Is this the end of the dollar? Or at least the dollar as it exists today. Because the dollar is currently considered the world’s reserve currency, central banks, and foreign corporations have held significant amounts of it to settle international trade and financial transactions since the end of World War II. In recent years, the dollar has strengthened against other major currencies, such as the Japanese yen and the British pound, as other countries struggled to recover from the lockdown-induced recession.
As the Russian invasion of Ukraine threatens the international balance of power, leaders in several emerging market economies have reintroduced plans to reduce their dollar reliance. Malaysia proposed the establishment of an Asian Monetary Fund with China’s support. At the same time, the United Arab Emirates and India discussed agreements to trade certain commodities in rupees, and to strengthen its relationship with China, Saudi Arabia declared its willingness to trade in currencies other than the dollar. Brazil and Argentina have also discussed the formation of a currency union to lessen their dollar reliance.
Why are countries trying to reduce their reliance on the dollar?
Recently, Tucker Carlson discussed on his program how the Biden administration had used the dollar as a political weapon, which has harmed the dollar and will eventually lead to poverty in the United States.
Carlson discussed how multiple countries were moving away from utilizing the U.S. dollar as a reserve and settlement currency. According to Carlson, the U.S. government’s sanctions against Russia are partially to blame for the recent global de-dollarization initiatives.
Carlson explained that the sanctions did not lead to the collapse of the Russian economy due to its reliance on exports of goods required by other nations. According to Carlson: In contrast to the United States, Russia lacks a mature financial system. Russian oligarchs are not made wealthy by credit default swaps, and they become rich by selling essential commodities such as gasoline, gas, iron, fertilizer, coal, and grains.
However, these sanctions, which blocked billions of dollars belonging to the Russian central bank and other Russian oligarchs, were intended to warn other nations about the dangers of holding U.S. dollar reserves.
Carlson argued that due to these deterrence-driven actions, other significant economies began to view the dollar as a potential liability.
Why did foreigners begin to abandon the U.S. dollar? Because the U.S. dollar was no longer a dependable store of value. Suddenly, it became a political weapon that could be used against anyone possessing it.
Carlson cites the changes in China, Brazil, India, Pakistan, Saudi Arabia, and even France as evidence. Countries that are planning to trade using the yuan and their own national currencies as alternatives to the U.S. currency.
Carson stated that the concluding phase (the devaluation of the dollar) would be the impoverishment of the American people due to the return of all these dollars to the country, ultimately resulting in an economic catastrophe.
His concern is not unfounded. Americans benefit from the dollar’s status as the reserve currency due to the leverage it generates with trade partners such as China.
The transition from the dollar is occurring as China aggressively tries to become the global economic center of gravity. Belt and Road Initiative, the centerpiece of Chinese President Xi Jinping’s foreign policy, has long been criticized as a debt-trap diplomacy strategy designed to increase political leverage in defaulting developing nations. China has recently attempted to mediate peace between Russia and Ukraine. If successful, China’s influence will become increasingly dominant.
As a result of Western sanctions, Russian economic actors now utilize the yuan more than the dollar. David Bahnsen, the proprietor of The Bahnsen Group, a wealth management firm based in New York City, told The Daily Wire that Chinese officials are acting in their own self-interest, and the U.S. is providing them the opportunity to do so.