Recently, the US Federal Reserve raised interest rates for the fourth time this year, triggering a chain reaction in many countries around the world and continued turbulence in the international financial market.
In response to the huge impact brought by the US monetary policy and the abuse of financial hegemony by the US, many countries around the world are actively exploring the path of "de-dollarization".
Expert analysis points out that the global "de-dollarization" trend has a long history.
At present, the "weaponization" of the U.S. dollar is damaging the credit of the U.S. dollar step by step and accelerating the global trend of "de-dollarization".
"Bypassing the dollar" to deal with the appreciation of the dollar
On July 27, the Federal Reserve announced to raise interest rates by 75 basis points, raising the target range of the federal funds rate to between 2.25% and 2.5%.
This is the fourth time the Fed has raised interest rates this year and the second in a row by 75 basis points.
Since the beginning of this year, the United States has ended its ultra-loose monetary policy, raised interest rates one after another, and continuously reduced the size of its balance sheet, which not only increased the risk of recession in the United States, but also triggered a chain reaction in the global financial market. Many countries are facing high inflation, rising foreign debt, capital flight, etc. a series of questions.
Data show that Israel's annualized inflation rate reached 5.2% in July this year, the highest level since October 2008.
Egypt’s annualized inflation rate reached 13.6 percent in July, the highest level since May 2019.
Annualized inflation in Tunisia surged to its highest level since October 1991 in June.
The Turkish lira fell to around 18:1 against the dollar in August, more than halving its value from a year ago.
In response to the huge impact of U.S. monetary policy on their own economies, many countries in the world have begun to explore the use of bilateral and multilateral currency agreements in international trade to settle transactions, promote the diversification of foreign exchange reserves, reduce their holdings of U.S. debt, and “de-dollarize” in various ways. ".
The US financial sanctions on Russia forced Russia to launch a "de-dollarization" initiative.
From April 1st, Russia has switched to rubles when supplying natural gas to "unfriendly" countries and regions.
In June, Russia proposed at a BRICS-related meeting that it is advancing the development of a reserve currency based on the BRICS basket of currencies.
In Europe, enhancing the international status of the euro has always been an important goal of the EU, and the EU has already begun an attempt to "de-dollarize".
As early as the beginning of 2019, Germany, the United Kingdom, and France established the "Trade Swap Support Tool" (INSTEX) system to help European companies bypass US dollar settlements and conduct related trade with Iran.
Since then, Russia has also joined the system.
In November of the same year, six countries, Belgium, Denmark, Finland, Norway, the Netherlands and Sweden joined the system.
At present, 14 EU countries have joined INSTEX and completed the first transaction.
In Asia, the central bank of India launched a rupee settlement mechanism for international trade in July; the five ASEAN economies reached a consensus in July to plan to establish a regional integrated payment network to bypass the US dollar for direct foreign exchange settlement.
In the Middle East, the Iranian foreign exchange market launched the Iranian rial/Russian ruble currency transaction, and the Russian side said that it would gradually abandon the use of the US dollar in trade with Iran; Turkey is negotiating a bilateral currency agreement with Russia, including Turkey's purchase of Russian rubles Energy, and accept Russian tourists to use rubles for consumption in Turkey; Israel's central bank began to include Canadian dollars, Australian dollars, Japanese yen and Chinese yuan in its foreign exchange reserves this year, and plans to reduce the proportion of the dollar in its foreign exchange reserves from 66.5% to 61% ; Egypt's central bank purchased 44 tons of gold in the first quarter of this year, increasing the country's gold reserves by 54%.
At the same time, many countries sold off U.S. debt in large quantities.
The latest International Capital Report (TIC) released by the U.S. Treasury Department shows that, as the largest overseas creditor of the United States, Japan reduced its holdings of U.S. debt for three consecutive months before June.
Britain, the third-biggest holder of U.S. debt, cut its holdings by $19.1 billion in June to $615.4 billion.
In May of this year, the top ten holders of U.S. debt, including Ireland, Belgium, Luxembourg, and Switzerland, all sold U.S. debt.
"The Fed's rapid rate hikes to keep inflation in check have made U.S. debt less attractive," the Business Television Channel reported.
The International Monetary Fund (IMF) recently released the "Currency Composition of Official Foreign Exchange Reserves" report, showing that in the fourth quarter of 2021, the market share of the U.S. dollar in global central bank international reserves dropped from 59.15% in the previous quarter to 58.81%, a record high. 26-year low.
"De-dollarization" is becoming a trend
According to the US "Capitol Hill" report, after the US sanctions against Russia, many countries have doubts about continuing to use the US dollar for international trade settlements, including the BRICS countries, which account for more than 24% of the world's GDP.
After the outbreak of the Russian-Ukrainian conflict, in order to destroy the Russian economy, the United States and other Western countries kicked Moscow out of the Society for Worldwide Interbank Financial Communication (SWIFT) payment system.
The United States' move to "weaponize" the dollar has aroused the vigilance of many countries.
"After the Russian-Ukrainian conflict, the United States launched unprecedented financial sanctions against Russia, which is one of the direct reasons for the global trend of 'de-dollarization'. The Russian-Ukrainian conflict is not only a geopolitical dispute, but also a 'currency edge' dispute - the United States confiscated Russia's related overseas assets, freezing its sovereign wealth fund, kicking Russia's major banks out of SWIFT, etc., are actually wantonly plundering Russia's national wealth at the financial level." Zhang Monan, deputy director and researcher of the US-Europe Research Department of the China Center for International Economic Exchanges, accepted this reporter. In the interview, it was pointed out that the series of chain reactions brought about by the US sanctions against Russia once again proved that whether the US directly used financial sanctions against a certain country or caused other countries to face secondary sanctions due to financial sanctions against a certain country, it would Relevant countries have caused a huge impact.
