by Timothy Alexander Guzman, Global Research:
As more nations continue to find viable solutions to bypass the US dollar for other alternative currencies, the US government’s stranglehold on global finance and trade continues to decline. No one should be surprised at this point since Washington has been using its currency as a weapon of war including the economic sanctions it has imposed on various nations across the globe and its open threats for regime change and so on against those who are unwilling to obey Washington’s Old-World Order. So you can expect major challenges for Washington. Most of the world are currently working to end the reign of the US dollar which has been a reserve currency since 1944. The BRICS+ coalition and the idea for a new multipolar world order is already taking place, it’s inevitable.
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An analysis from J.P. Morgan, ‘De-dollarization: Is the US dollar losing its dominance? sounded the alarm concerning the risk of the US dollar losing its reserve currency position. According to Alexander Wise, a member of Strategic Research team at J.P. Morgan, a geopolitical shift has taken place,
“However, its hegemony is in question, especially in light of the ongoing Russia-Ukraine crisis. The risk of de-dollarization, which is a periodically recurrent theme throughout post-war history, has returned into focus due to geopolitical and geostrategic shifts.”
It was well-known that US sanctions would backfire at some point in time:
In particular, the U.S. sanctions on Russia have made some countries wary about being too dependent on the greenback. In addition, against a backdrop of rising interest rates, a strong U.S. dollar is becoming more expensive for emerging nations, leading some to trade in other currencies. In July 2023, Bolivia became the latest South American country — after Brazil and Argentina — to pay for imports and exports using the Chinese renminbi
The report asks one important question, “What are the potential implications of de-dollarization, and what could this mean for global markets and trade?” How could the US dollar lose its world reserve status?
There are two scenarios that could erode the dollar’s status. The first includes adverse events that undermine the perceived safety and stability of the greenback — and the U.S.’s overall standing as the world’s leading economic, political and military power. For instance, increased polarization in the U.S. could jeopardize the perceived stability of its governance, which underpins its role as a global safe haven.
The second factor involves positive developments outside the U.S. that boost the credibility of alternative currencies — economic and political reforms in China, for example. “A candidate reserve currency must be perceived as safe and stable, and must provide a source of liquidity that is sufficient to meet growing global demand,” Wise noted.
These scenarios will undermine the role of the US dollar geopolitically and that would weaken Washington’s position as a global player, “Fundamentally, de-dollarization would shift the balance of power among countries, and this could in turn reshape the global economy and markets.” So, who would it effect the most according to Wise? Obviously, the US consumer:
The impact would be most acutely felt in the U.S., where de-dollarization would likely lead to a broad depreciation and underperformance of U.S. financial assets versus the rest of the world. “For U.S. equities, outright and relative returns would be negatively impacted by divestment or reallocation away from U.S. markets and a severe loss in confidence. There would also likely be upward pressure on real yields due to the partial divestment of U.S. fixed income by investors, or the diversification or reduction of international reserve allocations”
De-dollarization would drastically impact U.S. growth as foreign investments would decline as inflationary pressures would dramatically increase the cost of imported goods and services including food, oil and gas that will create uncertainty among the US population. Relatively speaking, the US would become an unstable environment for any foreign investment:
De-dollarization could reduce institutional, investor and corporate demand for the dollar over time, and in size could cause its value to fall. If there is a specific catalyst for the move, de-dollarization could also result in heightened exchange rate volatility, especially as over 60 currencies are pegged to the greenback
Although the use of the dollar has declined, its share of global currencies in use remains slightly higher. Meera Chandan, Co-Head of the Global FX Strategy research team at J.P. Morgan said, “Overall dollar usage has declined, but it remains within long-run ranges and its share remains elevated compared to other currencies.” She continued, “The dollar’s transactional dominance remains top-of-class despite secular declines in U.S. trade shares. On the other hand, de-dollarization is evident in FX reserves, where the dollar’s share has declined to a record low of 58%.” The renminbi could replace the dollar, but it will take time according to Alexander Wise who said that “one might naturally expect the renminbi to assume a greater role in the global economy over time, but this transition would likely occur over the course of decades.” Wise says that China must do several things for the renminbi to become an alternative currency and that includes “Relaxing capital controls, opening markets, implementing measures to promote market liquidity, bolstering the rule of law, reducing appropriation and regulatory risk, and promoting Chinese government bonds as an alternative safe asset — these could all cement China and the renminbi as a credible alternative to the U.S. and the dollar.” The point is clear, for researchers at J.P. Morgan to ring the alarm on the inevitable demise of the US dollar is a sign of things to come.
BRICS+ and De-Dollarization Is Moving Forward
According to Al Mayadeen news, Deputy Foreign Minister Ali Bagheri Kani implied that Iran “will work on the de-dollarization of trade and economic and financial transactions within the group of major emerging economies, revealing that some efforts in this direction are already underway.” Bagheri Kani said that
“We have planned many missions and joint work with other BRICS members within the framework of this organization,” he continued “one of the most important tasks is the de-dollarization of trade and economic transactions and financial cooperation.”
It was a newsworthy story that the US mainstream media decided to not report on,
“In August, the 15th top-level BRICS summit in Johannesburg extended invitations to Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia to join the bloc. Their full membership, except for Argentina, is scheduled to take effect on January 1, 2024.”
Argentina’s new Western puppet, Javier Milei had declined an invitation to join the BRICS coalition and “vowed to dollarize the Argentinian economy and has been compared to former US President Donald Trump and former Brazilian President Jair Bolsonaro.” Le Monde Diplomatique interviewed Venezuelan President Nicolas Maduro and said that
the decision was “one of the clumsiest and stupidest things Milei has done against Argentina” and that “the new president in Buenos Aires has taken his country back to the 19th century and is turning it into a “vassal of the imperial unipolar world.”
Maduro is hopeful that Venezuela “would be accepted as a permanent member of BRICS+ at the next summit in Russia in October 2024. Caracas expects to acquire full membership in BRICS proper “sooner rather than later.”
