Today, more than 60% of all foreign currency reserves in the world are in U.S. 
dollars – but there are big changes on the horizon…Some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade…[and this shift] is going to have massive implications for the U.S. economy
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Michael T. Snyder gives us ten reason why the Reign of the Dollar as the World Reserve Currency Is About to Come to an End.
Snyder goes on to say, in part:
China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016 [and projected to become three times larger than the U.S. economy by the year 2040 by at least one economist. [As such,] China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet.
China, and other emerging powers such as Russia, have been quietly making agreements to move away from the U.S. dollar in international trade over the past few years [and, as such,] the supremacy of the U.S. dollar is not nearly as solid as most Americans believe it to be.
As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world. Things are rapidly changing, and most Americans have no idea where these trends are taking us.
The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end:
#1: China And Japan To Use Own Currencies In Bilateral Trade
A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement:
“China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade. The deal will allow firms to convert the Chinese and Japanese currencies directly into each other. Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.”
#2: The BRICS Plan To Use Own Currencies When Trading With Each Other
The BRICS continue to flex their muscles. A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India:
“The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade…The two agreements will enable credit facility in local currency for businesses of BRICS countries…[which is] expected to scale up intra-BRICS trade that has been growing at the rate of 28% over the last few years but, at $230 billion, remains much below the potential of the five economic powerhouses
#3: China and Russia Use Own Currencies In Bilateral Trade
Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade. [In fact,] Russia and China have been using their own national currencies when trading with each other for more than a year now.
#4: Use Of Chinese Currency Growing In Africa
Who do you think is Africa’s biggest trading partner? It isn’t the United States. In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.
A report from Africa’s largest bank, Standard Bank, recently stated the following:
“We expect at least $100 billion (about R768 billion) in Sino-African trade…to be settled in the renminbi by 2015.”
China seems absolutely determined to change the way that international trade is done. At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.
#5: China and United Arab Emirates To Use Own Currencies In Bilateral Trade
China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.
The UAE is a fairly small player, but this is definitely a threat to the petrodollar system. What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?
#6: India To Use Gold To Buy Oil From Iran
Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade. For example, it has been reported that India will begin to use gold to buy oil from Iran.
#7: Saudi Arabia Likely to Abandon Use of Petrodollar in Dealings With China
Who imports the most oil from Saudi Arabia? It is not the United States, it is China…Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia…so how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?
#8: The United Nations Continues to Push For A New World Reserve Currency
The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world. In particular, one UN report envisions “a new global reserve system…that no longer relies on the United States dollar as the single major reserve currency.”
#9: The IMF Has Been Pushing For A New World Reserve Currency
The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world. In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….
#10: Most Of The Rest Of The World Hates The United States
Global sentiment toward the United States has dramatically shifted, and this should not be underestimated. Decades ago, we were one of the most loved nations on earth [but] now we are one of the most hated. If you doubt this, just do some international traveling. Even in Europe (where we are supposed to have friends), Americans are treated like dirt. Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.
If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar but because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.
What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?
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. It will bring very undesirable changes to the American lifestyle through:
1. massive inflation,
2. high interest rates on mortgages and cars,
3. substantial increases in the cost of food, clothing and gasoline and
4. a much harder time financing its debt. Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade but what if… the appetite for U.S. dollars and U.S. debt dried up dramatically? That is something to think about.
Conclusion
At the moment, the global financial system is centered on the United States but that will not always be the case. The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam. Under the right conditions, a shift in momentum can become a landslide or an avalanche.
Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade. When will this major shift occur? Only time will tell.
Courtesy: http://www.munknee.com/shift-f...is-mean-for-america/
Wishful thinking. In the last recession, everyone ran for the US dollar when the Euro and Pound were dropping like flies. The Canadian dollar was up for a while when gold and oil were sky high but it has since retreated. People will buy what they have confidence in and right now the US dollar rules the roost in that respect. It's all about consolidating your wealth. People ain't stupid to throw away their money.
Emerging market currencies have their own issues today. They still prefer to hold their reserves in US assets. All the conspiracy theories can say what they want, but that is a fact.
Its been a while since any one who is credible has been projecting the end of teh US dollar as they world's store of value.
Only the markets can determine reserve currency - facts on the ground.
BTW, as China's economy matures its rate of growth will come more in line with the natural averages we've seen in the history of mankind. So regurgitating it will grow from $3 trillion to $18 trillion by 2016 (2 to 3 years from now), while the US will grow only from $16 to less than $18 trillion in the same time - China +$15 to US +$2 trillion - defies statistical probabilities.
How many letters of credit in the world today are denominated in Yuan and Ruble? Almost all are in US Dollars.
A reserve currency needs the infrastructure of a mature capital market - the likes that exist here on Wall St (as I peep out of my window).
Only the markets can determine reserve currency - facts on the ground.
BTW, as China's economy matures its rate of growth will come more in line with the natural averages we've seen in the history of mankind. So regurgitating it will grow from $3 trillion to $18 trillion by 2016 (2 to 3 years from now), while the US will grow only from $16 to less than $18 trillion in the same time - China +$15 to US +$2 trillion - defies statistical probabilities.
How many letters of credit in the world today are denominated in Yuan and Ruble? Almost all are in US Dollars.
A reserve currency needs the infrastructure of a mature capital market - the likes that exist here on Wall St (as I peep out of my window).
The projection that China will bypass the US economy is based on the CIA PPP measurement of GDP. In ACTUAL terms this isn't going to happen for quite a while. Especially as you said that China's economy is maturing so we will see 7% instead of the historic 10% Assuming of course that there isn't a bubble popping in its domestic financial sector as some predict, with all the ghost cities that have been built.
People like Lucas, and others, who yearn for the collapse f US hegemony don't understand that if it happens the whole world will be flushed down into a very filthy and over flowing latrine.
Because like you said, no one accepts a L/C dominated in anything other than US dollars, or maybe yen.
In the comments over the US Government loosening its control over ICAAN - Internet Corporation for Assigned Names and Numbers - there is the danger of authoritarian countries denying its citizens freedom of the Internet. Similar comments were made if the US were to withdraw from its control of the world's shipping lanes, then we'll see how all those who wish for the demise of the US will react.
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