Just over 50 years ago, at a meeting of the world’s top economic powers, US Treasury Secretary John Connally shocked his counterparts by proclaiming the dollar “is our currency, but it’s your problem.” Back then, America wanted a cheaper currency, forcing others to revalue theirs. Half a century later, the global economy faces the opposite challenge: The greenback is hovering at a 20-year high against its fellow major currencies, creating a huge problem for everyone outside America buying dollar-denominated goods. And no commodity is more important than crude oil.
Since Connally made the dollar everyone else’s trouble, the greenback has become king of the global energy and commodity markets. The price of nearly every raw material the world consumes today, from oil to wheat to copper, is set in dollars. Even tea, the quintessential British beverage, is priced in the US currency, rather than sterling.