As the dollar was made important for world economy
The reason for which the dollar plays such important role in world economy is caused by the following three pacing factors:
- dollar as world reserve currency and
- the solution of the U.S. President Nixon in 1971 not to convert dollar into gold any more.
The majority of problems for the rest of the world began with a combination of these three factors.
1973: The agreement of the USA with OPEC and Saudi Arabia on sale of oil in dollars
The largest geoeconomic changes for the last fifty years took place in 1973 after the agreement between OPEC, Saudi Arabia and the USA on oil sale only in dollars.
In particular, Nixon agreed with the Saudi king Feysal about accepting only dollars as a payment for oil and the related investments, transferring billions of excess dollars to the treasurer bills of exchange of the USA and other financial resources acting on the dollar basis. In exchange Saudi Arabia and other countries of OPEC appeared under military protection of the USA.
1981: The dollar dominates in a basket of currency reserves of the IMF
The second factor, perhaps, even more important for world economy: the dollar becomes world reserve currency and saves the dominating role in a basket of the international currency reserves of the IMF since 1981. The dollar role, connected, obviously, with trade in petrodollars, almost always saved its share in more than 40% of the SDR basket while euro saved a stable share in the amount of 29-37% since 2001. To understand economic changes in process, it is enough to notice that the yuan for 2017 is finally included in SDR with an initial share in 10% that there is higher than the level of yen (8.3%) and pound sterling (8.09%), but it is much less, than dollar (41%) and euro (31%). Slowly but surely, the yuan becomes more and more used currency in world trade.
The 1980-2010th: As the dollar destroys the planet
The reason for which the USA could feed this global demand for dollars is connected with need of that other countries owned dollars to have an opportunity to buy oil and other raw materials. For example, if the Bolivian company exports bananas to Norway, the payment method requires use of dollars. Therefore Norway should own the American currency for payment and receiving the purchased goods. The same way the dollars received by Bolivia will be used for purchase of other necessities, such as oil from Venezuela. It can seem improbable, but practically all countries used US dollars for trade among themselves several years ago even if it were the countries configured against the USA and their imperialistic policy.
This continuing use of dollar made some destructive impact on the planet. First of all intensive use of the American currency in combination with Nixon's solutions created the economic standard based on dollar which soon replaced precious metals, such as gold which was the standard for world economy for many years. It resulted in considerable instability and to the economic systems which in the years ahead created catastrophic financial policy, for example in 2000 and 2008.
The main source of economic reliability passed from gold to dollars. This large shift allowed U.S. Fed to print dollars practically without restrictions, well understanding that demand for dollars will never stop, especially in sectors of the private and state enterprises. It set use rate the global economic system of financial instruments, such as derivatives and other securities, instead of real material goods, such as gold. Having made it for the sake of the benefit, the USA created conditions for a new financial bubble which can bring down all world economy when blows up.
The USA fell into an enviable state, having an opportunity to print sheets of paper without gold support, and then to exchange them for real goods. This economic agreement allowed Washington to reach unprecedented strategic advantage over the geopolitical opponents (originally the USSR, later Russia and China), namely to receive almost unlimited potential of dollar expenses, even when they grow to the astronomical sizes of a national debt (about $21 trillion for 2017). The destabilizing factor for world economy is capability of Washington to accumulate huge public debts, without worrying about effects for international markets. The countries just needed dollars for trade and therefore were ready to buy them for diversification of the financial assets.
Honor the continuing use of dollar as means of payment for everything, in combination with almost infinite capability of FRS to print money and treasuries to issue bonds, led to the fact that the dollar became the main safe shelter for the organizations, the countries and the individuals legalizing this vicious financial system which for decades influenced the world.
2017: Easing of military power of the USA: beginning of the end of dollar
Problems for the USA began in the late nineties during expansion of the American empire after death of the Soviet Union. The stated geopolitical purpose - achievement of global hegemony. With unlimited opportunities and the ideology based on exclusiveness of the USA, this attempt, appear, was within reach for politicians in the Pentagon and on Wall Street. The crucial element for achievement of global hegemony was in preventing capability of China, Russia and Iran to create the Eurasian region of integration.
For many years and for various reasons these three countries continued to do large business by US dollars, bowing to economic pressure of the fraudulent financial system created for the benefit of the USA. China needed to continue to play a role of world factory, always accepting dollar payments and purchasing hundreds of billions of American treasury bills.
With the president Vladimir Putin Russia began to carry out almost at once dedollarization, paying off external debts in dollars, trying to reduce this economic pressure. Russia is one of the countries of the world with the smallest volume of the public and private debt expressed in dollars today, and recent prohibition on use of US dollars in the Russian seaports is the last example. For Iran sanctions which created big incentives for a bypass of dollar and search of alternative payment methods were a problem always.
Financial crisis of 2008 and also the growing aggression of the USA since the events in Yugoslavia in 1999 became the decisive factor which changed perception of such countries as China and Russia. The war in Iraq along with other factors prevented Saddam to begin oil trade in euro that threatened financial hegemony of dollar in the Middle East.
