Slowly but Surely The World Is Marching towards The De-Dollarization
The comments below are an edited and abridged synopsis of an article by Michael Romanowski
The steady recession from the dollar-denominated system is called de-dollarization. As a result of economic sanctions imposed by Washington, US adversaries have triggered a shift in the global currency landscape. Ever since Saudi Arabia and the US reached a deal to trade oil and other relevant goods in US dollars, they have enjoyed global status. The greenback accounts for 70% of global trade transactions. Consequently, the world uses the dollar to settle payments. This generates major demand for the currency itself, allowing the US government to refinance its debt at low interest rates through bonds and securities.
Russia and China are on the path ofde-dollarization. Russia drives the de-dollarization train, with more than itsstate budget relying on oil revenue. The plan to de-dollarize Russia’seconomy is being discussed and the work is being conducted on PresidentVladimir Putin’s orders. China has already eliminated transactions denominatedin US dollars from the bilateral trade with Iran, and has signed similar agreementswith Canada and Qatar. China’s currency spread has few obstacles, however. Thecountry’s capital markets are underdeveloped and not fully accessible. The yuanis not allowed to float freely, because the government determines the rate.Also, Beijing initiates its climb up the international currency ladder from alow point. German Foreign Minister Heiko Maas calls for abandoning SWIFT,ending US dominance and establishing a new payments system independent of the US.The de-dollarization process poses international economic ramifications. Thedollar will remain the dominant source of trade and payments for theforeseeable future, but currency guru Barry Eichengreen suggests that thecurrency could lose its status within 10 years.