Before the dollar was annealed as an international reference currency, there was a different monetary system, the so-called gold standard, which simply consisted of a system that fixed the value of the monetary unit from gold.
What was the gold standard?
The issuer of the currency it could ensure that the promissory notes it issued were backed by a certain amount of the precious metal, whose value was already set according to an exchange rate established and agreed by the financial organizations of the time.
As an example, in 1944, when the adoption of the dollar as a global currencyWithin the framework of the creation of the Brettón Woods agreements, at that time the US currency had an exchange rate pegged to gold, which was $ 35 per ounce of gold.
From this dynamic, it was guaranteed that for every 35 dollars that the North American government issued, the value of that paper money was backed by one ounce of gold, which meant that by having 35 dollars, you were not only acquiring paper money as such. , but the central bank of the United States guaranteed you that at the same time you were owner of an ounce of gold.
What happened to the boss?
That system collapsed in 1971 and the great difference that exists today with the time when the gold standard predominated, is that simply and simply, the dollar no longer has a metal that supports its value, so in this circumstance, being the holder of a US dollar, now you are only owner of paper money as such, and the guarantee that the North American government gives you of its value, in other words, which is basically based on the trust that its holders give it, who would be represented by various markets and investors around the world, who make millions of daily transactions, such as purchases and payments using the US currency as the international reference currency, which is present in all its imports and exports, as well as investments with many countries on the planet.
What are the latent dangers behind the dollar as an international currency?
When the value of the dollar was based on the gold standard, there was no such general concern that prevails today. The reason is very simple, because at that time the United States government could issue as many dollars as its gold reserves could support, so there was a physical asset that justified the issue of the currency.
In spite of everything, everything changed in 1971, when, due to the costly Vietam War, the government of Richard Nixon made the decision to leave behind the convertibility of the dollar for gold, since its reserves of the metal were not enough to sustain the huge amount of money. banknotes that it has had to emit to cover the diverse expenses caused by the war.
Thus was born the system that we know today, despite all this is not perfect and several renowned economists dispose of their reluctance regarding the solidity represented by the dollar, not just for the US economy, but for the entire international financial system as a whole.
The reasons for concern focus on the fact that Central Bank of North America, the Fed (Federal Reserve System), in Spanish the Federal Reserve System, Today you can issue as many dollars as you want, in other words, technically there is no cap on the amount of indebtedness that the United States can have with the world, as well as at the domestic level.
This situation is surely worrying, since it is thought that the dollar could mean the advent of a new financial bubble, whose outbreak would cause the worst economic crisis in history.
The reason behind these gloomy predictions focuses on the growing increases in the debt ceiling of the US government.In addition to this, it is thought that the confidence that the United States represents, at any moment could collapse in the face of a viable crisis in the country, given that dollars are supported only by confidence in the economic power of the United States, Any economic crisis of the nation is always a point of important concern, since it will not always be able to grant certainty to countries and investors, about a paper money that does not have any physical asset behind it.
The new proposals that try to emulate a monetary system like the gold standard
Faced with the new challenges that lie ahead as a result of the hegemonic decline of the United States, the international economic system is in the process of transformation in which there is an increasing participation of other nations to try to determine a new financial reference system.
Exactly, in recent years, one of the most prominent actors with regard to these initiatives is China, a country that has long become a serious contender for the leadership of the international economy, and to achieve it, it is carrying out a series of actions aimed at reducing the power and influence of the dollar in world economic transactions.
Of this dynamic, recently, the Chinese government launched on March 26, yuan-denominated oil futures contracts, so that this proposal serves as the beginning of the end of the hegemony of the dollar. The motivations behind this new Beijing implementation can be understood from various angles.
In the first place, what has already been taken for granted is that China wants to gain greater visibility in the decision-making of the international community, Therefore, being the catalyst for a new monetary system is an excellent resource for gaining status and accreditation globally, a trust currently placed primarily in the United States.
Likewise, secondly, it should be mentioned that the political and diplomatic relations that the Donald Trump government maintains with the rest of the world are far from peaceful, being China, one of its main sources of attack on economic and commercial losses that your country had with other countries.
Therefore, it is natural that the government of China wants to accelerate as soon as possible its proposal to disassociate itself from the monetary control systems that Washington owns, and the answer to this dilemma has been found in the weakening of the dollar against a new reference currency. It is in this context that the creation of the petroyuan occurs.
Can the petroyuan succeed?
The international environment in which the creation of the petroyuan takes place is an optimal scenario to improve initiatives against the attacks and hostilities launched by the Donald Trump government against many countries in the world, an action that has made it extremely unpopular and at the same time. Time has taken away important allies that previously were a great foothold for US hegemony. Regardless, it is because of these circumstances that the petroyuan has found an environment conducive to reaching markets, at least with regard to the political possibility of the moment.
Despite everything, on the other hand, in the financial field, it has become clear in recent days that the dominance of the dollar is so ingrained in today's world that it will not be an easy task for the currency that is backed by Chinese oil. prevail in world markets, which are strongly dollar confidence.
Still this first attempt to unseat the US currency in world oil payments represents a first step in diminishing the power of this currency, and that is why it is so relevant for the establishment of a new economic order, for all that it represents and entails at the same time.
Will the dollar ever return to the gold standard?
At some time during the Trump presidency, the opportunity for the US financial system will return to the gold standard to back up its currency. Despite everything, this initiative has not achieved a greater impact due to how complicated it would be for an economy that today manages a public debt of more than 14 trillion dollars, to sustain all that amount of dollars in gold, which according to statements by some economists. , according to the amount of this metal that the federal reserve has, technically it could be viable, since they mention that for the gold standard to be considered valid in the United States central bank, it is only necessary that the 10% of all dollars in circulation, which, according to these analysts, is within the Fed's current opportunities.
As the international economy is today, it is reasonable to think that it needs several structural changes, but the important thing here is that what has been said is always taken into account Transformations must always be aimed at the well-being of the majority of the world's population. and not just a few.
