De-dollarization is spreading... America is actively pushing the boat behind it

The so-called "de-dollarization" trend today, although receiving support from many countries and regions, the country that can actually "de-dollarize" effectively is probably still only the United States.

"De-dollarization" is a long-term process over the past 20 years, causing the global reserve ratio in USD to gradually decrease. However, up to now, the US domestic currency still holds the largest market share and currently no competitor is able to "overtake" it.

De-dollarization is a strategy that countries have used to challenge the dominance of the USD. In the post-Covid-19 period, fluctuating foreign exchange reserves and the global crisis continue to be one of the major factors driving the current strong de-dollarization process. In addition, geopolitical competition and declining confidence in the USD are also contributing factors to this process at the present time.

The US dollar's share of global payments now accounts for 41.74%, down from 85.7% at its peak, according to the latest global payments statistics for March 2023, released by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

De-dollarization accelerates globally... US is behind the 'pushing the boat'. (Source: The Economist)

The total global foreign exchange reserves announced by the International Monetary Fund (IMF) in April were 12,000 billion USD, of which the USD accounted for 58.36%, recording a new low in recent decades, down about 27% compared to the peak period.

Still no opponent?

The unilateral actions of the US government regarding the USD have further aggravated the current USD crisis in the global market. By raising interest rates 10 times in a row since March 2022, the US has caused the exchange rate to increase, affecting USD users around the world.

It seems that "de-dollarization" is accelerating globally?

"De-dollarization" has recently become a frequently mentioned phrase in the international community and seems to have become a trend. Many countries consider the goal of reducing dependence on the USD as a good way to escape difficulties and cope with crises.

This list seems to be getting longer and longer, from Asia, through the Americas, and even the Middle East, including Brazil, Venezuela, India, Indonesia, Malaysia, Ghana, Russia, France, Australia and China...

However, one thing the world should remember is that the status and even dominance of the US dollar was once a necessity and a consensus, and also one of the core structures of the global system that the international community jointly defended after World War II.

Although the so-called "de-dollarization" trend is currently supported by many countries and regions, the country that can actually "de-dollarize" effectively is probably still only the United States.

The creation of currency has always been associated with power and responsibility, the sovereign currency of a country and the international currency circulating globally are the same.

For a quarter of a century after the end of World War II, the dollar enjoyed all the benefits of international currency status. But during the Nixon administration, Washington found that it was paying a higher price for its responsibilities, and it decided to abandon the Bretton Woods system decisively.

The US Treasury Secretary at that time, John Bowden Connally Jr., also left a famous quote for the world: "USD is our currency, but your problem."

So, in fact, since that time, the US has always been doing some "de-dollarization", although they may not be conscious of it, but the concept of "making the USD someone else's problem" has clearly led to this result.

They want to enjoy the benefits of the dollar's dominance, but they don't want to shoulder the responsibilities that come with being an international currency.

US dollar but another country's problem

For a country's sovereign currency to become an international currency, it is necessary to implement the strictest fiscal and monetary policies, maintain domestic balance of payments and exchange rate stability, and gain the trust and respect of the international community, only then can the currency be more widely recognized and used.

However, since the 1970s, the US budget deficit has been increasing year by year, the federal debt ceiling has increased from tens of billions of dollars to $31.4 trillion in June 2023 - a time when the US government and Congress are having to negotiate a difficult debt ceiling. However, such negotiations seem to happen in every administration, under every US president.

The essence of the debt ceiling is fiscal discipline, and repeatedly exceeding the ceiling is a default or irresponsible debt transfer. At this point, the task of maintaining exchange rate stability has become tying other countries' currencies to the USD, leaving other countries to suffer the consequences of the US's "overspending" - this is a direct damage to the international status of the USD.

Only when the international community can hold and circulate the international currency with confidence can it maintain price stability for strategic goods and not weaken significantly due to changes in the situation.

To a large extent, the historical dominance of the US dollar has been determined by the petrodollar. When the world could only buy oil with US dollars, the US dollar was the most important international currency. Although the petrodollar still dominates the international strategic commodity market, its weakening trend is evident.

Since the 1973 Middle East oil crisis, oil-producing countries have sought to challenge the dominance of the Petro-dollar. Many countries have now begun to use their local currencies to pay for energy, resources and important commodities such as oil, natural gas, food, etc.

Perhaps more and more goods around the world will be paid for in other currencies, so the position of the US dollar may continue to weaken.

The country that supplies the international currency must also unite more allies, use sanctions cautiously, and take the lead in shouldering the consequences of the financial and international crisis in order to gain the support of more and more countries and protect the long-term value of the international currency.

However, when the financial crisis broke out in 2008, the world's largest economy's massive quantitative easing policy dragged the world into the wave of the US subprime mortgage crisis.

The outbreak of the epidemic in recent years and the Russia-Ukraine conflict have caused the global economy to falter. However, in addition to attracting the world to sanction Russia, the US has continuously raised interest rates, issued the "Deflator Act", strongly attracting global capital flows to the US, disrupting the global economic recovery, including allied countries.

Those moves have seriously damaged confidence in the USD, so "de-dollarization" has become a big trend as it is today.

It is difficult to distinguish the advantages and disadvantages of the international status of the US dollar. As long as the US remains a responsible global power, other countries cannot shake the position of the greenback.

However, the US is currently using many of its measures to support the global "de-dollarization" process. Although the outcome of this process is still unknown, and both good and bad are equally unpredictable, it seems that the US is the main force of "de-dollarization".

Source: https://baoquocte.vn/phi-usd-hoa-lan-rong-my-dung-sau-tich-cuc-day-thuyen-229221.html