2023-07-26 01:35:39
Three reasons are driving countries around the world to want to abandon the use of the dollar as the dominant currency in their international affairs.
First, the power and influence of the United States over global monetary policy is considered by many countries to be excessive. As the issuer of the world’s reserve currency, the dollar has a huge influence on the global economy and its value can negatively affect the economy of other countries. Some countries, such as India, feel that US monetary policy is holding them hostage and are looking for alternatives, such as using the Indian rupee in trade. This desire to avoid dollar dependence is present in other countries as well.
Second, the sharp appreciation of the dollar against other currencies is making imports very expensive for developing countries. Countries like Argentina, grappling with economic and political woes, are trying to pay for Chinese imports using the yuan instead of the dollar, trying to avoid dollar transaction costs. Additionally, Brazilian President Luiz Inacio Lula da Silva has advocated for the creation of alternative currencies for trade deals and has called for a group of nations to abandon the dollar.
Finally, the growing diversification of global trade and demand for oil is putting the petrodollar, the system in which Gulf countries in the Middle East use the US dollar to trade oil, at risk. The United States has become a net exporter of oil thanks to its shale oil production, which is causing structural changes in the oil market. These changes could weaken the dollar’s role as a global reserve currency, as oil exporters could be driven to seek other currencies for their transactions.
In conclusion, the abandonment of the dollar as the dominant currency is an issue that is attracting more and more interest and concern among countries around the world. Various factors, such as US influence on monetary policy, high costs for developing countries and the diversification of global trade, are undermining the dominance of the US dollar. Many countries are exploring the use of other currencies and assets as alternatives, seeking to reduce their dependence on the US currency.
The issue is complex and has challenges and implications for both the United States and the rest of the world. How this situation evolves will be critical to the future of the global financial system. But it is equally true that the ongoing war in Ukraine is closely linked to this attempt to break US hegemony which has one of its major pivots in monetary policy.
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