The U.S. Dollar has been the world’s dominant currency since the end of World War II. That was almost eighty years ago. Even though the dollar has faced many challenges over that time, it has always remained the standard of currency around the world. The newest challenge to the supremacy of the dollar is known as BRICS, which is a collection of countries who are pooling their currencies to match and beat the United States. BRICS stands for Brazil, Russia, India, China and South Africa.

These countries are teaming up to create a new world reserve currency. This was and is our dollar, but it may be this new currency in the near future. People are calling this the de-dollarization of the world.

The U.S dollar was not always the world reserve currency. Before the U.S dominated other countries like France who had the world reserve status throughout the eighteenth century and Great Britain from the nineteenth century through World War II. So the French Franc and the British Pound were both reserve currencies.

The U.S dollar became the world’s reserve currency shortly after that with something called the Bretton Woods agreement. The U.S has held its status for about hundred years and according to billionaire investor Ray Dalio, the worlds reserve currency changes every 94 years or so. So we have passed the point of expiration.

Why is this happening all of a sudden and why do we care? First the world reserve currency status means that right now American dollars are being used for international trade throughout the world. Every nation in the world will do business with dollars. This use means that there is demand for these dollars, which gives it stability and value. It works together that countries use the dollar because it is stable and it is stable because people us it.

Also, having the reserve currency is good for the United States because it means that America is more attractive for foreign investors to invest. More investment means a better economy here in the USA. If investors go to other countries then our own economy will fall and it will be harder to pay our debt.

Another reason the US has reserve dollar status is because it was up until very recently the only currency that could be used to buy oil. It is known as the petro-dollar. This made the dollar very powerful.

Money was based at least in part on the value of gold. Fort Knox was a thing and the gold there was the value of the American dollar. Government spending on the Great Society and Vietnam meant that the United States needed to increase the dollar supply and could no longer be on the gold standard. President Nixon took us off the gold standard in 1971 and established the petro-dollar and that is what has been the world reserve currency for over fifty years.

Another reason that countries are getting away from the dollar is because it can be weaponized against countries that are not doing what the US government wants. For example, when Russia invaded Ukraine, the US froze the dollars of Russia. This is a controversial move because if the United States can take away dollars from any country then it is not as reliable and stable as countries originally thought. Russia supported their country with precious metals and by taking currency from nations that need Russian oil and natural gas.

China has formed what is called the petro-yuan (Chinese currency). This is a good deal for China because they are hurting the United States at the same time as they are making themselves stronger. More and more countries are using this new currency standard instead of the dollar. The more the dollar falls the faster it will because nations will look for something else that is better.

To sum this all up, if the world gets rid of the dollar it will be bad for us. America will be poorer and maybe worse. If China is the new world reserve currency then that will be bad for the rest of the world including the US.