Have you ever wondered why the U.S. dollar is accepted as payment around the world? Better yet, have you ever wondered why the dollar liquefied exchange in Iron Curtain countries during the 20th century, and still liquefies trade in countries like Cuba, Iran and North Korea today?
That the dollar continues to facilitate global exchange is a reminder of a simple truth that regularly eludes economists, politicians and pundits: no one trades money, lends it, or borrows it. Underlying any financial transaction is the flow of actual resources. Those who lend dollars are lending resource access to others, and those who borrow dollars are borrowing access to resources. Considering buying and selling, when a grocer accepts $50 dollars for various food items, the $50 is accepted precisely because it can be exchanged for goods of roughly equal value.
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