dollars the US has the power to cut off its access to US currency but other countries have been building workarounds some EU countries oppose the US sanctions against Iran these sanctions put in place after the u.s. withdrew from the Iranian nuclear deal in 2018 included banning dollar transactions with Iranian banks as a result the EU is developing a euro back system that...