De-dollarization is the transition away from usage of the US dollar and towards other currencies. It is a global macroeconomic trend with geopolitical ramifications, illustrating the decline of US imperial hegemony and the rise of multipolarity on the world stage.[1][2]
Below are some specific situations where dollars might be substituted for other currencies:
- Trading oil and / or other commodities (Petrodollar)
- Holding as a reserve asset to ensure central bank capitalization in the form of foreign exchange (forex) reserves
- Bilateral trade agreements
- Dollar-denominated assets
Since the establishment of Bretton Woods system in 1944, the US dollar has been used as the medium for international trade. In recent years, several countries are transitioning to trade in national currencies.[3]
History
2000s
In October of 2000, Iraq announced it would price its oil sales in the Euro, moving away from the US dollar which Saddam described as "the currency of the enemy."[4][5] The United States invaded Iraq three years later in 2003, after which the oil markets were reverted to being priced in USD.
In 2009, Muammar Gaddafi, leader of Libya and President of the African Union at the time, suggested to the States of the African continent to switch to a new currency, independent of the US dollar: the gold dinar.[6][7] Two years later, in 2011, NATO invaded Libya and murdered Gaddafi.
2010s
Russia and China's central banks are among the largest buyers of gold in the late 2010s and into the 2020s. This shows a clear preference for accumulating hard assets as the perception of dollar-weakness (and US weakness) grows.[8]
In 2017, Venezuela was sanctioned after dropping the US dollar.[9]
2020s
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the digital clearinghouse protocol for international inter-bank USD transactions, all transactions of which are cleared through the New York Federal Reserve Bank. SWIFT has been politicized and used as a financial weapon against states which find themselves in the poor favor of the USA.
In 2021, Russia, China, and the EU are all increasingly interested in reducing their reliance on dollars in their trade.[10] This comes after the US threatened to suspend Russia's participation in the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system for political reasons.
Following the 2022 Russo-Ukrainian conflict, Western nations voiced support for censoring Russia from the SWIFT system. Weeks later, the Eurasian Economic Union (EAEU) and China are confirmed to be working on an "independent international monetary and financial system"[11][12] In 2022, the use of dollars for Russia–China trade dropped from 80% to 40% and yuan use rose from 1% to over 40% following Western sanctions.[13]
Increasingly, international investors are beginning to realize the risks associated with holding USD which are constantly debased through money printing (also known as quantitative easing, or QE). Investors recognize that Russia and China are propelling the global de-dollarization process.[14]
In 2022, Brazilian president-elect Lula da Silva proposed creating a new currency for international Latin American trade called the Sur and strengthening UNASUR. Ecuadorian economist and politician Andrés Arauz said Latin America should reject the IMF and help African countries relieve their debt.[15]
More reading
- De-dollarization: The revolt against the dollar and the rise of a new financial world order[16]
References
- ↑ Gal Luft (2018-08-28). "The anti-dollar awakening could be ruder and sooner than most economists predict" CNBC.
- ↑ The Loss of Dollar Hegemony by Rod Brana on Liberty Speaks
- ↑ Helmut Reisen (2009-06-20). "Shifting wealth: Is the US dollar Empire falling?" Vox EU CEPR.
- ↑ "U.N. to let Iraq sell oil for euros, not dollars" (2000-10-30). CNN.
- ↑ "Iraq nets handsome profit by dumping dollar for euro". The Guardian.
- ↑ "Gold Dinar: the Real Reason Behind Gaddafi’s Murder" (2019-05-03).
- ↑ "How Muammar Gaddafi’s Vision for a Debt-Free Africa Led to His Death" (2020-06-29).
- ↑ Valuewalk (2020-11-27). "Central Banks To Keep Buying Gold, Drive The Price" Yahoo Finance.
- ↑ "Venezuela Accused Of Drug Trafficking After Dropping U.S. Petrodollar" by Whitney Webb of MintPress News
- ↑ Divyanshu Jindal (2021-09-18). "Russia, China and EU are pushing towards de-dollarization: Will India follow?" Modern Diplomacy.
- ↑ Pepe Escobar on Twitter: "...On Friday, the Eurasian Economic Union (EAEU) and China decided to design the project for an INDEPENDENT INTERNATIONAL MONETARY AND FINANCIAL system. ..." (Archived)
- ↑ "The EAEU and China will develop a project of an international financial system" (2022-03-14). Kapital.kz.
- ↑ Ben Norton (2022-12-26). "Russia dropping US dollar for Chinese yuan – and fast" Multipolarista. Archived from the original on 2022-12-27. Retrieved 2022-12-27.
- ↑ Louis Gave (2022-06-29). "De-Dollarization Is Accelerating, Propelled By China & Russia | Louis Gave" Wealthion.
- ↑ Ben Norton (2022-12-01). "Latin America’s plan to challenge US dollar with new currency and ‘regional financial architecture’" Multipolarista. Archived from the original on 2022-12-02. Retrieved 2022-12-04.
- ↑ Gal Luft (2019). De-dollarization: The revolt against the dollar and the rise of a new financial world order.