Opinion | The Dollar Still Has Its Mojo. X, Not So Much.

“There is a great deal of ruin in a network,” Adam Smith once observed.OK, it was actually “nation,” not “network”; he was reassuring a compatriot that a British defeat at the hands of American revolutionaries wouldn’t destroy his country’s future.But both his original version and my update seem relevant these days — partly because Smith carefully didn’t say unlimited ruin.And we may be watching in real time what happens when the level of ruin in a network — specifically X, previously Twitter — reaches the tipping point at which the edifice implodes.By a network I mean a social arrangement held together by what economists call network externalities — situations in which people find it convenient to engage in some activity because many other people are doing the same thing.

A commonplace example is the long-running dominance of Excel spreadsheets; I don’t know anyone who loves Excel, but businesses keep using it largely because everyone else is using it.A less mundane example — indeed, one wrapped in a lot of mystical thinking — is the international role of the dollar.I’ve spent more or less my entire professional career being bombarded with dire warnings that the dollar’s global status was at imminent risk of collapse, and with it American power.Even if such a collapse were likely, it would matter much less than people think; America certainly derives some advantages from what was once called the “exorbitant privilege” of issuing the world’s dominant currency, but they’re not that big.In any case, predictions of the dollar’s demise generally fail to appreciate the extent to which the dollar’s role is a result of network externalities that no potential rival offers.

International banks make payments in dollars because dollar markets are huge, largely because the dollar is used so widely.Importers and exporters write contracts in dollars because everyone else does and hold dollar balances to make those payments.

And s...