With collapse of USSR and end of Cold War, political and economic power relations that had been in place since end of World War II were rendered obsolete. What we are observing today is a shift in global power dynamics, which will eventually allign to a new axis of world order.
Although mainstream media channels all over world have successfully managed to disinform general public into believing that what has been taking place since September 11 attacks is a “War On Terror”, a growing number of people are starting to suspect that there are other political and economic dimensions to causes of 9-11 Attacks, bombing of Afghanistan, and current invasion of Iraq.
Ever since Bretton Woods Agreement of 1944, which established rules of commerce and financial relations among major industrial states and independent nation-states, US has been enjoying an artificial privilage in global economy through its ability to adopt US dollar as currency of global exchange. When President Nixon liberated US from gold standard in 1971, dollar became denominator of world reserve currency, and global economy became fully dominated by US dollar at expense of rest. Although this fact has been known by those in financial and political circles, it is hardly ever mentioned in media.
International institutions, such as IMF and World Bank, has been giving loans exclusively in dollars up to this day, and thus, rest of world has been forced to build their dollar reserves for repayment of debt and international trade for over sixty years. Today, over two thirds of world trade is conducted in dollars conferring on US an economic advantage.
However, as well as being an advantage, same system has also created a very fragile US economy that is fully dependent on faith rest of world has in stability of dollar. Analysts know perfectly well that, as strong as US economy may appear, it could collapse very abruptly if trust in stability of dollar is broken, or if there is an alternative means of pricing instead of dollar.
When US buys goods and services produced by other countries, pricing and payments are made in dollars. As US does not have a corresponding need to accumulate foreign reserve, it enjoys privilage of spending more than it earns, and can afford to run a trade deficit year after year, while rest of world earns more than it spends as a result of this artificial monetary system.
Currently, huge trade deficit in US indicates that US economy has a “need” to “borrow” two billion dollars per day from rest of world to keep its economy from collapsing. Naturally, if dollar remains dominant global currency, there would not be any risks, and US could continue to enjoy its privilage without any complications. On other hand, any tendency to move away from dollar towards another currency would spell disaster and would demolish global hegemony that US has been enjoying for nearly sixty years.