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Economy

Is De-Dollarization a Real Possibility? Elon Musk concurs

2023-04-29

[Epoch Times] Not yet, but...
Former president Donald Trump warned that the U.S. currency was crashing and wouldn’t be the world standard any longer. He may have been onto something. Recently, Russia, China, and Brazil have been part of the growing list of countries that have embarked on policy of de-dollarization.

Understanding dollarization and how it affects both the United States and other countries is prudent. And it’s important to know why more countries are calling for de-dollarization and how that affects the U.S. economy.

The U.S. dollar is still ~~mostly~~ dominant among global foreign exchange reserves. But its share in central banks has dropped from 1999’s 70 percent. By the fourth quarter of 2022, the U.S. dollar accounted for 58.36 percent of foreign exchange reserves. The euro is second with 20.5 percent, while the Chinese yuan is 2.7 percent.

China’s yuan has a long way to go before it can rival the dollar. And China is operating under current account restrictions, such as its limitations on capital flow.

But de-dollarization is now part of the international landscape and should be watched. There may not be a total break from the dollar, but another player may step up.

Twitter owner Elon Musk now says that the Fate of the US Dollar Is Sealed

[Garowe] Tesla founder and Twitter owner-Elon Musk has thrown his suggestions that the de-dollarization narrative is inevitable and the result of the US using the currency as a weapon on the world stage is over.

In a Twitter post, he further alleges that the way the greenback has been weaponized as key economic sanctions on other countries will soon have a negative impact on the US economy.

The tech billionaire entrepreneur says other countries at some point will no longer want to use the US dollar, to free themselves from dependence on America and its diktats.

" Based on data from Morgan Stanley, since 2001, the dollar had slipped considerably in world trade. De-dollarization is real and is happening fast," the user said. "Dollar share went from 73% (2001) to 55% (2020). Went from 55% to 47% since sanctions launched on Russia, now de-dollarizing at 10x faster than the previous two decades. #gold #silver."

Musk agreed with this analysis. "If you weaponize currency enough times, other countries will stop using it," the Tesla chief said on Twitter on April 25.

For many weeks, speculation has been circulating about the decline of the dollar, the currency of world trade since the end of the Second World War.

Posted by:Bobby

#2 Seigniorage. To cross a border you need the other guy's currency or something they will accept. In Ye Olde Days the local goldsmith would weigh the coins, assay the metal content and make the exchange ...easier than today's market. When the US was an industrial powerhouse everybody had a need for our currency --- if not for themselves then someone else would need it for their own trade. With the US deindustrializing there just isn't that need any more.

Posted by: magpie 2023-04-29 15:11

#1 Why is this important to us? It's beause we love to consume more than we produce (aka work.) And so we run these huge trade deficits with the rest of the world and pay them in greenbacks.

When the dollar is the international currency, they are happy to accept the greenbacks. So as long as our printing presses work, we can consume a lot more than we produce (aka work.)

If the dollar is no longer the international currency, then other countries will not accept just greenbacks. They'll demand that we work and actually produce real goods and services that we can trade to them for the things we import.

In other words, the gravy train will be over.

Posted by: Tom 2023-04-29 06:40

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