Not so far back in history, the dollar was denominated in gold.
That worked until capitalism told us that the real value of a currency had to be the capital, the productive wealth of a country. Gold was just a raw material, worth less than the factories and farms that made America the first real global superpower.
Fine until .. China. China’s factories and ships, and workers will, soon pass the productive wealth of Detroit, Iowa and even Silicon Valley. So, does that lean the yuan rise relative the dollar? There is another alternative … world currency denominated by the barrel of oil … the “petrodollar.”
The ‘Harvard Political Review’ published an article on Dec 18, saying that “China has taken steps to negotiate a potential economic deal that could harm United States’ economic, social, and political supremacy. The deal regards increased Chinese influence over oil and the petrodollar ……Recent conversations between Saudi Arabia and China have dealt with lifting the dollar off oil and replacing it with China’ national currency, the yuan. This motion directly threatens the petrodollar influence on the world and could
lift the roof off steady inflation in the United States, create unsupported national deficits, and stir economic turmoil in the United States …”
Who else has a currency that is, ion effect, denominated in barrels of crude? Russia. Putin’s empire does not make much else. So why should anyone need to use dollars to buy oil. China accounted for more than 15 percent of Saudi’s crude oil sales in 2018 and probably even more of the closer by Russian crude.
Now, emulating Trump. China’s Xi has enlisted Saudi Arabia against Canada.
Canada’s Global News said on Dec 14 that “First …Trump attacked Canada on trade. Then Saudi Arabia punished it for speaking up for human rights. Now China has the country in its cross-hairs …” While the Jamal Khashoggi issue was being stir fried by Washington, Reuters reported from the G20 forum in Argentina on Dec 1 that “… China firmly supports Riyadh in its drive for economic diversification and social reform, President Xi Jinping told Saudi Crown Prince Mohammed bin Salman …”
The China Daily Mail reports that “the closer Saudi-China ties indicate the on-going formation of a multi-polar world. Do not overlook the reality that Saudi is also improving its relation with Russia. It is why President Trump’s pragmatic wisdom is so outstanding. He has recognized this trend, and understands that it will be too costly for the U.S. to maintain its unipolar global supremacy status. Therefore, his goal is to make America great, not just ‘again’ but also in a longer horizon under the shadow of multi-polarity.”
The Saudis, of course, control the world oil market. It is as if the entire Kingdom is Fort Knox. So, it is in their interest .. along with the interests of China and Russia to use the yuan to as a petrodollar.
While it could happen and most likely will happen sometime in the future that another form of currency will replace the US dollar. Who knows maybe the United Nations will issue a currency, the UN has issued stamps for 70 years now. (In US denominations.) It’s unlikely the Chinese Yuan will replace the dollar for two reasons.
1) The Chinese government is still a communist government with a mix of capitalism. Good chunks of the Chinese economy are less than transparent. The Chinese also on some levels come across more as mercantilists than capitalists.
2) When Saudi Arabia politely asks the US to remove US forces from the country and invites the Chinese in, only then can the Chinese expect oil to be priced in Yuan on the world market. Then again the US is an exporting oil nation again.
Thus far the US dollar has survived a serious challenge from the Japanese Yen, and from the Euro. Arguable the English Pound could reestablish itself as the international currency before China gets to have the international currency.
So you think the British Empire will make a comeback?