When the euro and yuan will rid the world of the US dollar's hegemony


In the past "coronavirus" year, quite alarming bells sounded in relation to the US dollar. The share of the dollar in international transfers, according to SWIFT data, decreased to 37,64% against 37,82% for the euro. That is, the American currency at the end of 2020 lost its position to the European one. The share of the Chinese yuan fell to a “miserable” 1,66%, but at the same time, a number of experts are making a long-term bet on it. What could all this be connected with?


It should be noted that the dollar is still the main funding currency. It, according to the Bank for International Settlements, accounts for almost half of all world trade and 61% of all foreign exchange reserves. However, there are also negative tendencies that are gradually shaking his seemingly unshakable positions.

First of all, it is the continuous growth of the US government debt. Its size is truly colossal; today it has already exceeded $ 28 trillion. The sharp increase in the national debt was due to several factors at once. Firstly, already ex-President Donald Trump tried to "fire up" the American the economy and has achieved significant success in this. Under him, GDP growth in the United States was 3%. They had to pay for this, among other things, by increasing the national debt. Secondly, the further increase in borrowing was caused by the coronavirus pandemic, which in 2020 crossed out all the previous achievements of the Republican. The need to allocate colossal funds to support the population and business led to the deficit of the US federal budget to GDP, which amounted to 14,9%. These are the worst figures since the Second World War.

As of February 2021, this figure was already 16,2%, and now this figure will be even higher, as newly elected President Joe Biden intends to inject an additional $ 1,9 trillion into the economy as an emergency measure to restore it. The natural consequence of such a financial policy inflation will rise. The index of inflationary expectations of growth in prices for goods and services for the next year is 3,3%, and for a five-year period - 2,7%. Analysts point out that an almost twofold increase in the yield of US Treasury bonds, which is now 1,3% per annum, can serve as a harbinger of an increase in inflation. A direct consequence of this was that professional investors began to withdraw from risky assets and shift them into US government bonds.

The American national debt is in many ways a unique system. Its total volume is about $ 23 trillion. At the same time, international investors account for a package of long-term securities, estimated at 11,6 trillion, and short-term securities in the amount of $ 1,2 trillion. Everything else is securities that circulate within the United States itself. That is, almost half of their colossal national debt is domestic borrowing. Even without outside investors, the United States will be able to hold out by self-subsidizing, printing new dollars and returning them to the financial system through debt obligations. If something happens, the American economy will be able to avoid a complete collapse.

However, the role of foreign investment, which accounts for more than half of the US national debt, still cannot be underestimated. A very negative trend for Washington is being observed here. On the one hand, many other states stopped building up their portfolios in American bonds, and some, like Russia or China, began to significantly reduce it. This is largely due to the policy of ex-President Donald Trump, who, for the sake of America, was ready to impose sanctions even against traditional allies. On the other hand, a stable “anti-dollar opposition” has emerged in recent years.

For example, the European Union is deeply thinking that it is no longer possible to rely on the United States as a reliable partner that always stands on their side. Brussels and Berlin are trying to pursue more and more independent policies. In particular, Germany is fundamentally not inferior to the United States on the Nord Stream 2 issue, avoiding surrender under external pressure and insisting on a mutually beneficial compromise. Political subjectivity requires real economic sovereignty, so an objective increase in competition between Americans and Europeans is inevitable, which is reflected in the dynamics of the use of their currencies in international settlements.

It is also worth mentioning the growing role of China. So far, the share of the yuan in transfers is some 1,66%, seriously inferior to the euro, dollar, pound, Japanese yen and Canadian dollar, but this is only “for now”. Recall that in 2010, the Chinese currency was in 35th place in the world in terms of popularity in international settlements, and in 2014 it became the 6th. The yuan is officially included in the IMF's list of reserve world currencies. Taking into account the real role of the PRC in the international economy as the main exporter and the second importer in terms of volume, one should expect further growth in the popularity of its national currency. China was the first to cope with the consequences of the coronavirus pandemic and is successfully competing with the United States itself.

In the future, many analysts expect professional investors to "turn to the East" and increase the role of the yuan as an alternative to the dollar as the world currency. Together, the "European" and the "Chinese" can, if not completely overthrow the "American" from his pedestal, then actually move him on it, forcing him to make a lot of room.
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  1. Bulanov Offline Bulanov
    Bulanov (Vladimir) 2 March 2021 13: 14
    0
    If the United States prints trillions of dollars, then why does the dollar rate against the ruble not fall? Do rubles also print in trillions?
    1. 123 Offline 123
      123 (123) 2 March 2021 14: 25
      +1
      If the United States prints trillions of dollars, then why does the dollar rate against the ruble not fall? Do rubles also print in trillions?

