MOSCOW, February 1 – RIA Novosti, Natalia Dembinskaya. The American currency is squeezed out of state reserves by aggressive foreign economic policy and the massive foreign debt of the United States. Yes, and no need for variable rate dollar savings. Emerging markets are switching to payments in national currencies. Economists are confident that the financial world will never be the same again.
Doubts about stability
in the report”The future of the monetary system“Analysts from the Credit Suisse Research Institute of the Bank of Switzerland point to a loss of confidence in the American economy. This is facilitated by accelerating inflation, a large budget deficit ($1.3 trillion), unsustainable external debt (31 trillion, 121.5 percent). Also, no one likes attempts to use the dollar as a weapon in the economic conflict.
“Macroeconomic imbalances have increased significantly. In addition, geopolitical tensions have increased in recent years. The probability of a massive abandonment of the US dollar is growing,” the report’s authors wrote.
being pushed out of reserves
If the dollar accounted for 80 percent of the world’s reserves in the 1970s, by 2022 it will be only 58.8 percent in at least 20 years.
In floating exchange rate conditions, the use of reserves as a protective mechanism against depreciation of the national currency is no longer valid. Analysts point out that with a consistent monetary policy, the market itself finds balance at the optimal point.
In addition, globalization has meant that many countries can easily access them “on the go” when needed, rather than “pre-finance” dollars to deal with crises.
“For those who pay for imports in a currency other than the United States, the Federal Reserve can cut the dollar and take money from major trading partners instead,” the report explains.
Economists see Russia’s union with China and India as a striking example. Last year, Moscow, Beijing, and then Delhi transferred their settlements to the national currency. The Chinese and Indians only pay for Russian products in yuan and rupees. Accordingly, the dollar’s condition fell.
“Diplomatic and military conflicts are reshaping international trade. World powers form their own financial and economic blocs. Over time, new currencies may emerge that simplify mutual agreements within these blocs,” says Evgeny Shatov, partner at Capital Lab.
After analyzing all the processes, Credit Suisse identified several scenarios. Including the emergence of a global currency or a new hegemon. However, both situations are unlikely.
The first option requires absolutely unpredictable political unity. And yet there is nothing to replace the dollar.
For the yuan to qualify for this role, its share of international trade must grow exponentially from the current three percent. It is no longer a fully-fledged convertible currency with extremely limited value in the world. In addition, the exchange rate largely depends on the actions of the People’s Bank of China.
The most likely scenario is the emergence of a multipolar financial system. This will be helped by expanding trade in national currencies, developing regional capital markets, and insurance mechanisms against shocks from US monetary policy. For example, the BRICS has already established a pool of foreign exchange reserves.
A supranational currency is also quite possible in the long run.
“The rapid division of the world into economic and political blocs such as the USA-China will also lead to currency fragmentation. This has already happened in history. Enough to remember the fierce struggle between the USA and the UK, enough to remember the fierce struggle between the US and Britain, Aleksey Fedorov, one of the leading economists of the TeleTrade information and analytical center, the world, in the second half of the 19th century. “As is the case, then in some cases it will be temporarily divided into two or more zones.”
To him, the options could be different: yuan and dollar, yuan, dollar and euro or something else – it all also depends on the degree of destructiveness of the conflict between China and the USA. as the subjectivity of individual regions.
“For example, we hear statements about the single currency of Brazil and Argentina in the EAEU countries – a gold-linked unit of account in Russia’s trade with Iran, etc. All this is for a transitional period until the winner wins. The economist emerged in the war between the USA and China. But when that happens (not before 2035-2040), the world will get a new reserve currency,” he said.
However, a reserve currency is always dependent on another state. Therefore, the world may prefer a single supranational currency. It is possible to issue digitally by the Central Bank of different countries under certain conditions.
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