In another thread it was brought up that one of the benefits of having a Federal Reserve is that the US Dollar became the worlds reserve currency. While the idea has some merit that I don't want to debate here, consider the possibility of currency without a US Central bank. We keep forgetting that US States are as large, well populated and generate as much economic activity as entire European nations. CA would be one of the world's largest (Failing Socialist) economies. So, if there were no Federal Reserve how would it work? Each state could issue currency the same way Germans issued Marcs, the Swiss Francs and the British pounds. The state would initially try to set a value for the currency backed by the taxing power from commodity or commodities produced in the state: gold, CDMA chips, wheat, etc. The value would ultimately be set commodity exchanges on a daily basis where people hedge risks and speculators take their chances on the markets. While the US Dollar would no longer be the world reserve currency, so what?