For many years now, international trade has largely been conducted in the US dollar. By default, the USD is the de facto “reserve currency” of the world. That status was reinforced in 1973 when Richard Nixon (and Kissinger) negotiated a deal with Saudi Arabia to trade all oil in USD in exchange for arms and protection. The other OPEC countries followed and agreed to similar deals in using the USD as the trade currency for oil. The USD reserve status was never challenged ever since, until recently.
In 1971, President Richard Nixon unilaterally ceased direct convertibility of the USD to gold. As the world’s reserve currency particularly after the successful petrol dollar deal, US was granted a unfettered right to print the fiat USD as it is deemed to be a fail-safe currency. Most currencies of the world today are fiat currencies. It’s value is as good as the confidence that it commands. Currency “value” is extremely volatile and is highly susceptible to financial raids by central banks and hedge funds. Just a week ago, the Russian rouble lost 60% of its value as it comes under a concerted attack. Even with its relatively strong foreign reserves, defending against an all out financial war is a huge challenge.
It won’t be long before confidence in the world’s financial system will crumple. What will emerge after the storm is subject to conjecture. As of now, the modern world is already accustomed to digital money. The plastic card does most of our daily financial transactions. No cash is needed. In fact, there are already situations where credit cards or electronic means are the only mode of payment. Cash is not acceptable. Signs are ubiquitous that the mobile wallet will soon be a major contender as the mode of payment (buy/sell). A major hurdle that is restraining its use is the lack of a unified standard and competing platforms. These problems will not be a show stopper for a “one system” currency and payment system to emerge.
In fact, as the financial troubles continue to simmer, the search for a new “one world” system is bound to accelerate. The beast is getting impatient. Once it awakens, it will unleash a financial catastrophe so damaging that the world will gladly embrace whatever that promises peace and stability. Many will sigh with relief and worship the beast that appears as an angel of light.
Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.