US dollar primacy in question as the age of petrodollar may be over

WHEN your local currency is pegged to the US dollar, you are held hostage to American fiscal and monetary policy. This is quite rightly so, as the US Federal Reserve makes such decisions in the light of what is best for the American economy and with scant regard to any wider global impact.

Some currencies are formally linked to the US dollar, whilst others are informally linked through trade relationships. The most important of these runs through the international trade in oil.

In June 1974, Saudi Arabia agreed to sell oil exclusively in US dollars in exchange for security guarantees. This created what many called the petrodollar, and the agreement forced every country in the world to hold huge amounts of US dollars because of the oil trade.