The Future of World Currency: A Study on Shifting Global Finance

This essay examines the potential shifts in the international financial system, particularly concerning the future of the US dollar as the world's reserve currency. It highlights the increasing national debt of the United States and its aggressive foreign policies as contributing factors to a “de-dollarization” trend. The essay discusses how the Chinese Yuan is gaining prominence in global trade, especially in the energy market, and how countries like Russia, Iran, and Turkey are moving away from the US dollar in their trade agreements. Furthermore, it explores the repatriation of gold reserves by countries like Germany and the Netherlands, signaling a lack of confidence in the US dollar. The analysis references predictions from the World Bank about the potential replacement of the US dollar by the Euro or Chinese Yuan, drawing parallels with the historical decline of the British pound. The essay concludes that the increasing US debt and the growing strength of the Euro and Yuan suggest a possible shift in the dominant world currency by 2030.

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Following the huge national debt as well as the aggressive foreign policies which have
been enacted recently in the United States, there is a possibility that the international financial
system might change significantly in the next decade. This is in consideration to the fact that the
current foreign economic policies which have been put in place to govern the US economy and
its huge national debt have led to a “de-dollarization” and made the dollar to lose its reserve
currency slowly (Aiyar, 2009). Statistics have it that 70% of the word traditions are traded in the
US dollar, 20% in euro and the rest in Asian currencies, mainly in Chinese yuan. These statistics
are changing slowly following the emerging trends in the world economy. For instance, China
has recently led a powerful blow on the US dollar in the global energy market when it opened
trade in oil futures for its currency (Chinese Yuan) and which is the third widely used currency
internationally, and the attempt was embraced with absolute success.
For that matter, although the US dollar has been the only widely used currency in the
world market especially when trading in raw materials, the Chinese yuan is likely to start
pushing through the fastest growing oil markets sector (Cooper, 2009). And not just through
hydrocarbons. Consequently, in the bilateral trade partners of the dominant financial partners like
Moscow and Beijing, the US dollar has also lost its fame to the Chinese yuan. In 2017 for
instance, the share of Chinese yuan currency utilization in the Russian international trade hit
15% and has henceforth been increasing which has resulted to a decline in the usage of US dollar
as a common exchange currency.
The current trade agreements between Russia and China to trade for yuan and rubles have
also hit the news headlines since the first conference which was held in 2014 and such a payment
will not depend on US, UK and other prominent banks implying that US dollar will have lost its
base in these two countries. In a similar case like this of Russian-Chinese agreement, Iran has

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also abandoned the use of the US dollar as their trade currency and transferred all its
international trade deals into euro (Carbaugh & Hedrick, 2009). This has seen the US dollar ran
out of the question in Iran and most of the traders shifted to the alternative trade currencies like
euro and Chinese yuan. Currently, Iran is being paid in terms of euros for its black gold in India,
and this has seen the economy of this country keep on growing without disruptions. Turkey has
also expressed its plans in abandoning the US dollar and switched to the mutual settlements in
the national currency with Iran.
The fact that Russia is expected to join the likes of Turkey cannot be ruled out. This is in
regard to its current headlines that its government is considering to settle for oil in national
currencies mainly in Turkey and Iran by running away from the US dollar (Jaeger, Lanzeni &
Mayer, 2010). Turkey has been reducing the dependency on the US dollar by buying gold on the
world market. Just like the rest of the countries, Turkey has not kept its gold ingots which weigh
more than 28.7 tons in the American Reserve System. Ankara, on the other hand, has followed
the same path by taking everything and placing its gold in the depositories of its territory just like
it’s the case with Switzerland and England banks.
Other countries are also following the same trend of clearing with the US dollar currency.
For instance, Germany has recently completed its programme of shifting its gold reserves from
the US and which has seen 300 tons of ingots back to its homeland reserves. Germany
withdrawal of its gold reserves has also been followed by another 100 tons of gold repatriation
by the Netherlands. The outflow has continued since 2014 without interruption to affirm the fall
of the US dollar.

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The reasons behind these withdrawals are quite obvious: pressure from the upcoming
currencies likes the Chinese yuan and euro, the increasing rates of the Federal Reserve System,
and the strengthening of the geopolitical risks. To support the trend, the World Bank has
predicted the fall of the US dollar and its possibility of being replaced by either the euro or the
Chinese yuan (Murphy & Yuan, 2009).
It is also worth to remember that the replacement of British pound by the US dollar in the
year 1944 came with some of the signs which have been discussed above. First, the replacement
phase was set after the UK accumulated excessive debts and most of the strong economies
withdrawing the gold reserves and that saw it collapse (Mallaby & Wethington, 2012). Currently,
the US debt has gone beyond 20 trillion dollars and has kept increasing steadily making it less
attractive on the market. On the other hand, both the euro and yuan have continually gained
momentum and that will see one of them replace the US dollar by 2030.
References
Aiyar, S. S. A. (2009). An International Monetary Fund Currency to Rival the Dollar. Why
Special. Retrieved from: https://object.cato.org/pubs/dpa/dpa10.pdf
Cooper, R. N. (2009). Future of the Dollar (No. PB09-21). Washington, DC: Peterson Institute
for International Economics. Retrieved from:
https://core.ac.uk/download/pdf/6603319.pdf
Carbaugh, R. J., & Hedrick, D. W. (2009). Will the dollar be dethroned as the main reserve
currency?. Global Economy Journal, 9(3). Retrieved from:
https://www.degruyter.com/view/j/gej.2009.9.3/gej.2009.9.3.1541/gej.2009.9.3.1541.xml

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Jaeger, M., Lanzeni, M. L., & Mayer, T. (2010). Yuan as a reserve currency. Deutsche Bank
Research, 16, 3-5. Retrieved from: http://www.k5m.org/private/Yuan.pdf
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