The international monetary system is like the sewage system: you only think about it when something goes wrong.
In late 2008 something did go wrong. For decades, ever since the end of the second world war, international finance had been dominated by the US dollar. Central banks held their reserves primarily in US dollars, commodities were priced in US dollars, international trade was settled almost entirely in US dollars, and cross-border investment flows were denominated largely in US dollars.
Then the world got a nasty shock. In the aftermath of the Lehman Brothers implosion, banks stopped lending. Suddenly companies everywhere found they could no longer get their hands on the US dollar funds they needed to conduct everyday business. International trade all but ground to a halt.
The scare prompted governments and institutions around the world to re-examine their dependence on the US currency. China started to encourage the use of the yuan for settling its foreign trade, and pundits everywhere began to predict the inevitable decline of the US dollar as the world's unquestioned currency of choice for international transactions and foreign reserves.
But if the US dollar does slide into terminal decline, something has to replace it. Conventional wisdom dictates that only one currency can dominate international finance at any one time, and usually it's the currency of the leading trading economy of the day.
In the 5th century BC it was the Athenian silver drachma. By the 1st century BC the drachma had been displaced by the Roman aureus. Then, after repeated devaluations and protracted inflation, the aureus was supplanted by the Byzantine solidus, which in its turn gave way to the Arabian dinar.
