In recent weeks, a series of global events have challenged the hegemony of the US dollar, leading to speculation about a coordinated attack against the currency. These events include major economic deals and agreements among countries traditionally reliant on the US dollar for trade, as well as a regional banking crisis that has pushed billions of dollars into cryptocurrencies and gold.
Saudi Arabia and China have signed a deal to build a refinery worth 83.7 billion Chinese Yuan ($12.2 billion), further solidifying their economic ties. This comes as Saudi Arabia is reportedly considering accepting Chinese Yuan for oil sales, a move that would be a significant blow to the US dollar’s dominance in the oil market. Additionally, China and France have completed their first liquified natural gas (LNG) trade using the Chinese Yuan as the settlement currency, further demonstrating the growing prominence of the Chinese Yuan in international trade.
Russia, another major player in global politics and economics, is also taking steps to reduce its reliance on the US dollar. The country is considering using the Chinese Yuan as a reserve currency and has reportedly shifted about 33% of its reserves into the Yuan, according to recent IMF data. China and Russia have also agreed to use the Yuan as a settlement currency in their bilateral trade.
Another significant development involves the BRICS nations – Brazil, Russia, India, China, and South Africa – announcing the development of a new currency. This move underscores their collective desire to reduce dependency on the US dollar in global trade. China and Brazil have already agreed to use the Chinese Yuan to settle their trade transactions, while India has announced plans to settle trade in Indian rupees with certain countries.
The Chinese Yuan has now surpassed the Euro to become Brazil’s second-largest currency in foreign reserves. Additionally, Russian companies have issued bonds in Yuan worth the equivalent of more than $7 billion last year, further emphasizing the growing prominence of the Chinese Yuan in global financial markets.
In Africa, the President of Kenya has urged citizens to get rid of US dollars, while in the United States itself, a regional banking crisis has led to the withdrawal of over $225 billion from US banks in just two weeks. As a result, Bitcoin has risen 45% since March 10th, and gold is set to break the $2,000 per ounce mark.
The implications of these developments are far-reaching. Inflation and systemic instability have caused many to look for alternatives to the US dollar. The money supply, as measured by M2, has fallen by 2.4% since last year – the largest deterioration of US dollars since 1930. Consumer Price Index (CPI) inflation lags behind M2 growth by approximately 18 months, which means that the fastest tightening cycle in history may be approaching, leading to significant increases in prices.
The question of whether these events constitute a coordinated attack against the US dollar remains unanswered. However, it is clear that the US dollar’s dominance in the global economy is facing unprecedented challenges, and its future as the world’s primary reserve currency is becoming increasingly uncertain. The impacts of these developments will be felt not only in the United States but across the global financial landscape as well.