Currency and international markets

Somebody posted a question in the board

This might be more of a macroeconomics question but its important: What is the effect/advantage of a country having a large amount of international economic activity using its currency? For example, the international oil market has used the US dollar as its currency of choice. How does this effect the US economy and what would happen if the oil market switched to a different currency such as the EURO.

I searched for article on this subject, and here's what I've found:
http://www.iie.com/publications/papers/paper.cfm?ResearchID=537

The Rise of the Euro: Currency Is Emerging as Rival to the Dollar

Adam S. Posen
Institute for International Economics

Article in The Ripon Forum
July 2005

As a result, the euro stands to gain market share in usage (as a reserve currency, in invoicing of trade, and as a vehicle for financial transactions) in a lasting fashion when investors opt out of the dollar. This will increase the cost of capital to the United States on a sustained basis since we will have to compete harder to retain investment in our currencies. This also will erode some of the competitive advantages of our financial industry by encouraging denomination of transactions in euros and will add to uncertainty for our industrial companies as more products are sold with euro price tags. This will not happen wholesale or overnight. Such erosion, though, is exactly the process of slow decline that undercut the British pound’s advantages as a reserve currency over the first half of the 20th century once the dollar existed as an alternative to it.

Another interesting article, an interview with Samuelson and Mundell - http://english.people.com.cn/200512/26/eng20051226_230852.html

Their views are so different on almost every subject starting with tax-cuts. Samuelson ssems to be more negative towards Bush's economic policies than Mundell.

Yong Tang: It seems that the weak dollar is no longer weak in 2005. The dollar is climbing up all the time. What is the reason for this? Is the strong dollar policy of American government really dead?

Samuelson: In the short run the dollar appreciates relative to the Euro and Yen. That can last for as long as those countries recycle eagerly their trade surpluses with the US into holding dollar assets (Such as low-yielding American Treasury bonds). Be not misled. So strong and irreversible are America?s balance of payments deficits, we must accept that at some future date there will be a run against the dollar. Probably the kind of disorderly run that precipitates a global financial crisis.

President Bush is a reckless economist, leading a reckless crew of subordinates. Spending on a hopeless imperialist caper in Iraq, plus Bush's giving away to the rich much of America's tax base, will eventually depreciate the American dollar. Those abroad who now gladly hold dollar assets will then reap the capital losses that they are not now expecting.