Until the mid-twentieth century, the gold standard was the dominant monetary system, based on a fixed quantity of gold reserves stocked in national banks, which limited lending. At that time, the United States managed to become the owner of 70% of world’s gold reserves (excluding the USSR), therefore it pushed its weakened competitor, the UK, aside resulting to the creation of the Bretton Woods financial system in 1944. That’s how the US dollar became the predominant currency for international payments.
But a quarter century later this system had proven ineffective due to its inability to contain the economic growth of Germany and Japan, along with the reluctance of the US to adjust its economic policies to maintain the dollar-gold balance. At that time, the dollar experienced a dramatic decline but it was saved by the support of rich oil exporters, especially once Saudi Arabia began to exchange its black gold for US weapons and support in talks with Richard Nixon.
President Richard Nixon in 1971 unilaterally ordered the cancellation of the direct convertibility of the United States dollar to gold, and instead he established the Jamaican currency system in which oil has become the foundation of the US dollar system. Therefore, it’s no coincidence that from that moment on the control over oil trade has become the number one priority of Washington’s foreign policy. In the aftermath of the so-called Nixon Shock the number of US military engagements in the Middle East and other oil producing regions saw a sharp increase. Once this system was supported by OPEC members, the global demand for US petrodollars hit an all time high. Petrodollars became the basis for America domination over the global financial system which resulted in countries being forced to buy dollars in order to get oil on the international market.
Analysts believe that the share of the United States in today’s world gross domestic product shouldn’t exceed 22%. However, 80% of international payments are made with US dollars. The value of the US dollar is exceedingly high in comparison with other currencies. That’s why consumers in the United States receive imported goods at extremely low prices. It provides the United States with significant financial profit, while high demand for dollars in the world allows the US government to refinance its debt at very low interest rates.
Under these circumstances, those hedging against the dollar are considered a direct threat, to US economic hegemony and the high living standards of its citizens. Therefore political and business circles in Washington attempt by all means to resist this process.
This resistance manifested itself in the overthrow and the brutal murder of Libyan leader Muammar Gaddafi, who decided to switch to Euros for oil payments, before introducing a gold dinar to replace the European currency.
Despite Washington’s desire to use whatever means to sustain its position within the international arena, US policies, are increasingly faced with opposition. A growing number of countries are trying to move from the US dollar along with its dependence on the United States, by pursuing a policy of de-dollarization. Three nations active in this domain are China, Russia and Iran. These countries are trying to achieve de-dollarization at a record pace, along with some European banks and energy companies that are operating within their borders.
The Russian government held a meeting on de-dollarization in spring of 2014, where the Ministry of Finance, announced the plan to increase the share of ruble-denominated contracts and the consequent abandonment of dollar exchange.
Last May at the Shanghai summit, the Russian delegation manged to sign the so-called deal of the century which implies that over the next 30 years China will buy $ 400 billion worth of Russia’s natural gas while paying in Rubles and Yuan. In addition, in August 2014 a subsidiary company of Gazprom announced its readiness to accept payment for 80,000 tons of oil from Arctic deposits in Rubles that were to be shipped to Europe.
Payment for the supply of oil through the Eastern Siberia – Pacific Ocean pipeline can be transferred in the Yuan. Last August while visiting the Crimea, Russia’s President Vladimir Putin announced that the petrodollar system should become history while Russia is discussing the use of national currencies in mutual settlements with a number of countries.
These steps recently taken by Russia are the reason behind the West’s sanction policy. (Ukraine and Crimea are a cover story hiding the facts)
There is little to no hope, the United States will survive its own wave of chaos, as it continues to lash out across the world. (with allies such as Canada, headed by millionaire PM Justin Trudeau, you will hear more about foreign affairs than domestic problems)
Read More at Source: The Global De-dollarization and the US Policies | New Eastern Outlook