The dollar replacement
THE year 2023 is bringing about a profound change in the geo-political and financial out look of the world. And the most significant and radical transformation is the downward spiral of the United States Dollar currency. No one could have believed that it will happen so fast and the American control of the world financial market will fall so rapidly. At first, it was thought that his radical change will be brought about by one nation but that concept has been altered. The fall of the Dollar was foreseen to be brought by the Chinese Yuan but now there are many other challenges for the American Greenback. So much so, that blue-chip companies are planning to shed their Dollar reserves in favour of other currencies, or at least other commodities. It is imperative to look at these series of events in order to get a grasp of the larger picture at play with the Dollar and its oncoming replacement.
First and foremost, the Asian economies have been exploited by Dollar supremacy. From the 1970s, the Central Bank of America removed the backing of the currency issuance with gold reserves. That basically means that American economy runs on a paper mill and that paper mill is run by the Federal Reserve Bank of America. And only by printing money and sending it to other nations in exchange for goods and services, the entire world has been exploited by this printing of paper without any hard-earned value or commodity to back it up. When the American Central Bank issues Dollar notes, it does so without any promissory value. It is just paper. And with this paper money that has no value at the bank with its issuing authority, the American economy has been hijacked by a banking system that is failing.
Further, most of the American economy runs on nothing but credit and loans. It is estimated that out of total American economy, over 70% of the money in circulation only exists on Computer and Cellphone screens as credit and loans. Without any actual value like in the case of stocks or gold or silver, the American economy is a system of loans that is monopolized by American banks. This system of exchange of empty paper to buy anything and everything from around the world is now collapsing and it is due to the rise of new nations that have realized their power and the value they possess. And it is the awakening of these third world economies that has given rise to the promotion of real value, actual commodity and most significantly mutually valuable exchange.
During 2023, many events have taken place in quick successions that have eliminated the long-standing dominance of the Dollar. And new currencies are on the rise, Yuan being the most valuable as of today. The replacement of the Dollar is occurring mainly due to the exploitation of the American commerce and banking system and flawed American foreign policy. The first hit came when the Russians were hit with sanctions and they looked towards China for a replacement. What started as a means to damage the Russian currency, has resulted in strengthening of the Yuan since Russian fuel supplies are being paid for in Yuan, and Russia is now importing consumer goods, machinery, parts and other items from China.
The Russian economy is sustaining itself and demand for Yuan has gone up. Similarly, other nations are now inclined towards replacing the Dollar. Malaysia and Indonesia have already signed multiple bi-lateral agreements in which their trade is now in Yuan. Malaysia and China have also agreed to create an Asian Monetary Fund so that the dominance of Western nations in controlling Asian economies through IMF can be curtailed. The IMF mainly deals with other Nation States through financial agreements and deals that are backed by the Dollar. The creation of an Asian Monetary Fund means that all nations that are part of the Asian Financial outlook will move away from dependence on Dollar and the IMF. The global financial markets have already begun calculating the impact of this development on the Dollar.
The value of the Dollar has been at the top for one very specific reason and that is its consumption in the world oil market. The Saudis have politically aligned themselves with the American Dollar for decades. For this reason, the term Petro-Dollars was actually used in International Relations. The dealings of billion Dollar corporate deals in Oil in exchange for Dollars have kept it high in the International market but that is changing because of another development which is the opening of diplomatic relations between Saudi Arabia and Iran under the umbrella of Chinese leadership. This has opened a plethora of doors for the economies of Middle East and Asia and has damaged the American influence in the region. Now, both oil producing nations have agreed to supply oil and gas to China under the banner of One Belt and One Road Project and all these trading deals will be done without the involvement of the Dollar. This will be a fundamental change in the International Monetary system. Without the threat of Iranian aggression, Saudis will no longer need to be a security state under the protection of the American army, and with no need for American army, there will be no need to sell oil for petty paper money in dollars.
The last and the most aggressive development is the launch of BRICS, that is, Brazil Russia India China and South Africa are joining hands to launch a new trading system, free of the Dollar. The BRICS nations have agreed to deal in alternate currencies and now there is a draft resolution to introduce a new currency that will be used by not one but all the BRICS countries. And with this, other nations including Pakistan are now becoming part of BRICS plus. It is important to mention that these countries account for more than half the population of the entire world and over 70% of overall trade. Central Asian states and Middle Eastern countries are also eager to join this new financial and monetary system free of Western influence and Dollar dependency. Hence, the Dollar is set to be replaced by the Yuan and the common currency being planned.
Together with all above developments, China is determined to connect the world under its banner. The One Belt One Road Project has no adversaries at the moment. Pakistan and Gwadar are the main cornerstones of the Land Route of OBOR. The Pakistan Government must join this new movement of Dollar Replacement and shift the financial system to Yuan and participate with the new alliances being formed. Iran and Saudi Arabia will multiply their economic outlook through co-operation and regional connectivity, both nations are close to Pakistan and the geo-strategic location of Pakistan and particularly Gwadar can rescue Pakistan from its economic woes. The answer to complications of the financial system is not bail outs from the International Monetary Fund but instead, it is exploring the opportunities of a rapidly changing world and a financial system where old power circles are shifting and the Dollar is being replaced by the Yuan and the Rupee for the foreseeable future.
—The writer is Chairman, Jinnah Rafi Foundation, based in Lahore.
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