A very important development is taking place to overcome the pessimism of those who have pinned their hopes on the US. The establishment of a fairer world order is no longer a possibility but is becoming a reality step by step. A wave of rebellion is rising that will destroy the eighty-year reign of the Dollar in world trade.
The throne of the Dollar, which was made the international unit of exchange after World War II under the Bretton Woods regime of 1944, is crumbling!
Moreover, the end of the Dollar’s hegemony does not impose the hegemony of another currency. The Dollar had replaced the pound sterling. But imperialists no longer determine the world economy. A new multi-currency economic order is being established. A multilateral economic order is replacing the unipolar, Dollar-hegemonic economic order.
For this auspicious development, three tools stand out on a world scale to get rid of the Dollar hegemony:
1. Trade in national currencies;
2. Trade in the currency of developing countries instead of Dollars or Euros;
3. Create a new international currency to replace the Dollar.
Trade in national currencies spreading
The most important development breaking the reign of the Dollar is the spread of trade in national currencies. Countries are now using their national currencies instead of the Dollar in trade among themselves.
Trade in National Currencies (TNC) has become the dominant trend in international trade. Every new day brings news of a new TNC deal. Most recently, Iran and Indonesia announced that they would trade in national currencies. Iranian President Ibrahim Reisi visited Indonesia on May 23rd and announced a trade in national currencies agreement with President Joko Widodo in the capital Jakarta.
Today, 60 countries trade in their national currencies instead of the Dollar. The TNC is also being implemented by countries like India, a longtime US ally to the south. India currently has TNC agreements with 19 countries. India has defied Western pressure to trade with Russia in the wake of the Ukraine war. To circumvent Western sanctions, it pays for its oil purchases from Russia in Indian Rupees. India, the world’s fifth-largest economy, is trying to internationalize the Rupee to reduce the demand for Dollars.
Russia, whose trade with China is expected to exceed $200 billion by the end of 2023, has adopted the Yuan as its unit of payment, dealing a major blow to the power of the Dollar. In Beijing on May 24, Russian Prime Minister Mishustin noted that the share of payments in the national currency between the two countries rose from one-fourth in 2021 to two-thirds last year.
According to the latest data from the Bank of Russia, the share of the Yuan in international trade rose from 4% in January 2022 to 23% by the end of 2022.
It replaced the Dollar as the most traded currency in Russia in terms of monthly trading volume for the first time in February 2023, according to a report by Bloomberg. The gap is widening in favor of the Yuan.
A similar development is taking place in Brazil, the great power of the BRICS that is back on the scene. During Lula’s visit to Beijing, Brazil, and China have already implemented a plan to trade with the Yuan. Trade between the two countries amounts to 150 billion Dollars!
Argentina, the second largest economy in South America, has also decided to pay for goods imported from China in Yuan instead of US Dollars from the beginning of 2023.
In April 2023, Bolivian President Luis Arce announced that the government was actively considering the adoption of the Chinese Yuan as an alternative to the US Dollar in international trade.
On March 23, 2022, Putin signed an order prohibiting “unfriendly” countries (including the EU, the US, and Japan) from purchasing Russian gas in any currency other than the Russian Ruble, following sanctions imposed following Russia’s invasion of Ukraine in 2022.
In August 2022, Türkiye and Russia agreed to use the Ruble in the natural gas trade. Türkiye is also developing trade with Iran in national currencies.
At the Samarkand Summit of the Shanghai Cooperation Organization on September 16, 2022, leaders agreed to take steps to increase the use of national currencies in trade between their countries.
The use of third currencies is spreading
The second tool to get rid of the Dollar is the widespread use of a currency other than the Dollar. The Chinese Yuan, the Indian Rupee, and the Russian Ruble stand out in this field.
Countries prefer whichever currency is in their interest. Bangladesh, for example, has agreed to pay its debts to Russia in Chinese Yuan. India has offered to use its own currency as an alternative in trade with countries with Dollar shortages, especially Sri Lanka, Bangladesh, and Egypt.
Saudi Arabia started to accept the Yuan in the oil trade. Other Gulf States are also discussing using the Yuan for oil trade. Previously, oil was sold only in US Dollars. However, now trade in Yuan is a rising trend. In August 2018, Venezuela announced that it would price its oil in Euros, Yuan, Rubles, and other currencies.
On November 24, 2022, Ghana’s Vice President Mahamudu Bawumia stated that they were working to buy oil with gold, saying, “The exchange of gold for oil represents a major structural change.”
Reserves are no longer held in Dollars
The percentage of reserves held in Dollars is steadily declining. According to Bloomberg, the percentage of Dollars held in foreign exchange reserves fell from 73% in 2001 to 58% in 2023. (1)
There are stages to the demise of the Dollar as a reserve currency. The first major collapse began with the 2008 crisis. It accelerates in 2016. The fastest collapse came with the Ukraine war.
In 2022 alone, the rate of decline is 8%. According to Bloomberg’s experts’ calculations, the rate of decline in the Dollar’s share of reserves has increased 10-fold in the last year.
The international creation of a new currency is accelerating
Meanwhile, efforts to create a new international currency to replace the Dollar are gaining momentum. The August summit of the BRICS will mark an important start to the creation of a new currency to facilitate trade among members. BRICS currently accounts for 41% of the world’s population and 31.5% of the world’s goods and services. New BRICS members are already lining up at the door.
In Latin America, a new single currency called “Sur (south)” has been adopted. The two giants of Latin America, Brazil, and Argentina, want to start using this currency in their bilateral trade to reduce their dependence on the Dollar.
The most important development that will bring down the Dollar will be the spread of digital national currencies.
China is leading the way in this field. There will be no need for banks the exchange digital national currencies developed on the basis of block-chain technology.
Weaponization of the Dollar destroys Dollar hegemony
In its conflicts with the oppressed world, the US uses its financial power to go rogue. It unilaterally confiscates the Dollar-denominated money of Russia and Afghanistan. It uses its financial system as a weapon to subjugate China and Russia. The weaponization of the Dollar erodes its status as an “internationally valid currency”. The US policy of turning the Dollar into a cudgel, which theoretically is supposed to function as a “universal good”, is destroying the Dollar’s throne.
The US administration’s unilateral actions and preferences regarding the Dollar are exacerbating the current Dollar crisis in the international market. The US raised interest rates eight times last year. This has led to high exchange rates around the world. Fareed Zakaria, A sharp spokesman for the American ruling classes, points out that the US itself is responsible for this decline in the use of the Dollar. (2)
As in an Anatolian saying popularized by our great writer Yaşar Kemal: “May your oppression increase so that you will soon perish!”
Footnotes:
2. https://www.washingtonpost.com/opinions/2023/03/17/america-foreign-policy-lacks-flexibility/