Historically, the world economy operated on the "gold standard," where a nation's currency had a fixed value in terms of gold. For instance, in the early 20th century, $1 equated to 1/20 of an ounce of gold, meaning 20 dollars equaled an ounce of gold. This system was abandoned later.
The transition began with Roosevelt during the Great Depression, requiring Americans to exchange gold coins for US dollars. President Nixon permanently ended this practice in 1971 under European influence. Others followed suit.
Surprisingly, just two years after abandoning the gold standard, the petrodollar system was established in 1973 between the US and Saudi Arabia. This system priced and traded oil in US dollars. With oil standardized in dollars, countries buying Saudi oil needed US dollars. Since Saudi Arabia was a major oil exporter, other oil-producing nations also priced their oil in dollars. Thus, the petrodollar system was formed.
Countries shifted to using the US dollar for oil trade and more. The dollar's dominance continued until recently.
However, note that the new dollar, detached from gold, is termed "FIAT," from the Latin "fieri," meaning arbitrary decree. It signifies paper money backed only by government approval, no longer gold. Abundance of gold, like in Africa, lost its direct purchasing power, replaced by valueless paper money. This paper money purchases treasures like oil, enriching exploiters who store these treasures.
Today BRICS, a group of the world economies originally consisting of Brazil, Russia, India, China, and South Africa, aims to reintroduce gold-backed currencies, including a proposed alternative to the dollar. With around 70% of global oil production moving away from the dollar, the US dollar faces a challenge from the BRICS currency backed by gold.
Source
BRICS and its allies could weaken the US economic influence established by the petrodollar. The impending transition could lead to significant inflation, potentially resembling the Great Depression era.
This journey is gaining momentum unexpectedly, even acknowledged by sources like CNN. We're truly in a post-colonial era, and the prospect of Africa's liberation from colonial influence might just be possible in the current generation.
The safest bet right now would be to diversify funds into physical gold/gold backed ETFs, Bitcoin and other trustworthy cryptocurrencies like Hive and Ethereum.
References:
https://en.m.wikipedia.org/wiki/BRICS
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My name is Edwin Ifeanyi Louis (eil7304) and I love to write about finance and investing, movies, technology, gaming, fiction and just about any topic that piques my interest on a Blockchain platform called Hive.
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