The second in a three part series about the fall of the dollar as the world’s reserve currency and the decline of the American empire (Part One link). From Federico Pieraccini at strategic-culture.org:
As seen in my previous article, US military power is on the decline, and the effects are palpable. In a world full of conflicts brought on by Washington, the economic and financial shifts that are occurring are for many countries a long-awaited and welcome development.
If we were to identify what uniquely fuels American imperialism and its aspirations for global hegemony, the role of the US dollar would figure prominently. An exploration of the depth of the dollar’s effects on the world economy is therefore necessary in order to understand the consequential geopolitical developments that have occurred over the last few decades.
The reason the dollar plays such an important role in the world economy is due to the following three major factors: the petrodollar; the dollar as world reserve currency; and Nixon’s decision in 1971 to no longer make the dollar convertible into gold. As is easy to guess, the petrodollar strongly influenced the composition of the SDR basket, making the dollar the world reserve currency, spelling grave implications for the global economy due to Nixon’s decision to eliminate the dollar’s convertibility into gold. Most of the problems for the rest of the world began from a combination of these three factors.
The largest geo-economic change in the last fifty years was arguably implemented in 1973 with the agreement between OPEC, Saudi Arabia and the United States to sell oil exclusively in dollars.
Specifically, Nixon arranged with Saudi King Faisal for Saudis to only accept dollars as a payment for oil and related investments, recycling billions of excess dollars into US treasury bills and other dollar-based financial resources. In exchange, Saudi Arabia and other OPEC countries came under American military protection. It reminds one of a mafia-style arrangement: the Saudis are obliged to conduct business in US dollars according to terms and conditions set by the US with little argument, and in exchange they receive generous protection.
To continue reading: Challenging the Dollar: China and Russia’s Plan from Petroyuan to Gold