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Is the era of dollar hegemony coming to an end?

It is well known that the back of the currency is a commodity and a financial settlement transaction. The currency that is not supported by the transaction is the same as the used paper, and the dollar is the world’s most main reserve currency, behind which the commodities represented by oil are also denominated in United States dollars, And through a SWIFT international clearing system, which is indirectly controlled by the United States dollar, to complete the transaction. With the endorsement of the economic power of the United States, the US dollar and the U.S. debt jointly supported the dollar’s currency status after the gold-fired system. The dollar is like a ghost of a spiral in the world’s economic night sky, and for decades, with the magic of the Fed’s money, no one of the economies The U.S. economy is going to pass the high-deficit risk to a number of low-cost, high-deficit-deficit economies through the United States dollar. In recent years, however, the multi-country has either actively or has been forced to turn to a non-dollar currency, such as the euro, the renminbi, and another alternative, to create a world financial order for the United States dollar.

Is the era of dollar hegemony coming to an end?
Is the era of dollar hegemony coming to an end?

In the global dollarization trend, although the dollar still dominates, but this is not irrevocable, which means that the future of the dollar is not bright. So far, 25 countries around the world have begun to dollarize, including China, Russia, Germany, France, Iran, India, Vietnam, Hungary, Malaysia, Thailand, Pakistan, Kazakhstan, Angola, Venezuela, Iraq, Nigeria, Indonesia, Belarus, Armenia, Kyrgyzstan, Turkey, Qatar, the United Arab Emirates and other countries. This may accelerate the demise of the dollar after the abolition of the Bretton Woods system in 1971, which is the root cause of the EU’s recent establishment of a dollar-independent financial settlement system.

According to the latest Zerohedge report, the five BRICS countries, China, Russia, India and Brazil and South Africa, are in the process of setting up a unified payment system in support of their local currencies, which can be installed on smartphones for purchase and transaction settlement in any of the five countries, which means that among the BRICS countries, following the partial de-dollarization process in some areas of commodity trading between China, Russia and India, Brazil and South Africa will also use the payment system to circumvent the dollar, and officially begin to dollarize the bright sword, which means that China and Russia will take a big step towards dollarization. In this regard, according to the Russian satellite news agency quoted the Russian finance minister as a public statement, “it’s time for us to abandon the dollar and seek an alternative currency,” according to reports that we have been tracking de-dollarization for years. To avoid economic and financial sanctions from the United States, Russia has begun its process of dollarization in the economic and financial system in 2014, and Russia has reached local currency settlement agreements with Iran, China, Turkey and other countries. In addition, Russia has increased the BRICS monetary reserves, thereby promoting trade between these countries. In addition, Russian Deputy Finance Minister Vladimir Koretchev said earlier that the Ministry of Finance plans to reduce the share of the United States dollar when changing the monetary structure of the State Welfare Fund in 2020. then, Andre Coskin, president of the Russian Foreign Trade Bank, said that Russia, with all the prerequisites for economic growth, is continuing to implement the policy of de-dollarization of international trade. “with the European Union, China and the BRICS already have a non-dollar export settlement share of more than 50%. Russian banks and businesses have reduced the number of The reliance on dollar financing has halved the share of dollar assets in Russia’s foreign exchange reserves. At the same time, China and Russia have created a monetary environment in which there is no dollarization in oil commodity trading. The share of foreign exchange assets held by the Russian central bank has increased from 1% in the third quarter of last year to 15%, and the use of RMB is still expanding. At the same time, China and Russia are actively engaged in reducing the use of the United States dollar and achieving a wider settlement of the local currency. This will act as a vane for the use of local currency settlement for other goods in the course of trading.

Is the era of dollar hegemony coming to an end?
Is the era of dollar hegemony coming to an end?

At present, measures to dollarize or bypass dollar trading around the world have come one after another, and the dollar seems to have long lost the label of trust. These measures are manifested in the abandonment or reduction of the use of the dollar in commodities, including crude oil, and the use of bilateral or non-US currency transactions. So far, this third-party currency trading mechanism similar to the abandonment of the United States dollar is the most exciting part. Two months ago, countries such as Germany and France were building a dollar-independent local currency settlement system that was the best footer.

At the same time, the trend of de-dollarization is even more irresistible. For example, more and more market subjects are also gradually marginalization of the dollar, through bilateral local currency settlement to arrange transactions, and thus completely bypass the dollar (or petrodollars), and there is a need to choose a new reserve currency and oil currency, which means that the world oil market also has an additional trading currency choice. Yuan-denominated crude oil futures contracts will break the global oil price rules in the dollar-dominated market environment.

The energy market giant Intercontinental Exchange will work with Abu Dhabi’s state-owned oil producers and some of the world’s largest oil companies, including China, the UK and the Netherlands, to launch a new crude oil futures exchange in the first half of 2020, which could change the way Middle East crude is traded. This is bound to weaken the dollar-denominated WTI and Brent in oil. At the same time, Saudi Arabia is already looking for alternatives to petrodollars, especially in the face of low-cost shale oil seizing the market, which will force the latter to seek a more independent position, reduce its dependence on the dollar, and prefer to raise a lot of money through the listing of Saudi Aramco, the country’s largest oil company, in order to get rid of the status quo of excessive dependence on oil revenues, which is tantamount to de-dollarization in a very covert way. In response, Ron Paul, a former senior US official, recently predicted that the US dollar-based financial and monetary system is in danger. I stress that I see trouble in the future, which comes from too much debt and too much expenditure. In the longer term, the sharp rise in US bond yields will be detrimental to the US dollar, but all this may come to an end. We are getting closer and closer to the collapse of the dollar system every day, perhaps within a year or two. In this regard, the US financial media MarketOrcale believes that this seems to be a breakthrough between China and Russia. The dollar (petrodollar) is doomed to lose privileges, but will not disappear, this shock wave may continue to play its role in the same form.

Is the era of dollar hegemony coming to an end?
Is the era of dollar hegemony coming to an end?

In fact, few people realize that the dollar can only be supported by debt and more debt, and the factors that have so far prevented the dollar from depreciating are its reserve currency status, its strong state apparatus and the petrodollar, but all of these factors are now beginning to deteriorate. And now that voice is already floating over Wall Street, just after Fed economists recently warned that the decline of the dollar is an inevitable historical process, JPMorgan Chase also expressed doubts about the monetary status of the dollar in its latest report in October, even pointing out bluntly that it was precisely because of a series of economic measures and actions by the US authorities and the Federal Reserve. The threat to the dollar ’ s reserve currency status and the use of international payments is the real driving force behind the world ’ s de-dollarization, and countries like Russia seem to be preparing ahead of the dollar ’ s sudden loss of major reserve currency status one day.

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