With the shifting of global powers around the world notably in the Middle East the US dollar looks to be losing its world reserve currency status. We have seen the formation of the BRICS group of countries (Brazil, Russia, India, China, and South Africa) who are challenging the US dominated financial lending arrangements. The Asian Infrastructure Investment Bank (AIIB) has just held its opening ceremony on Saturday. The AIIB will challenge the World Bank and the Asian Development bank which Japan dominates. The funds in the AIIB will be used for infrastructure projects in countries to assist with trade and trade routes. China has now been accepted into the special drawing rights basket (SDR’s) of the International Monetary Fund (IMF). This means that China’s Yuan/Renminbi will be available for loans to countries along with the US dollar, the British pound, The Euro, and the Japanese Yen. China has also recently ordered their banks to stop buying US dollars. It is also interesting to note that Russia and China are buying record amounts of gold. Russia has also taken the initiative of pricing their own crude oil benchmark in Rubles and not in US dollars. The reliance used to be on the Brent crude price issued by the US. This is another blow to the US dollar.
All this will mean the US dollar will eventually fade away and be replaced by another world reserve currency-possibly backed again by Gold.
This article from zero hedge explains the US petrodollar very well, touching on it’s uncoupling of the Bretton Woods system backed by Gold, how the petrodollar came about, what to look for to cause its demise, and the timing of this event. It is a must read.