How Quickly Will The Dollar Collapse?
The comments below are an edited and abridged synopsis of an article by Alasdair Macleod
Macleod looks at the factors behind the growing rejection of the US dollar for trade settlement purposes by non-aligned nations around the world. They no longer fear political or economic reprisals from America.
The dollar’s monopoly was notably challenged by Saudi Arabia, which removed itself from America’s sphere of influence to that of China and Russia. Consequently, there is peace throughout the Arab lands.
But rising interest rates have destabilized western banking systems, which have added to the attractions of payment in China’s renminbi relative to maintaining bank deposits and investments in the currencies of the western alliance—particularly of the dollar. Foreigners hold $7 trillion of deposits and short-term bills and $24.5 trillion in bonds and equities. These balances are becoming surplus to their needs.
The outlook is for US bank credit to contract further, which will drive interest rates even higher. More banks can be expected to fail. Foreigners will be increasingly reluctant to hold dollars, which they will sell. The question now is not how much will the dollar decline, but how rapidly.
Up for discussion: Introduction; the end of the petrodollar’s monopoly; the alternative is China and the renminbi; assessing the impact of dollar liquidation; and Russia’s position.