Is the end near for the petrodollar?
Saudi Arabia might be leading the charge.
Finance Minister Mohammed Al-Jadaan told Bloomberg TV at the World Economic Forum (WEF) that Riyadh is open to talks about trading in currencies other than the U.S. dollar.
“There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal,” he said. “I don’t think we are waving away or ruling out any discussion that will help improve the trade around the world.”
This is a huge development for a couple of reasons.
First, the Saudis have had a dollar peg since the 1970s, making it a pillar in the petrodollar system. The Kingdom received security in exchange for pricing its exports in dollars, but with this assurance diminishing, officials want to move on.
Second, if Riyadh is willing to abandon the U.S. dollar – as well as the growing number of other countries — then why would the chief international reserve currency maintain its hegemony?
Meanwhile, Al-Jadaan pointed out something else that is interesting: the Saudis are investing billions in countries that it considers “vulnerable.” The country is offering financial aid, oil, investments, and more. It sounds like China’s Belt and Road Initiative.
Overall, a peak dollar prognostication might be premature, but the end may be near for the dollar domination.
Consider what Credit Suisse wrote last year:
“We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West.”
It should be a fascinating time in the coming years.
A BRICS-denominated international reserve currency.
A SWIFT alternative.
The rise of the yuan and digital yuan.
Non-dollar-denominated cross-border trade.
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