De-dollarization is spreading... The US is actively pushing the boat

The current so-called "de-dollarization" trend, although supported by many countries and regions, the country that can truly "de-dollarize" effectively is probably still only the United States.

Although "de-dollarization" has been a long-term process over the past 20 years, the proportion of global reserves held in USD has gradually decreased. However, up to now, the US domestic currency still holds the largest market share and currently has no competitor capable of "overtaking" it.

De-dollarization is a strategy that has been used by countries 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 payment market share now accounts for 41.74% globally, down from 85.7% at its peak, according to the latest global payment statistics released by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in March 2023.

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% from 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 respond to 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 supported by many countries and regions, the country that can truly "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 being an international currency. However, during the Nixon administration, Washington discovered that it was paying a higher price for taking on the responsibility, and so 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 it is 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 do not 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 government debt ceiling has increased from tens of billions of dollars to 31.4 trillion dollars 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, repeatedly exceeding the ceiling is a default or irresponsible debt transfer behavior. At this point, the task of maintaining exchange rate stability has turned into 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 confidently hold and circulate international currencies that the international community can maintain price stability for strategic commodities, without significantly weakening 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 in 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 use other currencies to pay for them, 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 carefully, and take the lead in shouldering the consequences of the financial and international crisis so that it can receive 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 large-scale quantitative easing policy of the world's largest economy 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 "Inflation Reduction 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