Is the Dollar in Danger of losing its Reserve Currency Status?

China will be buying Russian natural gas in ever increasing quantities. Both nations will benefit from the trade, but the trade will be ground breaking in one particular way. China will almost certainly pay for the gas not in US dollars, but in Roubles or Yuan. I doubt if either Russia or China will want to buy and sell dollars to trade in natural gas. For economic reasons as these economies become stronger in their own right as well as becoming relatively stronger than the American economy then neither Russia nor China will want to hold too many dollars.

The American Dollar has been a world reserve currency for many years; before that the pound sterling was the world’s reserve currency when coal was king. The Euro has attempted to become a world reserve currency and now a quarter of the world’s official currency reserves are held in Euros, but that holding is a long way from the 61% held in dollars.

A switch in the world’s reserve currency from dollars (whether to Yuan or Euros) will weaken the United States economically.

There is a strong relationship between energy and economic power. They depend on each other and ultimately energy decides the world’s reserve currency.

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