The dollar has been the World’s Reserve Currency since the 1970s when the Gold Standard was abandoned by President Nixon. Since then, the US dollar is widely accepted across the world making it the world’s leading currency. Today 43% of all cross border transactions use the US dollar. Furthermore, central bank reserves indicate that the value of the dollar is strong with 61% of these reserves being in dollars.
However, speculation has been rife over the past few years that this currency may die even as its percentage of the world’s currency supply diminishes. This is backed by a report by the International monetary fund that shows how the dollar has drifted marginally to a 15 year low. What this means is that countries that have been willing to use the dollar are ready to adopt other currencies to do business.
There are a number of circumstances that set the ground for the collapse of the dollar among them an underlying weakness, the presence of another viable currency alternative for all and a trigger towards the collapse. Presently, the first condition exists as the US dollar has recorded a 54.7% decline against the Euro in as span of 10 years. During this time the US debt almost tripled. Analysts claim that this is a sign that the U.S. will allow the value of the dollar to decline so as to pay its debt with cheaper currency.
China is consolidating its share of gold with the hope that it will become the international currency in the near future. Gold is considered a better replacement to the US dollar because of its worth. As such, China is buying into the world’s gold reserves in a bid to create a new currency.
Economists argue that should China succeed in increasing its market share in the world currency market, then there are high chances that the US dollar will be a loser. Even then, pessimists hold the belief that this can only work for the Chinese and not the Americans.
To understand this better, it is worth noting that the reason why the death is the dollar is inevitable is that an asset backed currency needs to replace it. According to financial experts, the biggest shock will be in the currency reset that will be followed by the Gold Trade Standard. Hence the return of the gold standard is near although it will be through trade vehicles as opposed to SWIFT bank platforms and Forex currency. Consequently, Gold Trade Notes will be used in the place of a letter of credit.
China’s recent slowing of economic growth as well as potential credit problems has worked for the dollar that has gained strength over the Yuan.