At present, the latest trend in the de-dollarization of the global market is that the use of blockchain technology to de-dollarize the initiative has been one after another, especially after the Fed used different dollar tightening cycles to harvest the global market with the help of the intensification of dollar index volatility.
Because when U.S. policy is only for its own economy without considering trillions of dollars of spillovers, it is expected to overdraft dollar credit, and throughout monetary history, the status of the world's major reserve currencies has not been permanent (see the chart below for details).
According to the data released by the US Treasury Department on May 14, due to the high borrowing and deficit accumulated during the continuous spread of the new crown virus to stimulate the economy, the US federal debt exceeded $30.45 trillion for the first time, which is a shocking figure three years earlier than previously expected, accounting for 128.91% of GDP, it is clear that the United States may now be cashing out trillions of dollars of debt deficits, which in turn weakens the market's confidence in the dollar, because debt is always a shadow on the dollar. It's just that there are no seizures now.
According to data monitored by Reuters on May 15, the US Treasury Department and the Us Federal Reserve website data statistics show that the United States has printed a total of 36 trillion US dollars of basic currency liquidity, balance sheet purchases, increased debt ceiling, 2022 budget deficit and economic stimulus package in 38 months, the following line perfectly illustrates this process.
Edit the search map for the U.S. M2 money supply
BWC Chinese Network Finance research team exclusive analysis believes that with the sharp increase in US debt and inflation continues to deteriorate (inflation has been more than 6% for seven consecutive months, and recently as high as 8.3%), the phenomenon of the dollar's monetary status being reset is expected to occur, and those smart economies will make their currencies pegged to strategic resources such as gold or digital currencies with decentralized functions.
In this regard, senior economist Jim Rickards said that the us dollar can no longer become a normal world currency, has become a monopoly currency supported by a large-scale Ponzi scheme, while the United States weaponized its dollar currency status and launched flood-like liquidity to the market, causing many problems for global markets and oil-producing countries such as Iran and Venezuela, and is becoming a catalyst for long-term de-dollar centralization.
So from this perspective alone, the world already needs new cross-border settlement currencies that are independent of a country to facilitate the search for alternatives. Therefore, the digital currency that anchors the national currency developed based on blockchain technology does not theoretically need the technical support of the SWIFT system, in fact, as early as 2019, former Bank of England Governor Carney believed that the best way to reduce the status of the us dollar is to replace the US dollar with a global digital currency.
Immediately after, a Follow-up report by Reuters on May 15 said that at present, the United Kingdom, Switzerland, Canada, Japan, Sweden, the European Central Bank and the Bank for International Settlements have jointly formed a digital currency development team, urging global central banks to consider issuing digital reserve currencies to end dollar dominance. It is clear that this time the de-dollarization process will be driven by technology.
For example, taking Iran as an example, the latest development in Iran's de-dollarization is that, according to Iranian state television reported on May 12, at present, Iran, in addition to officially replacing the main foreign exchange currency position of the US dollar with the renminbi and excluding the US dollar from Iran's commercial operations, is also preparing to use its own currency in bilateral trade with Indonesia to seek to expand economic and trade relations including oil and agricultural products, and at the same time, it also uses the "barter" strategy to bypass the US financial system for trading.
At the same time, according to iran's national news agency IRNA reported on May 11, Iran's relevant institutions are also negotiating with Russia, the United Kingdom, Sweden, Switzerland, South Africa, France, Austria, Germany and Bosnia and other countries on the use of digital currency transactions in commercial and financial settlements.
Iran opens a massive data center to boost the national information network
Not only that, Iran will also follow in the footsteps of Venezuela's issuance of petro, PETRO, planning to issue encrypted digital currency by using crude oil, gold and other resources as physical collateral, and hoping that encrypted digital currency can break the dollar blockade and achieve economic recovery.
Iran's deputy minister of trade said in a public speech a week ago that Iran is ready to allow the use of encrypted digital currencies for international settlement, and iran's central bank has approved the adoption of digital currency mechanisms in the field of foreign trade to carry out a settlement transaction system for digital cryptocurrencies. The new development is that Iran has specifically proposed the establishment of cryptocurrency-related payment systems between Gulf states to reduce its dependence on the US dollar.
Goldman Sachs also said in a study to clients that central banks around the world are trying to adopt a digital monetary policy approach to achieve de-dollarization. Over the past two years, many economies have worked to digitize their monetary ecosystems, for example, Russia is also preparing to conduct a pilot test of the digital ruble in the second half of 2022, with blockchain technology as the core.
So far, according to the IMF, more than 100 countries or economies are exploring CBDCs, 48 more than last May. SWIFT Managing Director and Head of Innovation Nick Kerigan said on April 24 that the global central bank digital currency will become an important force in the future, stressing that SWIFT is unique in its solutions to this challenge.
In this regard, the world's leading think tank OMFEF Advisory Board explained that by introducing blockchain-backed digital currencies and strengthening the foreign exchange market, it can effectively bypass the centralization of the US dollar, and peter Schiff, a senior Wall Street prophet, believes that such an outcome will make gold and digital currencies supported by the local currency or strategic resources of strong economies at the center of the global central bank monetary system, which also indicates that global de-dollarization will enter a new stage, which is quite surprising to the Fed. But it didn't end there, and many countries suddenly began to stop the dollar, and the butterfly effect would become more and more intense.
According to a report released by the Bank of Japan on May 8, the Bank of Japan's digital currency scheme entered the second testing phase in May, and just two weeks ago, Japan's Ministry of Finance and the Financial Services Agency also joined forces with several major Japanese banks to lead the establishment of an international financial system similar to SWIFT that can be used for digital currency settlement to support cross-border transactions, and plans to start circumventing the dollar in the oil trading field with Iran.
At the same time, in April, Israel also officially announced that it would sell dollars in foreign reserves in exchange for yuan, and according to the latest report released by the US Treasury Department, Saudi Arabia also reduced its net holdings of US debt by 16.2 billion US dollars in the 12 months until February, and Japan, Saudi Arabia and Israel, as the traditional economic allies of the United States, also had to de-dollarize, which once again surprised the market. Another new development is that, according to Russian media outlet RT last week, Cuba's central bank has also asked foreigners not to bring dollars to the country and will no longer accept the use of dollars, which is the latest example.
BWC Chinese network research team believes that at present, the evolution of the international financial system is currently lagging behind the development pattern of the global economy, and eventually the role of major international reserve currencies will be regionalized, for example, the share of emerging market economies in global activity is now 61%, but the current 50% of global commerce and trade is still priced and traded in US dollars, it is clear that emerging markets lag behind 33% of their share of global financial assets, at the same time, The IMF has also hinted that it will launch a global digital currency, the IMF Coin, under the SDR mechanism, aimed at replacing the US dollar, again surprising the market. (End)