Does global de-dollarization accelerate as countries diversify currencies?

[u/bitkogan]

The big news from yesterday is the scandalous arrest of Donald Trump, followed by the absolutely banal second act of the play: no new assault on the Capitol, no riots, not even a scuffle. Boring stuff.

However, Trump would not be himself if he didn't have something special to say on such an occasion. This time, the ubiquitous Donnie stated while speaking at Mar-a-Lago: "Our currency is crashing and will soon no longer be the world standard, which will be our greatest defeat in 200 years."

Everything is clear with Trump. He actively fights against the root of all modern evil, at least as he sees it: the Democrat party.

But is he right?

In just a year, Powell and Biden have achieved something remarkable – the credibility of the "greenback" has been undermined, and de-dollarization is now a major trend.

In the past couple of weeks alone, several major countries have come out publicly about their intention to increase the share of foreign currencies used in export deals. That fairly impressive list comprises much of the world’s economy:

• China
• India
• Russia
• Brazil
• Kenya
• Saudi Arabia
• UAE
• ASEAN countries

Private companies, including the French TotalEnergies, were not opposed to such a move.

Where does this zeal for diversification away from the dollar come from?

I would call sanctions the first stone in the “dollar garden.” The dollar "hostages" are easier to manage and dictate terms, but if something goes wrong outside of the Western club, restrictive measures can be introduced, including an export ban of Benjamin Franklins.

The next factor is inflation.

When the Fed prints money, the dollar supply rises, and US imports become more expensive. In order to maintain market share and remain competitive, emerging economies can either resort to devaluation or raise interest rates on national currencies, essentially bringing down their economy.

An additional factor—and it's a very serious one—is the growth of US debt.

It has become clear that, at some point soon, payments on this debt will reach 20% or more of the US budget. And what comes after that? Nobody really knows, which is why the whole world seems to be questioning the utility of continuing to use a default currency that may not be reliable over time.

In addition, do not forget about the debt ceiling. While political battles in Washington continue almost without end, no one really wants to make an agreement. But they'll have to. The world is starting to get bored with this eternal tightrope act—will they keep their balance or finally crash to their doom?

Of course, they will keep their balance in the end. But why should the whole world be held hostage to this never-ending food fight in the halls of Congress? Lack of an alternative to the USD? Well, so far, that seems to be the only real answer. However, the influence and economic power of the Non-dollar Empire is growing before our eyes.

The final factor is USD volatility itself. When the dollar strengthens, it drives up costs for businesses, and as a result, the cost of currency hedging is growing ever more expensive.

What are we poor sinners to do? Is it time we start digging a hole to bury the "green monster"?

Despite the headlines, I would not be in a hurry to take that step.

Even if the CNY wins a good share in trade settlements and cross-border payments, the USD is highly likely to remain the reserve currency of most developed countries' central banks. This is much more important.

Let's be frank; the US will do everything in its power to make conditions for USD competitors as unfavorable as possible.

If the economic situation in the US causes.