Before the World War, gold was backup of every country. As the European countries exhausted their gold reserves, the dollar replaced the gold as backup.
What is the world’s deadliest weapon? It doesn’t looks like a nuclear bomb. That is the US dollar. Not just Pakistan, the whole world is a slave to the US dollar. For USA the dollar is not only a medium of trade, it is a tool, a weapon which controls the world. For the past few months you must have read news that Pakistani rupee is falling and the dollar is getting strong. What is different between USD and Pakistani rupee? Both are piece of paper. But Pakistani rupee has no value outside the Pakistan and the world is dependent to US dollar, because the US dollar is a world currency which can be easily traded for other currencies outside the country as well.
But how did Benjamin’s photo become the world’s reserve currency? Till 1914, before the First World War, most of the world’s currencies were linked to gold. That means whatever paper money were printed by central banks were backed by physical gold in the treasury. Gold was every currency’s backup. Then the countries in Europe exhausted their gold reserves in the war. Without gold their currencies didn’t have any value. At that time 70% of the world’s gold reserves were concentrated with one country United States of America. There was an agreement signed in 1944 which is called the Bretton Woods agreement. Under this agreement it was decided that since the US dollar is stable so everyone can link their currency to US dollar. This way the US Dollar became the world’s backup. Today all central banks keep 59% of their reserves in US dollar.
Journey from backup currency to a weapon
In 1971, President Nixon abolished the gold standard that gave USA complete freedom to control the US dollar. That means gold went out of our hierarchy and the US dollar came right on top of everyone. International trade is done in US dollars, loan payments happen in US dollars, and the dollar is controlled by the US Federal Reserve. They have the control how US dollar will be used. This dollar is used as a weapon. Through sanctions the US can control which country can pay using the US dollar and which country can’t pay using US dollar. This is what US did with Russia after Russia invaded Ukraine. US imposed sanctions on Russia. Means Russia was stopped from trading with all those countries which accept payment only in US dollar.
Would you like to live in a society like this where your chairman can enter in your house and take decisions for you? Of course not. In my house, rules should be mine, but unfortunately we live in such a world where the US Federal Reserve’s policies dictate policies to many other counties. The US dollar gives the US extra territorial reach. The US is able to dictate people’s behavior, the future of companies and the transactions of a country.
Can we challenge the US Dollar?
To replace US dollar along with a strong economy, we will have to find a currency which majority of the countries trust. While conducting trade these countries should use that currency and pay of their loans in that currency. Believe in this story that this piece of paper has some value. The Chinese Yuan has tried to be the reserve currency but China is a dictatorship and it is not transparent. China is aggressive nation which can go to any limits to achieve its goals.
Aitzaz Hussain Jamali
Nawabshah Sindh
