Future of Dollar
Recently we have seen dollar reaching parity with euro for the first time in 20 years. It looks like the US dollar is doing fine in the tumultuous times we all are in now. There are, however, distinguished voices that point to looming troubles for the dollar global system.
According to, for example, Michael Hudson and Steve Keen, once the original Bretton-Woods agreements ceased to exist at the beginning of the 70’s with the demise of the gold standard caused by Nixon’s decision to end the US promise to convert dollars into gold a new petrodollar system came into being. Trade in oil (and some other commodities) was supposed to be conducted in US dollars. So if a country wanted to buy oil it was invited to borrow dollars and purchase the desired product. How such a country would cover the incurred debt was a different story very much guided by the World Bank and the International Monetary Fund. For instance, the WB gave loans for developing agriculture in a way that assured specialized exports at the expense of domestic food security (diversity), which resulted in purchasing food from the USA and getting more dependent.
We are living through the times when the petrodollar system is put into question. One may readily observe regionalizing tendencies and withdrawal from the globalization agenda. Some oil futures begin to be traded in other currencies than the US dollar. The recent Russian deals with India include payments in dollars, euro and a rupee-ruble-denominated mechanism. What would happen to the US dollar once countries start selling and purchasing oil (and other key commodities) using Chinese yuan (renminbi), UAE dirham, Indian rupee, Brazilian real, etc.? Or even better: countries may engage in some sort of global swap exchanges outside the current SWIFT based banking system.
It does not mean that the US dollar would necessary collapse. In Russian alone people privately own about 90 milliards of US dollars. Panama, Ecuador, Timor, Salvador and other countries use the US dollar as their currency. America is also a country rich in resources and other assets (industrial, infrastructural, intellectual, cultural, etc.). However, it may lead to curbing profits of many multinational companies especially in the financial, real estate and oil sector.
If you have an idea regarding how the trade in oil will look like in the nearest future and which currency we will use to buy it, please write to us at firstname.lastname@example.org We will be grateful for sharing your views and will publish a summary of them on our web-site.