Sat | Jun 10, 2023

Alfred Dawes | A new world order

Published:Sunday | April 2, 2023 | 10:02 AM

While we squabble about racist terms and double downs versus apologies, a major shake-up in the balance of power in the world is taking place. Since World War II, the world reserve currency has been in the United States dollar, or as it is called, the petrodollar.

In the post-World War II era, shifting power centres saw the ascension of the US as the leading global superpower. Reconstruction loans to European countries were denominated in US dollars and with the breakup of the British empire, it was not the Pound Sterling, but the US dollar that was used as a primary instrument of trade. International trade revolved around the dollar, and with the global financial institutions, the World Bank and the International Monetary Fund (IMF) firmly under the control of NATO allies, a new world order was born.

That post-war US dollar was backed by gold reserves. A printed a dollar was linked to a set amount of gold, limiting its supply and fixing its value to that of gold. It was a stable currency that made it attractive enough for other countries to use as their own currency, or having their local currency pegged to it. As Saudi Arabia and other oil-producing gulf countries grew in influence with the world’s addiction to fossil fuels, an agreement was made that cemented the dollar as the primary global instrument of trade. The US guaranteed their security in a tumultuous Middle East, in exchange for the exclusive use of the dollar in oil transactions. Thus, the petrodollar was born.


The dollar’s hegemony over global trade meant that when an increased supply was needed to finance the Vietnam War, there was little resistance to the removal of the gold standard by President Richard Nixon. With no link to gold, America was free to print as many dollars as it needed to cover its debts. Whether through financing its deficit in international trade, or filling a hole in the government’s budget, the petrodollar gives the US an extraordinarily privileged place in the world. As the US prints money at will, it is in effect exporting inflation to every country that uses the dollar. As more dollars are printed, their value must fall as with any other fiat currency. Other less privileged countries could not escape economic instability of printing money to finance government spending. Argentina and Zimbabwe learned painful lessons in hyperinflation that are fresh in the memories of their citizens today.

That the dollar is still the reserve currency of the world, however, meant that this fate did not fall on the world’s largest economy. Well, until now. The increasing of the US money supply by almost 40% over the last three years has been linked to the massive inflation the world has experienced during that time. Local experts warned against the Bank of Jamaica, BOJ’s rapid and significant increases in interest rates, advising that our local inflation was imported, and not domestic demand driven. This imported inflation was initially caused by the large increase in the US money supply and increasing US consumer demands that led to global shortages and rising prices. This has been combated with the Federal Reserve raising interest rates rapidly and forcing other central banks to raise their rates in tandem. In other words, the US monetary and fiscal policies determine those of the world, especially vulnerable economies like ours.


The other global negative of having a dominant reserve currency is that of the application of sanctions on any country that falls out of line with US foreign policy. The inability to access the US dollar or the US banking system has left many an unfriendly government with economic instability and chaos. The threat of sanctions has kept many more countries in line. This petrodollar diplomacy with the big stick of the greatest military on earth, means the US effectively controls the world. The word on the street is that Gaddafi was overthrown and murdered because he was advocating for the gold-backed African dinar as a means of trade on the continent. This would have disrupted the influence of not only the dollar, but the CFA Franc in francophone countries that still used that currency controlled by the Bank of France. Similarly, it is widely held that it was Saddam Hussein’s decision to sell oil in Euros that led to his regime’s end and his hanging.

The US dollar has been under attack of late with the Chinese yuan being increasingly used to settle trade with its partners. Russia has started what it says is the complete removal of dollar denominated assets from its sovereign wealth fund and already the dollar’s share of global currency reserves has fallen from 72 per cent to less than 60 per cent in the last two decades. And now, in a move that has surprisingly not been carried much by Western media outlets, the BRICS countries are working on establishing a new reserve currency based on a basket of currencies from the five-nation bloc. At the same time there are discussions under way to increase BRICS membership to include former enemies Saudi Arabia and Iran, thus strengthening its position as a counterforce to the US-European hegemonic alliance. Central banks are also buying up gold and repatriating their gold reserves at a quickening pace as if to secure their currencies’ value in a post-petrodollar world.

Something seismic is coming. I am sure.

n Dr Alfred Dawes is a fellow of the American College of Surgeons, and CEO of Windsor Wellness Centre. Follow him on Twitter @dr_aldawes. Send feedback to and