What are the effects of the majority of the world abolishing the U.S dollar as intl. trade currency, and why?

Question

I've been hearing bits and fragments about this topic, that started when Iran replaced the dollar with the Euro as it's foreign trade currency. Some people point out that if that were ever to happen on a wider scale, the U.S economy would collapse due in part to the 7 trillion debt (33% of which is to foreign nations/enterprises) that would have to be paid by a currency the U.S would have to buy instead of just paying in U.S dollars.

I'm not an economist, but I hope that someone with a background on banking/economics would clear it up, away from propaganda, ideology ..etc.

Answer 1

That won't have a major effect. As trade stands today, we buy currency when we trade internationally. Each government holds reserves of other nations currencies. For example, China has a lot of dollars in reserves. We have british pounds. And so on. When we make a purchase from another country, we use these reserves of currency, which we have acquired over the years through trade of currency. Say you bought something on ebay from Great Britain. You most likely paid pounds, using dollars which were then converted to that currency. So you thought you paid dollars, but the seller received pounds, because your dollars went to purchase pounds on the open market.
So what would happen if this switch were made? Well, there would be some effect on the dollar. It would weaken against the other currency, since demand for dollars would fall and the demand for the other currency would increase. Thus, the number of dollars needed to purchase the other currency would increase, assuming the supply of dollars remains the same. A weaker dollar cuts both ways. It makes it more expensive to purchase goods from abroad. However, it makes domestic goods produced here cheaper to foreign countries, and bolsters the amount of exports that we have. So, the economy would have some bad effects, but these would be offset somewhat by the good effects of more exports. Since our exports are cheaper than imports, citizens would purchase domestically more, which would also translate to more job creation, which would also help the economy.