Source: China Daily
China Daily, July 10 -- According to foreign media reports, the Anglo gold standard and the dollar standard reflect centuries of imperial monopoly power. As the international environment continues to change and the dollar's weaponization has raised distrust of the current system to new heights, some countries are so alarmed that they are preparing reserve currencies for trade. There are fears that the dollar could become a permanent political tool or be used as an economic strategy to force sanctions against their will.
The European "Modern Diplomacy" website reported on the 6th that the Independent Media Institute (IMI) said that "de-dollarization" has obviously arrived. After the collapse of the Soviet Union, the United States declared a new world order and launched a series of new wars, including against Iraq. However, it now seems that the "petrodollar" era is coming to an end at an "alarming" pace. The problems of the dollar only increase, because all the pillars supporting the "petrodollar" are unstable.
First, the United States is no longer the dominant manufacturer, and many countries are catching up in science and technology. Second, the United States no longer seems to be an attractive development model for countries in the Global South. In addition, the United States imposed sanctions on a number of countries, each of which began to achieve "critical mass" through mutual transactions. Finally, after the withdrawal of US troops from Afghanistan, military power is no longer considered supreme. Monetary systems reflect the power relations in the world: they do not change them. The Anglo-gold standard and the dollar standard reflect centuries of imperial monopoly power. However, in a multipolar world, more diverse arrangements should be expected.
The magazine reported on the 7th that the current geopolitical system and all its accompanying features are achieved by the supremacy of the US dollar as the world's reserve currency. Proponents of the current order faithfully believe that the system, supported by American military power and Western economic dominance, will continue indefinitely.
But the international environment is beginning to shift, partly because of the flourishing of economic alliances outside the confines of Western-backed international institutions, and partly because of the policy decisions of these institutions and their American patrons. No recent action has accelerated this transformation more than the decision of the United States to freeze and seize the foreign exchange reserves of the Russian Federation at the very beginning of the Russian-Ukrainian conflict.
The weaponization of financial reserves has brought distrust of the current system to new heights. The end of dollar dominance may not come soon, but it is much more likely than many Western countries are willing to admit.
A recent report on the Business Insider website also mentioned that in the context of "de-dollarization", countries around the world have chosen alternative currencies for trade. The U.S. dollar has been the world's reserve currency since World War II, playing a vital role in the world trade and financial system. But sweeping sanctions imposed by the United States and its allies on Russia and its expulsion from the dollar-dominated global financial system have alarmed other countries so much that they are now preparing reserve currencies for trade.
A working group of the Reserve Bank of India (RBI) said in the report: "The internationalization of the currency is also closely related to the country's economic progress, especially its position in global trade. "While the macro-geopolitical environment is prompting countries to seek alternative currencies for trade, the dollar's dominance in global trade and finance has long been troubling. In its report, the RBI stressed that the United States needs to maintain its obligations and responsibilities as an issuer of reserve currency, but that the US government has "not hesitated to protect its interests" in the past when forced to choose between its own interests and those of the rest of the world. The report also said that this is a problem because it exacerbates imbalances in the international monetary system, which has tilted in favor of the United States.
In a previous Bloomberg report, Stephen Jen, a former currency expert at Morgan Stanley and CEO of Eurizon SLJ Capital Ltd., a world-renowned asset manager, also said that the dollar is losing its reserve status at a faster rate than widely believed.
Ren and his colleague Joana Freire wrote in a report that the dollar's share of global reserves in 2022 will decline 10 times faster than the average over the past 20 years, as many countries are looking for alternative currencies after sanctions triggered by the Russian-Ukrainian conflict.
"In 2022, the dollar's market share as a reserve currency suffered a stunning collapse, presumably due to its aggressive use of sanctions," they said, adding that "the unusual actions of the United States and its allies against Russia have alarmed large foreign exchange reserve holders," mostly emerging economies from the so-called Global South."
The article pointed out that the weaponization of the US dollar by the Biden administration has accelerated the search for alternatives in other countries. Some smaller countries are trying to de-dollarize, and there are concerns that the dollar could become a permanent political tool or be used as an economic strategy to put additional pressure on countries that may disagree to impose sanctions.