western media: gradual de-dollarization will be “inevitable”
2024-10-04
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reference news network reported on october 3on september 23, the website of spain’s insurrectionariat published an article titled “is de-dollarization just a matter of time? 》the author is alejandro marco del ponte, the content is compiled as follows:
in the past three years, the global economy has experienced rapid changes. economic policy advice, sanctions and geopolitical adjustments triggered significant reactions, affecting global financial markets. as in previous periods of economic and geopolitical instability, the likely transformation of the international monetary system in the short term raises questions.
at a campaign rally in wisconsin, u.s. presidential candidate donald trump doubled down on his "america first" rhetoric, declaring that he would impose 100% tariffs on goods from any country that breaks away from the u.s. dollar. this proposal reflects clear logic not only from the republican party but also from the democratic party. however, the isolation the united states has created through tariffs and its role as the "world's gendarme" is beginning to affect its currency and economy.
fiscal discipline in the united states has gradually weakened, and the government has launched an almost compulsory spending spree to maintain its global hegemony. paying down the national debt has become the largest item in the u.s. budget. from 1971 to 2024, the u.s. national debt has grown from $400 billion to $35 trillion, with interest payments exceeding even annual defense spending.
to explore this issue further, it is necessary to examine several key aspects that are good and bad for the dollar area: disproportionality in the dollar area, geopolitics, reserves in different currencies, and international trade. through the analysis of these aspects, it is possible to draw the following conclusion: although it may not be imminent, gradual de-dollarization is inevitable, and this is exactly the same as the united states' gradual loss of participation in the global economy and international hegemony.
the first thing to look at is the impact of the dollar and its relationship to the size of the u.s. economy, its role in world trade, reserves and finance. the role of the u.s. dollar is undoubtedly huge. in 2023, the united states' share of world gross domestic product (gdp) will be approximately 24%, and its contribution to world trade will be approximately 10%. the us dollar is the most widely used currency in world trade, accounting for approximately 90% of international transactions. in terms of reserves, the u.s. dollar is far ahead with a 60% share, followed by the euro with a 20% share, while the japanese yen, british pound, australian dollar, swiss franc, canadian dollar and yuan have relatively smaller shares. although the dollar's role in global reserves has declined over time, its hegemony remains absolute.
the war between russia and ukraine has triggered western sanctions against russia. the g7's approach to freezing russia's foreign exchange reserves was a sharp departure from its approach in other post-world war ii geopolitical conflicts, especially given its impact on currencies. the freeze raises the question of whether other central banks will seek to shift dollar reserves to other currencies out of fear of future sanctions. if so, such action is likely to undermine the dollar's dominance of the global financial system.
although the dollar's share of international reserves has declined slightly, it still maintains monetary hegemony. however, floating exchange rates and swap lines between central banks have weakened some countries' need for foreign exchange reserves. a serious weakening of the stability of the u.s. economy may affect countries' confidence in the u.s. dollar. both major u.s. political parties have identified this threat to the dollar.
even without a geopolitical or economic catastrophe, the u.s. dollar's role in global reserves is likely to continue to decline for several reasons: floating exchange rates leading to less demand for reserves; central bank reserve diversification policies, such as buying gold; this has led to the increased use of currency swap lines, thereby reducing the need for large reserves.
in the field of trade, the so-called "triffin dilemma" has emerged, forcing reserve currency issuing countries such as the united states to run trade deficits. many countries trade directly with each other using dollars and no longer trade through the united states. in order for these countries to have enough dollars, the united states must export its currency around the world, and this is accomplished through a trade deficit, which means it imports more than it exports. this deficit is crucial to keeping the u.s. dollar circulating around the world, but if the deficit becomes too large, it can raise concerns about debt accumulation and dollar depreciation. this dilemma puts the united states in a complicated position.