      Interesting question yes

      It is difficult to compare, the "style" of presenting information is different for everyone. And I could have made a mistake somewhere, I recommend rechecking the numbers.

      For example in the USA:
      The volume of money supply (M2) in circulation in the United States increased by 3 billion dollars (+ 978,2%.). Currencies in circulation grew by $ 26,7 million (+ 297,1%)
      https://www.federalreserve.gov/releases/h6/current/default.htm

      If we look at the data of the Bank of Russia:
      The volume of money supply increased by 2 billion rubles + 529,5%. Cash in circulation added 13,5 billion rubles (+ 124,8%).
      https://www.cbr.ru/statistics/ms/

      For comparison, China:
      The money supply (M) grew by + 10% to 218,68 trillion. yuan, and the volume of cash + 8,6% to 62,56 trillion. yuan.
      http://www.gov.cn/xinwen/2021-01/12/content_5579316.htm

      In general, everyone prints money. The mechanism of their introduction into circulation is different. The American national debt is becoming less popular, inflation cannot be spread all over the globe. The Fed doesn't bother with conventions and just prints as much as it wants.
      Not all trillions of dollars remain in circulation, most are "sterilized" in the stock markets or run through the "circulatory" financial system and again ends up in the Fed. But all other earthlings cannot do this, everyone understands that the Fed is releasing dummies, and there is nowhere to go, otherwise the collapse of the world system. Well, they are slowly preparing for it. And the exchange rate itself, in my opinion, has long been determined not by market mechanisms and does not reflect the state of the country's economy. For example, take a look at the closest neighbors, the Ukrainian economy has been in a tailspin for how many years, and the course is magically being held.
      In general, there is something to think about here. what
    2. Captain stoner Offline Captain stoner
      Captain stoner (Captain Stoner) 10 March 2021 10: 53
      0
      Rubles are also printed in trillions. I won't lie - I don't remember exactly how many trillions of rubles are dear Russians on bank deposits? on brokerage accounts? in mutual funds? in trust with banks and brokerage houses? in federal loan bonds? And this is "extra" money, not intended for current consumption.

      Why doesn't the rate fall? The government needs to fill the budget, especially since this year there will be elections, and the tsar and the boyars must distribute gingerbread to the "people" in the form of handouts, indexation of pensions, and so on. And the Russian economy remains export-oriented and developing, therefore (according to my forecasts) I do not expect less than 73 rubles per $ 1 until the summer. At the same time, the Central Bank of Russia to fill the budget from time to time simply "drops" the ruble, and it breaks through the next bottom with a crash.
  2. Alexzn Offline Alexzn
    Alexzn (Alexander) 2 March 2021 13: 21
    -2
    When the euro and yuan will rid the world of the US dollar's hegemony

    When this happens, we will recall the good old days with the dollar with nostalgia.
  3. Jacques sekavar Offline Jacques sekavar
    Jacques sekavar (Jacques Sekavar) 2 March 2021 14: 24
    +1
    When the euro and yuan will rid the world of the US dollar's hegemony

    Never, because the United States is one of the largest states in the world in terms of territory and natural resources, population and sales market, industrial and scientific potential, agricultural and food base of people, and much more.
    The decrease in settlements in dollars to 37,64% versus 37,82% for the euro does not indicate the decline of the United States and is associated with an increase in settlements in the eurozone, the trade turnover of the eurozone with the former colonial possessions and the rest of the world.
    All this against the background of imbalances in the structure of GDP and a decrease in the US share in world GDP, the growth of the political and economic potential of the PRC, a double circulation program and global initiatives - the NSP, SCO, EAEU, VPTPP, RCEP.
    All this is supported by obvious achievements in eliminating poverty, building the foundations of Socialism and a middle-income society, industrial potential, monetary policy, banking and financial infrastructure, the creation of alternative exchanges and rating agencies, and all other infrastructure, which will inevitably bring Renminbi up to the level of economic potential.
    This attracts all countries of the world, regardless of their size and economic potential, state structure and form of government, which are offered an equal and fair role in all these initiatives and projects.
    1. 123 Offline 123
      123 (123) 2 March 2021 16: 35
      +1
      Never, because the United States is one of the largest states in the world in terms of territory and natural resources, population and sales market, industrial and scientific potential, agricultural and food base of people, and much more.

      By the size of the territory of the United States (4), Russia has the first place.
      In terms of natural resources of the United States (2), Russia has the first place.
      By population of the United States (3), China has the first place
      In terms of US consumption (1), but living beyond their means, everyone is in debt. And the only thing that keeps it going is the dollar financial system.
      In terms of industrial production in the United States (2), China is in first place.
      In the development of science in the United States (2), China is in first place.
      For agriculture in the United States (3), China is in first place.
      In terms of the "fodder base of people" (although it is not clear what this means) and in many other ways, the United States is not a leader.
      And the EU is not taken into account in the calculations, perhaps this is not entirely correct.
      So the United States does not rightfully occupy a place in the financial system. The hegemony of the dollar is dying out.

