by Kenneth Schortgen, The Daily Economist:
Donald Trump’s talk of economic sanctions against China and the selling of arms to the Far East power’s nemesis Taiwan on June 30 indicate a sudden shift away from the apparent gains made between himself and China’s Xi Jinping earlier this year. But according to a report out today from Sputnik News, the President’s actions may be tied to much more than a simple trade war, or concerns over North Korea.
In fact, the issue at stake may be the fate of the dollar remaining as the world’s reserve currency.
It is no coincidence that a surge in global tensions over recent years comes at a time when the American economy is staring into an abyss. The key to the survival of the US economy as we know it is the status of the American dollar as the world’s top reserve currency.
The so-called petrodollar system, in which the world’s most traded commodity oil and gas are conducted primarily through American currency, appears to be coming to an end. That decades-old system is being challenged by the rise of China, Russia, India, Iran and others. If the petrodollar and its global privileges are displaced then the United States is facing an economic apocalypse.
Perhaps no two other countries have done more to forge a multipolar global order than China and Russia. China is the biggest oil importer and Russia is the world’s biggest fuel exporter. When they announced last year that oil trade would be henceforth conducted in their own national currencies of yuan and rouble that development marked a nail in the dollar’s coffin.
Now, only a few weeks ago, China and Saudi Arabia – the world’s second-biggest oil producer – reportedly launched earnest negotiations for future energy fuel trade to be conducted in yuan. Commentators say Saudi Arabia has little choice in the matter, since China has been progressively reducing the kingdom’s market share with other oil exporters, like Russia and Iran. If the Saudis want to maintain exports to the world’s biggest economy, then they will have to do their business in Chinese currency, not the US dollar as they have customarily done.
Randy Martin, an American political analyst, said the long-anticipated decline in the petrodollar is picking up pace.
“The petrodollar is in decline, and consequently the entire financial system that undergirds the western economies,” Martin said. “China and Russia have laid the global economic foundation for the new ‘Silk Road’ and the emergence of a new Eurasian economy that puts the US and its petrodollar on the outside. That leaves the US dollar and its economy in tatters as long as the US insists on trying to maintain its unipolar quest for global economic dominance. To be clear, what China and Russia have successfully done is to unravel the economic foundation of US global hegemony.” – Sputnik News