The US financial website Zerohedge reported on April 23 that there have been new developments in global de-dollarization. The US media quoted Bloomberg as saying on April 22, "The Bank of Israel has made the biggest adjustment to its reserve allocation in more than a decade, adding the renminbi and three other currencies to the reserves of more than $200 billion for the first time last year, which has attracted people's attention."
Starting this year, the Bank of Israel's foreign exchange reserves have expanded from the dollar, the euro and the british pound to include the Canadian dollar and the Australian dollar, as well as the yen and yuan. The increases mark a change in the Bank of Israel's "overall investment guidelines and philosophy," Bank of Israel Deputy Governor Andrew Abil said in an interview. It is reported that in Israel's foreign exchange reserves, the pound sterling and the yen will account for 5%, and canada and Australia will each account for 3.5%. According to the annual report released by the Bank of Israel at the end of last month, under the new method, the proportion of the renminbi in 2022 is set at 2%.
To accommodate these changes, the euro's share will fall from just over 30 percent to 20 percent. That's the lowest level in at least a decade. The dollar's share will fall from 66.5% to 61%. Abil said the "sharp" increase in Israel's foreign exchange reserves led the central bank to extend the investment horizon. "We look at the need to reap the rewards from reserves to cover the cost of liability."
In other words, Israel is reducing its exposure to the dollar and the euro to increase its exposure to the renminbi. Israel appears to be catching up with the meaningful changes in the global monetary landscape. As for Israel's approach to de-dollarization, Zerohedge further said that it hopes other countries will follow suit. Another new development that is even more unexpected is that a document released by the British Treasury on April 22 showed that the United Kingdom had authorized the Payment of Russian Gas by the end of May to The Russian Gas Industry Bank and its subsidiaries. Earlier, Russia proposed that gas buyers from various countries open accounts at the bank and use rubles to pay for natural gas. The media said the UK had approved the use of rubles to settle Russian gas by the end of May.
Not only that, but the U.S. economy continues to monetize huge amounts of U.S. debt, as shown in the chart below, as of April 23, the total U.S. federal debt was as high as $30.4 trillion, at 125 percent of its GDP. And in the process of transferring the risk of the US deficit to the global economy and opening financial restrictions at every turn, the process of global de-dollarization has almost become white-hot.
Among them, de-U.S. debt is very obvious. Another new development is that Goldman Sachs said in its latest report that just as the Fed launched QT, overseas investors' demand for US Treasuries plummeted. With just a few days to go until the Fed began to shrink its massive $9 trillion balance sheet, and as global interest rates readjust globally, there are growing fears that the Fed is falling far behind the curve and yields will soar higher before inflation is contained: Investors are increasingly concerned about the risk of imbalances between supply and demand on U.S. Treasuries, Goldman Sachs analyst Avisha Thakkar said on April 22, "a significant reduction in negative-yield debt, The weakening economic appeal of U.S. Treasuries relative to domestic alternatives and the de-dollarization efforts of official institutions should see weaker demand for U.S. Treasuries from foreign buyers in the coming quarters. ”
Us Treasury yields and US Treasury popularity are inversely proportional
According to the latest data from the TIC, the latest edition of the U.S. Treasury Department's latest international capital flows report released on April 16, the report data was delayed by two months, and the official institutions holding overseas of US Treasuries sold a net of $16.2 billion in US Treasuries in February this year. In the case of oil nation Saudi Arabia, the latest data show that Saudi Arabia reduced its holdings of $2.7 billion in U.S. Treasuries in February and currently holds $116.7 billion. Since February last year, Saudi Arabia has begun to reduce its holdings from the previous $132.9 billion, with a total reduction of more than 12%.
One of the logics behind this is that the US inflation data of more than 5% for 11 consecutive months, especially the latest data released by the US Bureau of Labor Statistics on April 12 shows that the US Consumer Price Index (CPI) data for March rose 8.5% year-on-year, exceeding the previous February 7.9%, and the US reported the highest consumer price data since 1981. The risk of default in the U.S. bond market has increased, and U.S. treasuries continue to lose their attractiveness.
All indicators of U.S. inflation are at historical extremes
Energy and monetary experts also believe that Saudi Arabia, as one of the main initiators of the petrodollar, has continuously sold US debt on a large scale, which may have an impact on whether the US dollar can maintain its position as the king of commodity trading currencies in the future. Clearly, the Saudi economy is embarking on a process of de-U.S. de-debtization and dollarization. It is worth mentioning that Saudi Arabia and the United Arab Emirates, two oil countries, began to use digital currencies in bilateral commodity transactions as early as a year ago to avoid the risks brought about by us dollar settlement.
In the context of the ongoing conflict between Russia and Ukraine, due to the various financial restrictions imposed by the US dollar on Russia, India, as Russia's main energy buyer, reported in the media at the end of March that India and Russia are working to establish a new trading mechanism for bilateral trade, which will allow settlement in local currency, rubles and rupees. Russia and India may choose to use the Russian Financial Information Transfer System (SPFS) for bilateral trade, which is similar to SWIFT. So far, the global de-dollarization process has been accelerating, and the specific methods include increasing non-US dollar foreign exchange reserves (such as increasing non-US dollar currencies such as gold and the renminbi), de-US debt (such as reducing US debt in different months), developing sovereign cryptocurrencies (already underway in many countries), signing extensive local currency swap agreements (such as exchange agreements between RMB and non-US dollar currencies), and trading commodities such as oil in non-US dollar currencies.
BWC Chinese network has been tracking the global de-dollarization process for a long time, and found that as of now, China, Germany and other 19 eurozone countries, Britain, Japan, Russia, Indonesia, Malaysia, Thailand, Iran, Angola, Venezuela, Iraq, Kuwait, Pakistan, Kazakhstan, Belarus, Armenia, Kyrgyzstan, Turkey, Qatar, the United Arab Emirates, India, Vietnam, Hungary, Brazil, South Africa, Romania, Sweden, Singapore, Canada, Switzerland, Saudi Arabia, Cuba, At least 52 countries in Nigeria have begun to use different methods to start the process of de-dollarization. The aforementioned Israel is becoming the 53rd country to de-dollarize by reducing its dollar reserves.
Taking three countries in Southeast Asia as an example, The Bank Negara Malaysia proposed a few weeks ago to implement a pan-Asian gold-backed currency among Southeast Asian countries because gold is more stable relative to the US dollar. As early as four years ago, the central banks of Indonesia, Malaysia and Thailand launched a direct settlement program for local currency transactions to reduce the dependence of the financial systems of the three countries on the US dollar. Argus, a former governor of Indonesia's central bank, said that "at present, 94% of Indonesia's export business and 78% of its import business are settled in US dollars, and the above plan will help diversify the settlement currency of the international financial business of the three countries."
We know that in the operation of the dollar shearing the world economic wool, the initiator of the 1997 Asian financial crisis is also considered to be closely related to it. Therefore, many countries in Southeast Asia have been worried about the US dollar for more than 20 years. This has also become the main reason for the de-dollarization of indonesia, Malaysia and Thailand, three Southeast Asian countries.
Billionaire Jim Rogers recently said that the tradition of dollar reserve status has changed. As the chart above shows, the fate of the pound and the guilder, which over the centuries was once considered the most reliable currency, has since been replaced. This also seems to be the result of the vicissitudes of the world economy and trade. (End)