The U.S. financial sanctions have changed the operation logic of the international financial market in the past. The international financial market no longer follows the principle of neutrality, and the property owned by sovereign countries is no longer inviolable. risk" international settlement tool.
In the long run, this has caused serious damage to the international credibility of the dollar.
Liang Si, a researcher at the Bank of China Research Institute, analyzed in an interview with this reporter that the global "de-dollarization" trend has a long history.
On the one hand, some countries have faced U.S. sanctions for a long time, and as a last resort, they need to seek settlement methods other than the US dollar for economic and trade activities, and explore the use of their own currencies for international trade settlement.
After the Russian-Ukrainian conflict, this phenomenon became more obvious.
On the other hand, in recent years, the economic volume of emerging market countries has continued to increase, the global economic center of gravity has gradually changed, the influence of currencies such as the euro, the yen, and the renminbi has increased, and the global monetary system has gradually shown a trend of diversification.
In addition, after the 2008 financial crisis, the U.S. monetary policy continued to adjust and repeat between quantitative easing and tightening, and the dollar value continued to fluctuate.
As the world's main settlement and reserve currency, the unstable value of the US dollar increases the risk of non-US currency countries using the US dollar for international settlements, which has a negative impact on the economic interests and stable development of these countries.
Especially recently, the Federal Reserve has raised interest rates successively, and the problem of capital outflow from emerging market countries has become prominent. Many countries have passively raised their interest rates to cope with the wave of US dollar interest rate hikes and stabilize their financial markets, but this will affect the healthy development of the economy.
America is 'destroying' the dollar
According to Bloomberg, several experts at the Federal Reserve Bank of New York believe that the U.S. dollar's status as the world's major reserve currency remains fairly solid, with "nothing in the world that can match it."
Despite this, the continuous weakening of US dollar credit has caused concern in the US industry.
Hudson, a professor of economics at the University of Missouri in the United States, analyzed that the Fed's recent continued tightening of monetary policy, coupled with rising oil and food prices, may bankrupt some developing countries and force them to sell public assets to American investors.
The United States, through the Federal Reserve, is implementing monetary policies that bankrupt developing countries.
U.S. columnist Frida Gittes believes that U.S. monetary policy is creating new problems for other economies and their people that have been hit consecutively.
"The United States is the biggest destroyer of the international status of the US dollar, and the US sanctions are seriously damaging the US dollar's credit." Zhang Monan believes that the US arbitrarily imposes financial sanctions and exerts extreme pressure, which exacerbates the weakening trend of US dollar credit and stimulates many countries around the world to promote currency The process of system diversification.
The more far-reaching impact is that behind the currency cycle is the global industrial cycle, and the original "dollar-petrodollar-commodity dollar" global currency cycle has been destroyed.
The dollar system is realized by two major cycles: one is that oil-producing countries such as the Middle East settle their energy trade in dollars and invest their oil earnings in U.S. government bonds to realize a “dollar-petrodollar” cycle; the other The cycle is that the world's major commodity trading countries, such as China, Japan and other countries, invest the proceeds from commodity trade surpluses in the US financial market to realize the "dollar-commodity dollar" cycle.
Today, the two major monetary cycles that underpin the dollar system are changing.
On the one hand, with the advancement of the U.S. energy independence strategy in recent years, the U.S. is changing from the world’s most important oil importer to a net oil exporter, and the U.S.’s reduced energy dependence on the Middle East and other oil exporting countries has pushed the Middle East countries to seek New energy buyers to diversify exports.
On the other hand, the United States insists on promoting "decoupling" and "disconnection" from China's supply chain, industrial chain, and value chain, and the investment of China's commodity trade surplus in the US financial market will also tend to slow down.
The above changes will change the currency circulation flow of "dollar-petrodollar-commodity dollar", which will not only affect the cyclical structure of the global monetary system, but also have a profound impact on the changes in the global financial system and pattern.
Liang Si analyzed that after World War II, the global share of the U.S. economy remained at a high level for a long time, and the U.S. dollar became the most important international reserve and settlement currency, and gradually established a dominant “overlord” status.
At present, the U.S. dollar still occupies an absolute advantage in global trade settlement, foreign exchange reserves of central banks, global debt pricing, and global capital flows. Although its status has declined in recent years, its “hegemony” status is difficult to shake in a short period of time.
The trend of "de-dollarization" is closely related to the evolution of the global political and economic landscape.
In the future, "de-dollarization" may be accompanied by slow fluctuations in the evolution of the global political and economic pattern, and this trend will exist for a long time.
"Although the US dollar still occupies a hegemonic position in the international monetary system, the global 'de-dollarization' has become an irreversible trend, and a diversified pattern of the international monetary system is gradually taking shape." Zhang Monan believes that, on the one hand, the euro is the second largest in the world. Although the big currency has been hit hard by the geopolitical and energy crisis this year, it is still a symbol of European economic integration. The EU will not change its determination to defend the euro, and the game between the euro and the dollar will continue.
On the other hand, China is the second largest economy in the world, and the process of RMB internationalization has been accelerating in recent years.
At present, the RMB has become the world's third largest trade finance currency, the fourth largest payment currency, and the fifth largest reserve currency.
As China continues to expand its financial market, expand the opening up of its capital account, diversify its overseas RMB assets, and accelerate the establishment of a network of RMB calculation, payment and clearing systems, the international influence of the RMB will continue to increase.
For example, China has established seven overseas RMB offshore centers in the 15 countries of the RCEP.
These changes will accelerate the diversification of the international monetary system.
Gaucho