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The U.S. dollar was adopted as the global currency reserve at the Bretton Woods Conference in 1944. President Xi Jinping lusts for the Chinese Yuan to replace the dollar as the dominant monetary unit in the world. Could China engender the trust needed to become a major player in the global monetary system? Should this be of concern to America?
President Richard Nixon understood the importance of oil and its relationship to the dollar as a world currency. Nixon played the oil/dollar game well. In 1974 Secretary of State Henry Kissinger and Saudi Crown Prince Fahd al-Aziz al-Saud signed a framework agreement to maintain security and promote orderly development in the region. This agreement ensured oil-producing countries would collect U.S. dollars for their oil exports. Saudi Arabia is the biggest oil producer in OPEC (Organization of Petroleum Exporting Countries).
U.S. dollars paid for oil became known as petrodollars. U.S. banks managed the dollar-denominated deposits. Federal Reserve chair Paul Volcker wrote “…this was the work of unfettered private markets in the recycling of petrodollars, particularly the Arab States and the Gulf. The United States role in monetary reserves and trade transactions materially benefits the dollar in global monetary market.”
