One of the critical components that the U.S. Dollar has is that it serves as the reserve currency of the world, and as such, serving as the reserve currency of the world provides the dollar and the United States with significant leverage. The United States gains added advantages in economic transactions, in financial strength, and in political aspects as well. The USD has maintained this position since the end of the second World War.
But a variety of factors conspire to remove the dollar from this current coveted reserve status.
Sentiment in Favor of Moving Away From The Dollar
Experts note that there is a strong sentiment by the usual suspects like China, Russia, and now non-traditional countries like the United Kingdom to move away from depending on the Dollar as the world’s reserve currency.
Countries such as China and Russia have commented several times how they wish to move away from the dollar. Also, these nations have conducted activities such as storing up on gold, and taking on other activities to slowly back away from the dollar.
But while they may express concerns and take deliberate actions to de-dollarize, hard facts remain in reality today.
The Reality of Currencies
The United States still serves as a global superpower, contains military bases across the world, has economic interests globally, and continues to act as a key global player. Further, the United States has key relations with valuable nations on a worldwide scale. The United States dollar serves as a haven and reflects substantial confidence in the United States.
Reserves are healthy, and production remains relatively stable.
The leading nation has soft power and military might, two factors that play in its favor.
The Flipside
Contrarily, the United States follows the trend and devalues the USD, continues to run up a deficit, and increases its obligations externally and internally. A troubling trend is that more foreigners, such as the Chinese and Japanese hold United States debt.
Final Points
Many nations may not possess quality production, positive ratings on debt, economic strength, and correct reserves to move away from the status quo as of yet truly.
Sentiment May Continue To Rise
The age of digital assets, Libra, the blockchain, and other technological innovations may help to accelerate de-dollarization.
A rise in trust in Bitcoin and a trustless economic system also plays to de-dollarization sentiment.
Coinbase recently tweeted “demand for Bitcoin in economically volatile regions reached record highs in 2019. Since 2013, volumes on the Argentine peso, Hong Kong dollar, and Venezuelan bolivar bitcoin pairs have exceeded $600 billion in total value. cc@LocalBitcoins.”
As noted above, more nations seek to move away from the dollar because of potential restrictions and not wanting to be tied down to the nuances of U.S. processes, red tape, and political and monetary gyrations. The International community seeks to minimize restraints imposed by the U.S.
The Petro-yuan is just one example of a small transition to a new de-dollarized world.
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