Former President Richard Nixon’s Treasury Secretary, John Connally once famously said, “The dollar is our currency, but it’s your problem.” The world was made to accept the dollar as the de facto currency and the US imported the tender around the globe. Things are taking a U-turn this decade as emerging economies kick-started the de-dollarization agenda to pull the US dollar down. They want the USD to solely remain America’s problem and not a global problem.
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There’s no doubt that the US dollar dominates the financial world through remittances, foreign exchange, and trade settlements among nations. It still controls the currency markets and is the most sought-after tender in the imports and exports sector. The majority of nations and businesses settle trade only in the US dollar sidelining all the other currencies. The US dollar is thriving in the markets despite the global de-dollarization threats that have engulfed the trade market recently.
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US Dollar Thrives, But De-Dollarization Rises
The de-dollarization efforts are immense and are coming from developing countries like China, Russia, Brazil, South Africa, and India. The emerging economies kick-started the de-dollarization agenda in an effort to reduce dependency on the US dollar. They aim to replace the hegemony of the USD with local currencies to strengthen their respective native economies.
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De-dollarization comes at a time when the role of the US in global developments is rapidly shrinking. Emerging economies are pushing above their weight having stronger GDP growth compared to the US and the West. Developing nations are considering de-dollarization as a long-term agenda and not a passing fad. This puts more pressure on the US dollar as it is now under constant purview from emerging economies.
The next decade could change the way how the financial world operates if de-dollarization becomes a success. The US dollar could become weak while local currencies strengthen. Read here to know how many sectors in the US will be affected if the de-dollarization initiative turns out successful.