War and the continuing presence of America in Afghanistan emphasized intentions of Washington to continue to surround China, Russia and Iran not to allow any Eurasian integration. Naturally, the more than a dollar was used in the world, the more at Washington was the rights to spend for military force. For the USA the payment on accounts in the amount of $6 trillion (it is the cost of wars in Iraq and Afghanistan) was an easy task, and it is unprecedented advantage in comparison with such countries as China and Russia whose military expenses in comparison with it make the fifth and tenth parts respectively.
Repeated unsuccessful attempts to subdue, undermine and control such countries as Afghanistan, Georgia, Iraq, Libya, Syria, Donbass, North Korea, Egypt, Tunisia, Yemen and Venezuela, had a considerable impact on perception of military power of the USA. In the military plan Washington faced numerous tactical and strategic defeats: Russia returned the Crimea without uniform shot, the West did not react in any way.
In Donbass resistance caused huge losses of the Ukrainian army supported by NATO. In North Africa Egypt passed under control of army after attempt to turn the country into the state which is under control of Muslim Brotherhood. Libya after destruction was separated into three regions, and, it seems, Egypt is configured friendly concerning Moscow and Beijing. In the Middle East Syria, Turkey, Iran and Iraq even more often cooperate in stabilization of the regional conflicts. Where it is necessary, they are supported by the Russian military power and the Chinese economic power. And, of course, in 2017 the DPRK continues to ignore military threats of the USA, having a restraining factor in the form of nuclear potential, having actually made these threats of the USA invalid.
Color revolutions, wars, economic terrorism and attempts to destabilize these countries made destructive impact on military power and efficiency of Washington.
Venezuela refuses dollar when calculating for oil. According to the business press, the state company directed the clients to open accounts in any other currencies, only not in the American. Several decades ago any idea of withdrawal from petrodollar was considered as direct threat of the American world hegemony requiring the military answer. In 2017, considering decrease in trust concerning the USA as a result of the beginning of war against the small countries (having laid aside such countries as Russia, China and Iran which have military opportunities, similar to which the USA was not seen for more than seventy years), in many countries the general recession of a dollar system began.
In recent years it became clear to many countries opposing Washington that the only way to adequately constrain effects of falling of the American empire - gradually to refuse dollar. It serves restriction of opportunities of Washington for military expenses due to creation of necessary alternative tools in financial and economic spheres which will allow to eliminate domination of Washington. It is important in the Russian-Chinese-Iranian strategy of consolidation of Eurasia and, thus, does the USA irrelevant.
Dedollarization for Beijing, Moscow and Tehran became strategic priorities. Elimination of unlimited influence of FRS and the American economy means restriction of expansion of imperialists of the USA and decrease in global destabilization. Without the normal military force of the USA directed to strengthening and imposing use of US dollar China, Russia and Iran laid a way for important shifts in a world order.
The USA practically shot to themselves at a leg, having accelerated process at the expense of an exception of Iran of the SWIFT system (having opened a way for the Chinese alternative, CIPS) and application of sanctions in such countries as Russia, Iran and Venezuela. It also accelerated production and acquisition of gold in China and Russia that directly contrasts with a situation in the USA and rumors that FRS has no gold any more. For anybody not a secret that Beijing and Moscow aim at building of gold holdings if when the dollar fails.
Beijing began to put the strong pressure upon Riyadh to force it to accept payments for oil in yuans instead of dollars. For Riyadh it is almost existential question. Riyadh is in the difficult situation connected with maintenance of the US dollar tied to oil though his main ally, the USA, implemented in the Middle East contradictory strategy, apparently from the agreement of JCPOA. Iran, the main regional enemy of Saudi Arabia, could remove sanctions (especially from the countries of Europe).
Besides, Iran could achieve a historical victory with the allies in Syria, having occupied an outstanding role in the region. Riyadh is obliged to submit to the USA, to the ally who does not care for the destiny in the region (Iran is more and more influential in Iraq, Syria and Lebanon) and even competes in oil market. To aggravate a situation in Washington, China became the biggest customer Riyadh, and, considering arrangements with Nigeria and Russia, Beijing can quietly stop buying oil from Saudi Arabia if Riyadh continues to insist on receiving payments only in dollars. It strongly would damage to petrodollar, a vicious system most of which of all causes damage to China and Russia.
The number of the countries which begin to see advantages of hostless system, unlike a system with US dollar grows.
Iran and India and also Iran and Russia, often trade in hydrocarbons in exchange for raw materials, thereby passing the American sanctions.
Besides, the economic power of China allowed it to allocate the credit of 10 billion euros for Iran, having allowed it to bypass recent sanctions.
Venezuela (with the largest reserves of oil in the world) in 2017 began the historical movement in the direction of a total failure from sale of oil in dollars and announced that it will begin to receive money in currencies of a basket of currencies without dollar.
Beijing will purchase gas and oil from Russia, having paid yuans, and Moscow will be able to convert yuan into gold on the Shanghai international energy exchange at once.
This mechanism "gas-yuan-gold" tells about revolutionary economic changes thanks to a gradual failure from dollar in trade.