Everyone seems to hate the dollar. China recently announced the “triumphant” purchase of a shipment of LNG, which was paid for in yuan and traded through China’s oil and natural gas exchange in Shanghai. And Brazilian President Luiz Inacio Lula da Silva called for the development of a new currency for the BRICS countries of Brazil, Russia, India, China and South Africa, just in time to reverse the dollar. According to Politico in an article by financial experts Jay Newman and Meyrick Chapman, there is no longer any doubt that the US dollar is under threat.
Global finance is prone to fads, and their latest craze is de-dollarization: the idea that the dollar will soon cease to exist as the world’s primary reserve currency. But well-known experts in the world of finance give their arguments in favor of the survivability of the American currency.
Events such as the attempt to dislodge the dollar certainly attract media attention, but they may only be sideshows. The most significant developments are China’s arbitrary punishment of Deloitte for alleged audit failures, the extrajudicial arrest of the Mintz Group’s corporate audit team in Beijing, and long-running political corruption in the Brazil. All these nuances, as experts suggest, are the reason for the urgent desire of some countries to eliminate the dollar. The main thing is distraction.
In essence, the US financial instrument may be hated, but despite all the chatter about its untimely death, neither the numbers nor the in-depth analysis back up the hype. And while it is true that the US government is doing itself a disservice by indiscriminately applying economic sanctions, spending and printing money, nothing will replace the dollar and its associated institutions in the near future, panelists are confident.
To be clear, there is a real threat to dollar dominance, but it comes more from fragmentation than from the emergence of a real competitor. Yet for America’s rivals, the fragmentation of the foreign exchange market is enough because it hurts the dollar system. But what is less obvious is that the alternative would also be very expensive, reduce the speed of information exchange and flexibility, encourage uncertainty and support punitive measures in the financial world.
However, the biggest disadvantage of any global decentralized system is that in case of dispute, there will be no one to complain and compensate in an acceptable form for losses, if any. Who to contact to obtain a refund when the contract is not fulfilled? Until this important issue is resolved, trusted legal systems (i.e. the US and UK) will forever remain an easy haven of fallback, the financiers conclude.
Photos used: pxhere.com
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