Will the World Stop Using the Dollar as Its Reserve Currency?

In the last 50 years, the United States has been complicit or even active in the overthrowing of multiple despotic and dictatorial regimes throughout the world. In addition, there have been many cases of even Democratic governments being toppled with the overt or covert help of the U.S. Some of the countries where these events have occurred have been Libya, Iraq and Ukraine.

In Venezuela, which sits on top of the world’s largest known oil reserves, there’s ongoing strife that threatens to overturn the government of President Nicolás Maduro.

When one tries to look for a common thread running through many of these stories, one can see that very often, these countries had made the decision (or at least announced plans in advance) to stop using the U.S. dollar as a reserve currency in which to conduct trade — particularly in important commodities such as oil. This has given rise to the term “petrodollar” when discussing the use of U.S. currency to trade petroleum or related products in.

In fact, all over the world, virtually all oil markets trade in U.S. dollars, which has a substantial influence on the dollar’s value. In the 1970s, the Organization of Petroleum Exporting Countries (OPEC) made an agreement with the United States to trade its oil — which accounts for 42 percent of the world’s total output — in dollars. As the globalist publication Foreign Policy admits, “It does matter that the trade typically takes place in dollars. This means that those wishing to buy oil must acquire dollars to buy the oil, which increases the demand for dollars in world financial markets.”

The phrase “those wishing to buy oil” refers to every country in the world that doesn’t have its own substantial oil supply — a number that at last count was more than 100. The fact that the United States has 130 military bases scattered all over the world has a large part to do with the location of much of this oil.

In 2000, Iraq announced it would cease selling oil to the global market for dollars, instead adopting the Euro for trading. This resulted in substantial short-term profits for the regime of Saddam Hussein. But, it also effectively angered the United States and set the two countries on a warpath, with the convenient reason of non-existent weapons of mass destruction (WMDs) offered up as an excuse for the U.S. to invade the Middle Eastern country. With Hussein dispatched, Iraq was forced to switch the oil trade back into dollars by mid-2003.

In early 2011, an email to then-Secretary of State Hillary Clinton from longtime friend and consultant to the Clinton Foundation Sidney Blumenthal stated that Libyan dictator Muammar Gaddafi was planning to create a pan-African currency with which to conduct his country’s oil trade, backed by $7 billion in secret holdings of gold. Not only would this threaten the U.S. dollar, it would also deeply affect the French CFA Franc, a currency guaranteed by France and used widely for trade in West Africa. Hillary Clinton met with French President Nicolas Sarkozy shortly after receiving this email. Together, they decided that funding national opposition factions to Gaddafi in Libya would be the best course of action. The following year, Gaddafi was overthrown and ultimately murdered by these groups.

In January of this year, the government of Iran, which holds 13 percent of all OPEC oil reserves, indicated it would stop using the dollar for oil trading, allegedly in response to President Donald Trump’s ban on travel to and from several Muslim majority countries. Since then, there’s been increasing talk from the Trump administration that it may consider ending the nuclear weapons development agreement ex-President Obama made with that nation in 2015. Whether military action would follow this is unknown, but it’s definitely been hinted at in statements from the White House.

A hoarding of gold by the countries of Russia, China and India has allowed these nations to advertise that their currencies are stronger than the U.S. dollar, which is a “fiat” currency, having been moved off gold backing by ex-President Richard Nixon in 1971.

It shouldn’t be looked at as coincidence that U.S. moves of military aggression (and in the case of Russia, economic sanctions) and talk of trade war have increased as this gold acquisition built up. China has said it would like to price commodities — including oil — in its own currency, the yuan, backed by the possibility of conversion to gold. The Russian central bank has established an office in Beijing to phase-in a trading system for exchange between the two countries backed by gold.

Russia has also issued federal loan bonds in Chinese yuan. Meanwhile, the Industrial and Commercial Bank of China has opened a yuan clearing bank in Russia. These measures would allow the two nations to bypass the U.S. dollar and to “de-dollarize” much of their trade.

“The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation,” said Dmitry Skobelkin, deputy head of Russia’s central bank.

China’s long-term trade plan, dubbed “The Silk Road Project,” has little stated inclusion of the U.S. dollar. At a recent summit held in Xiamen, China by the BRICS (Brazil, Russia, India, China, South Africa) countries — which produce about 22 percent of the global gross domestic product — Russian President Vladimir Putin declared, “Russia shares the BRICS countries’ concerns over the unfairness of the current global financial and economic architecture, which doesn’t give due regard to the growing weight of the emerging economies. We’re ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.” This was taken to be a statement that the BRICS countries — and Russia in particular — wanted to move away from the U.S. dollar in the future.

In fact, many foreign exchange analysts are saying that a long-lasting wave of “de-dollarization” will start impacting global markets shortly and that this could have tremendous impact on the long-term value of the dollar.

It’s worth noting that on August 21, U.S. Treasury Secretary Steve Mnuchin visited America’s gold repository at Fort Knox in Kentucky, making him the first cabinet member to visit America’s most secure vault in more than 40 years.

In November of 2015, President Trump told GQ magazine that “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.”

It’s known that interest by hedge funds and other sovereign wealth funds in gold has begun to increase. While gold is considered to be an inherently valuable commodity, not many people are aware that all of the gold ever mined in history would fit in three Olympic-sized swimming pools. This relatively limited supply means that a sudden rush for gold by large investment funds and foreign nations would drive up the price, perhaps by several times its current value. Noted writers and investors such as Peter Schiff, Marin Katusa and Douglas Casey are arguing that a long-expected rise in the value of gold accompanied by a steep decline in the value of the dollar can be anticipated in the future.

Earlier this year, former Federal Reserve Bank Chairman Alan Greenspan asserted, “I view gold as the primary global currency. When I was chairman of the Federal Reserve, I used to testify before U.S. Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that U.S. monetary policy tried to follow signals that a gold standard would have created.”

It’s been noted that if President Trump were to place gold-standard advocates in positions of power at the Federal Reserve, the U.S. might be able to return to the gold standard for its currency as former Republican Congressman Jack Kemp proposed (and introduced a bill for) back in 1984.

If the dollar is headed downward drastically, this might be the only way to prevent a major slide — provided that the U.S. has enough gold to back it with. Right now, although the United States has a larger supply of physical gold than any other country on Earth, the percentage it could back the dollar to would be lower than that of other nations for their own currencies.