Countries such as Brazil and others in the Southeast Asia region are trying to find currencies other than the US dollar to carry out trade. With the Fed steeply hiking up interest rates, other central banks around the world have to follow in order to stem outflows and as a result are depreciating their own currencies.
The main player in trying to move away from reliance on the US dollar for trade is China, and they have some leverage as being the biggest exporting country in the world. China is also selling off US Treasury's, and has been doing so for years.
Moving away from the dollar can really benefit local economies in other countries. It can help simplify importing/exporting businesses and allow them to better mitigate risks and help in their hedging strategies. A reason why moving away from the dollar is being accelerated can be due to the US freezing Russian reserves of US dollars, showing other countries that the US dollar may not be a safe haven to park money.
A global economy moved on from the US dollar could be highly detrimental to the US economy, and its geopolitical power. We should do what we can to make sure the US dollar remains the global reserve currency.
2 comments:
I think that this is a really important topic to talk about in the global economy, specifically as the Russia/Ukraine war continues to escalate, and China continues to strive for global power. The US dollar is a very important tool in international trade and export, and also gives the US a lot of power over international trade. If other nations want to move away from using the US dollar for trade, it gives more power back to the other nations who have not been benefitting from its use, and makes US restrictions on trade with nations like Russia less significant on the global scale. This could make conflict more prevalent, and give Russia and China some of the global power back that they have been searching for...although this would not be good for the US, or any US allies.
This blogpost reminds me that the world is becoming more and more flat. There are definitely still global powerhouses that can influence economic decisions, but many other countries are now able to make their own choices and still be successful. The movement from the US dollar will force America to "play nicer" with the other countries in the sandbox.
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