This is one of the best and straightforward explanations of what a reserve currency really is that I have read. Very short and worth the read. Few people understand this.

The tribute the world pays to the empire

Up until 1971 there was a way to force this imbalance to correct. Today there is not, at least no way without major market disruption. There are no limits to fiat reserve currency creation. There were limits to the amount of gold in circulation.

The importance?

I'll pose the questions and let you determine the answers for yourself.

What happens when the world gets tired of selling real goods for credit (US Treasury Bonds) that will never be repaid or that can't be fully utilized?

What happens when other trading partners use other currencies in place of the current major reserve currencies?

How will this affect the prices we pay for imports or domestic goods?

How will this affect the purchasing power of the US dollar?

How will this affect our commodity prices?

Will transitions be smooth and slowly adjusting, or violent and unexpected?

I don't have the answers to all those questions. Some opinions (that are often wrong), but few concrete answers. One thing I am pretty sure of, it will affect us all and I doubt if it will be in a completely positive manner. Positive for a few I suspect.

John