      The decrease in settlements in dollars to 37,64% versus 37,82% for the euro does not indicate the decline of the United States and is associated with an increase in settlements in the eurozone, the trade turnover of the eurozone with the former colonial possessions and the rest of the world.

      This is due to the transition of other countries to settlements in their own currencies. And no colonial possessions have anything to do with it.

      All this against the background of imbalances in the structure of GDP and a decrease in the US share in world GDP, the growth of the political and economic potential of the PRC, a double circulation program and global initiatives - the NSP, SCO, EAEU, VPTPP, RCEP.

      And how does this help preserve the US role?

      All this is supported by obvious achievements in the elimination of poverty, building the foundations of Socialism and a middle-income society, industrial potential, monetary policy, banking and financial infrastructure, the creation of alternative exchanges and rating agencies, and all other infrastructure, which will inevitably pull up to the level of economic potential.
      This attracts all countries of the world, regardless of their size and economic potential, state structure and form of government, which are offered an equal and fair role in all these initiatives and projects.

      What does this have to do with the United States? "Renminbi" is this a state in the United States? smile What kind of socialism, justice and equality are we talking about? Is this exactly about the United States?
      1. Jacques sekavar Offline Jacques sekavar
        Jacques sekavar (Jacques Sekavar) 2 March 2021 19: 21
        +2
        The economic potential of the PRC makes it possible to trade in banknotes of any state, because the very fact of trade creates employment, increases GDP, expands the sphere of influence and attraction of poor states that do not have the ability or desire to conduct payments in dollars or euros, but have certain natural resources that and are bought by the Chinese for their own "candy wrappers".
        Chinese initiatives and global projects such as the NShP, SCO, EAEU, VPTTP, RCEP are aimed at global integration and economic growth not only of China, but of all the parties to these agreements without limiting or setting any conditions for democratization, state structure, governance system, etc. P. as is often and selectively practiced by the democracies of the West, and any restrictions in one way or another hinder trade relations and the growth of the world economy.
        The economic potential of the PRC is greater than the US and EU combined, and any change is like communicating vessels - the economy of the PRC is growing, the share of the United States is decreasing, and vice versa.
        Yuan means money, whatever, and Renminbi is the name of Chinese money. In the PRC, there are other units of measurement, a calendar and many other things unusual for Europeans, but the growth of the PRC's economic influence in the world is also expanding the use of the Chinese language, names, banknotes.
        Socialism is a transitional stage in the transition from capitalism to Communism and, as a transitional one, has signs of different social systems. The building of socialism in the PRC is based on the fundamental Leninist provisions of the New Economic Policy in relation to the time and specific conditions of China, and what is their essence and difference from the economic policy of the state structure of the Russian Federation and the management system, if you wish, you can familiarize yourself with the primary sources, and not the speculations of political fighters and agitprom.
        1. 123 Offline 123
          123 (123) 2 March 2021 19: 31
          -1
          Thank you for sharing your opinion on the development prospects of China. hi
          Yuan, I will probably continue to call yuan, so in any case, it is easier to pronounce.
          What's just with the dollar? Why will he remain "hegemon"? The reasoning is not clear request
          1. Jacques sekavar Offline Jacques sekavar
            Jacques sekavar (Jacques Sekavar) 2 March 2021 20: 25
            +2
            Because the modern economy of the PRC is rooted in the existing world order built by the United States and does not set the task of changing it, world hegemony, the collapse of the dollar, but builds an alternative not relying too much on the United States and there are many reasons for that - the United States openly calls the PRC enemy number 1 and makes great efforts to discredit the Communist Party, undermine the economy, stir up conflicts with neighboring states, form an anti-PRC military-political bloc, interethnic disagreements and provoke social unrest - the whole set of tools for fighting competitors.
        2. Alexzn Offline Alexzn
          Alexzn (Alexander) 3 March 2021 13: 23
          0
          The building of socialism in the PRC is based on the fundamental Leninist provisions of the New Economic Policy in relation to the time and specific conditions of China, and what is their essence and difference from the economic policy of the state structure of the Russian Federation and the management system, if you wish, you can familiarize yourself with the primary sources

          Only a very naive person can regard what is happening in the PRC as the building of socialism. A completely naive (or rather poorly educated) person might think that Lenin has something to do with what is happening in China, where this name was long forgotten and the NEP was the brainchild of Uncle Dan.
          There are basic parameters (criteria) of socio-economic formations, today in any country in Europe there is a hundred times more socialism than in China.