Leaders of the BRICS countries who met on March 28-29, 2012 in New Dehli, India. They called for the formation of a new international bank and for no imperialist intervention in Syria and Iran., a photo by Pan-African News Wire File Photos on Flickr.
US hegemony about to collapse
Thursday, 12 April 2012 00:00
This month, South Africa will join the other members of BRICS in settling payments with China in the yuan and their own local currencies rather than in the US dollar. The world could be witnessing the end of the dominance of the American dollar as the international reserve currency of choice.
Dark times lie ahead for the US dollar as its future as the world’s reserve currency looks to be in great jeopardy. For more than 50 years the US dollar has been the chief monetary instrument used by the nations of the world to facilitate trade involving commodities such as petroleum, manufactured products, and gold.
But the times are changing and many of these nations, with China at the forefront, are finalising trade agreements that utilise only their own currencies. So it appears that the reign of the US dollar as the world’s reserve currency will, quite likely, be coming to an end within the next 10 years.
It is certainly no surprise that China, widely considered to be the premier economic power of the future, is wasting no time in exerting its growing power and influence in these matters. China is actively working with nations in Asia, the Middle East and other regions of the world to bring dramatic changes to the way world commerce is conducted and money is exchanged. Many of these countries who are moving away from the dollar no longer view America as a stable and reliable force on the world economic stage and they are seeking alternatives as a hedge against a severe future decline in the dollar’s value. That China is the main facilitator of these moves to do away with the dollar is without question — the evidence is everywhere.
Here are some specific examples of the various agreements that have been signed between China and other nations in recent times. China and Iran are creating a barter system by which Iranian oil will be exchanged for Chinese imported products. This is, quite obviously, an agreement designed to counter US sanctions against Iran since China has no intention of discontinuing the importation of Iranian oil.
Besides the barter system the two countries will also conduct trade using the Chinese yuan, the Iranian rial and gold. China and Japan announced plans to bypass the dollar and use their own currencies in their trade relations. Discussions involving a partnership between South Korea and China to exchange their currencies also have taken place.
This is a huge development as China, Japan and South Korea are the dominant economic powers in that Asian region. China and Russia have, for more than a year, been conducting trade using rubles and the yuan.
China and the United Arab Emirates (UAE) have announced an agreement which will use the yuan for oil trades. The Chinese National Bank said that this agreement, worth around US$5,5 billion, was made to “strengthen financial co-operation, to promote trade and investments, and to mutually assure regional financial stability”.
Russia and Iran have agreed to use rubles as a means of currency in their trades.
Russia has joined China in opposing US sanctions against Iran and fully intends to maintain a close relationship with Iran. China will pursue bilateral trades with Russia and Malaysia using the yuan, the ruble and the ringgit, respectively. The BRICS recently agreed at their summit meeting in Sanya, China, to establish mutual lines of credit in local currencies. This, again, is a very significant development since this group of nations represents a very powerful economic bloc going into the future. The United Nations Conference on Trade and Development has stated that “the current system of currencies and capital rules which binds the world economy is not working properly and was largely responsible for the financial and economic crises”.
Further that “the dollar should be replaced with a global currency”. The IMF recently issued a statement about replacing the dollar as the world’s reserve currency with a system of Special Drawing Rights called SDRs, an international type of currency created in 1969 which is, in effect, a “basket of national currencies” backed by the full faith and credit of the member countries’ governments.
It seems like everyone is jumping on the bandwagon to do away with the dollar as the reserve currency. This could be termed as “payback time” as many countries that either have lost respect for America, or who fear its military outreach, have found a way to combat physical force with economic power.
That may well be the case when we consider that this movement is being strongly promoted by China, Russia, and Iran, no real friends of the US. When the dollar is no longer the world’s reserve currency, the effects on America will be very severe. It will have monumental negative effects on the economy and its ability to conduct trade with other nations. In many cases nations will simply stop using the dollar or use it at heavily discounted rates.
Such actions will cause the Fed to run the Treasury Department printing presses non-stop, creating massive inflation and making the dollar the modern-day version of fiat money (money that the government declares to be legal tender although it cannot be converted into standard specie). And yet, in every dark cloud there is a silver lining. If the dollar loses world favour, if it is severely devalued, there will be an opportunity for the government and the business community to take advantage by working together to rebuild American manufacturing, since exports to other countries will be at much lower prices.
When that time comes we’ll see if each of them has the capacity to respond to the changing times and the new opportunities.
The demise of the dollar will also bring radical changes to the American lifestyle.
When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. — Southern Times.