US Dollar - Reserve Currency Status
The US Dollar, in its different forms, has been the world’s reserve currency for the best part of a hundred years now, but is its time coming to an end? Could a new gold-backed cryptocurrency be about to replace its hegemony?
After Britain spent more money than it could afford fighting for and against its neighbours across the English channel in World War I, America stood back, waited patiently and moved in to eventually become the standard bearer for the world economy. Ever since, America has dominated world politics and trade.
Britain and the pound weren’t the first dominant nation and currency to relinquish its power, however. Many fell before them, and the new king, America, will be the next to relinquish its crown. In fact, I believe the displacement is already underway. These things take time. Britain fought for decades and didn’t officially lose its reserve currency crown until after World War II.
The Forceful Arm of the American Government
America doesn’t help itself in remaining king of the currencies, of course. Most world trade is done in dollars using the SWIFT System, and America can and has dictated which governments can use it. SWIFT is not owned by America, but because of their reserve currency status they have so much clout, they dictate proceedings. So, if a country isn’t doing as America pleases it is literally switched off from the SWIFT payment system until it does as it’s told.
Any country not playing ball is penalised with sanctions by the US government, and the effect is usually catastrophic for governments and their economies. Of course, this only creates resentment. Two of America’s biggest foes, China and Russia have been victims of sanctions and have had their economies strangled. Some might say rightly, but that is not important for this argument. The fact is America has dictated world trade with its reserve currency status and at times abused its power. Read More