Brief Update On King Dollar's Slide

Yesterday we spent some time discussing the decline of US Dollar hegemony, as the world’s sole reserve currency. We got into the implications that decline holds for domestic but even more for foreign policy. We also noted Alasdair Macleod’s contention that the slide of the dollar could accelerate more quickly than many expect, as more countries shift to alternatives to the dollar to settle trade payments—leading to less need to maintain outsized reserves of dollars. Cf. WW3 Endgame In Sight?

Today Glenn Diesen, whom readers may be familiar with as a regular interlocutor with The Duran guys, links to an article at Yahoo Finance that provides a detailed overview of which countries are moving away from the dollar and what steps they’re taking:

The anti-dollar drive spearheaded by Asia has spread to Europe, with France growing sour on the greenback's dominance. Here are 6 rising threats to the buck's supremacy of global trade.

Here’s the bullet point summary—but the article contains a lot of detail about which countries are doing what:

• The dollar's supremacy in global trade faces fresh challenges as several countries float plans to use local currencies in commerce.

• Russia and Iran are working to create a gold-backed stablecoin, while France has pursued a trade deal with China in yuan.

• Here are 6 rising challenges to the greenback's dominance of international trade and investment flows.

However, Diesen gets to the heart of Macleod’s argument by citing some stats that tend to confirm the idea of an accelerated shift away from the dollar. Note that this shift began some years ago, but recent developments—which Macleod and others have addressed—have led to a significant acceleration:

Glenn Diesen

@Glenn_Diesen

The dollar share of total global reserves was 66% in 2003, 55% in 2021, and fell to 47% in 2022. The "status as a reserve currency eroded in 2022 at 10 times the pace seen in the past two decades".

11:07 PM · Apr 22, 2023

So, note the acceleration in 2022, the year the Great Sanctions War on Russia kicked off. The article does note the effect the Powell interest rate hikes have had, but the fundamentals remain unchanged for the long term:

For decades, the US dollar has reigned supreme as the world's reserve currency and is widely used in crossborder trade, especially for commodities such as oil. Thanks to its relative price stability, investors see it as a safe-haven asset in times of heightened economic and geopolitical uncertainty.

The dollar was further bolstered last year by a surge in US interest rates that made it attractive to foreign investors seeking higher yields. It surged 17% during the first nine months of 2022, but has since lost some of its shine on the prospect that the Federal Reserve may soon end its rate hikes as inflation cools rapidly.

Against this backdrop come the latest threats to the greenback's reign — here are 6 currency projects from across the world that are ultimately aimed at undermining the dollar's supremacy.