Legions of greenback naysayers go back a long way. In the immediate post-WWII years, the Europeans were bitterly complaining that chronic dollar shortages (sic) were sapping the recovery of their war-ravaged economies. And when Washington moved to help with more liberal provisions of dollar liquidity, the French began adding up Uncle Sam’s debts to show that America was bankrupt.

Ignoring the principle of fractional reserve banking, the French thought that the whole world would present its dollars for immediate redemption at the official price of $35 per ounce of fine gold.

Denouncing America’s “exorbitant privilege” of being able to pay its bills with paper money produced at a zero marginal cost, the French asked in the mid-1960s to be paid in gold. A few other countries followed suit, until President Richard Nixon slammed the U.S. gold window shut on August 15, 1971.

That ushered in a new era of the dollar standard and a generalized system of floating exchange rates.

The European trading block got a serious jolt. Germans, however, saw that coming. Worrying about their exports in an unpredictable new world of global finance, they were pushing their European trade partners since late 1960s to protect the struggling customs union with various fixed-exchange rate contraptions. Eventually, after 30 years of enormous pain and sacrifices, a re-united Germany succeeded in creating a common currency and a single market that now binds together 27 countries with half-a-billion consumers and an economy of $15 trillion.

The euro could be the only dollar rival

Those are all important milestones in an ambitious European project that is supposed to lead to an ever closer economic and political union.

The euro now serves as a legal tender in 19 EU countries, but it de facto plays the same role in the remaining eight members, because their currencies are virtually pegged to the euro while waiting to meet the stringent criteria for joining the monetary union.

For Europeans, the euro has never been contemplated as a dollar competitor. They wanted a common currency to establish a true customs union and a single market by ruling out currency fluctuations. The euro, therefore, was to serve as a lynchpin of an economic and social union that would, in time, make possible a federal, or confederal, political structure.

That partly explains why the euro has a relatively modest position in global finance.

Here is an impressive piece of data: In the first quarter of this year, the share of euro assets in global currency reserves was 19.2% -- exactly the same number observed in 2001. Throughout most of that twenty-year period, the euro denominated reserves stayed in the range of 20% to 24%, peaking out briefly at 28% during the acute phase of the last financial crisis in 2009.

That’s what’s happening to the dollar’s most serious rival.

All other pretenders – gold, the Chinese yuan, and the cryptos – are not even worth mentioning.

To understand the dollar’s unique role in world economy, you have to go back to the three basic functions of money: unit of account, medium of exchange and a store of value. On all three criteria, the dollar has no viable alternative -- at a global level.

Greenback remains the king of the hill

Expressing the value of goods and services in local monetary units is still a puzzle in trans-border trade unless stated in dollar equivalents. Even the values stated in euro or yuan numbers are regularly translated in dollar terms.

And to settle a bill in an overseas trade one has to use the dollar as a transactions currency. The trade inevitably goes through the dollar financial channels to complete the payment procedure.

The store of value function is more flexible because it depends on the assessment of expected investment returns and on the liquidity preference. Still, the dollar holdings accounted for 56% of official global reserves in the first quarter of this year. Last June, foreign governments also held a stable 60% share of all non-resident owned U.S. Treasury securities.

Apart from those basic money functions, the dollar serves as an instrument of money supply management by the world’s central banks. Broad and liquid dollar asset markets allow the monetary authorities to quickly and efficiently adjust their balance sheets. No other currency offers such an operational facility.

The EU and China, therefore, have a long way to go to challenge the dollar’s key currency position.

The Europeans need to make irreversible steps toward political integration to persuade financial markets that the euro is here to stay. Such essential steps would be the banking union, and the creation of a common budget as a foundation of the fiscal union.

China, for its part, may not even wish to think about challenging the dollar. First, because it does not have the depth and the openness of its financial markets. Second, opening up its financial markets to the extent needed to compete with the dollar -- China would lose control of monetary policy and gravely destabilize its economy.