The US dollar has dominated global trade and capital flows for many decades.
However, as Bruo Venditti of Visual Capitalist details below, Many nations are looking for alternatives to the greenback to reduce their dependence on the United States.
This chart catalogs the rise of the US dollar as the dominant international reserve currency and recent efforts by various nations to de-dollarize and reduce their dependence on the US financial system.
The dollar dominance
The United States became the leading financial power almost overnight after World War I. The country only entered the war in 1917 and emerged far stronger than its European counterparts.
As a result, the dollar began to displace sterling as the international reserve currency, and the US also became a major recipient of wartime gold inflows.
The dollar then gained a bigger role in 1944 when 44 countries signed it Bretton Woods Agreementcreating a collective international monetary system pegged to the US dollar, which in turn was pegged to the price of gold.
In the late 1960s, European and Japanese exports became more competitive with US exports. There was a large supply of dollars around the world, making it difficult to back dollars with gold. President Nixon stopped direct convertibility of the US dollar gold in 1971. This ended both the gold standard and the limit on the amount of money that could be printed.
Although it has remained the international reserve currency, the US dollar has progressively lost its currency purchasing power since then.
Russia and China’s steps towards de-dollarization
Concerned about America’s dominance of the global financial system and the country’s ability to do so ‘arm’ Meanwhile, other nations have been testing alternatives to lessen the dollar’s dominance.
When the United States and other Western nations responded by imposing economic sanctions on Russia invasion of UkraineMoscow and the Chinese government were form teams Reduce dependence on the dollar and establish cooperation between their financial systems.
Since the invasion in 2022, ruble-yuan trade has increased eighty-fold. Russia and Iran are also working together to launch a gold-backed cryptocurrency. after the Russian news agency Vedmosti.
In addition, the central banks (especially those of Russia and China). bought gold at the fastest pace since 1967 as countries diversify their reserves away from the dollar.
How other countries reduce dollar dependency
Dedollarization is an issue in other parts of the world:
- In recent months, Brazil and Argentina have been discussing creating a common currency for South America’s two largest economies.
- At a conference in Singapore in January, several former Southeast Asian officials spoken on ongoing de-dollarization efforts.
- The United Arab Emirates and India are in talks about using rupees act Non-oil commodities in a move away from the dollar, according to Reuters.
- For the first time in 48 years, Saudi Arabia said it was the oil-rich nation open to trade currencies other than the US dollar.
Despite these moves, few expect the dollar’s global sovereignty status to end anytime soon. The central banks are still sticking to it 60% of their foreign exchange reserves in dollars.
From Zerohedge.com
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