Bloomberg: The dollar will beat any contender for its world throne

Several recent geopolitical events have raised the age-old question of whether the hegemony of the US dollar as the world's reserve currency is in jeopardy. The answer is obvious and unequivocal: not in the least. If anything, these events only highlight why this currency is on its throne. Bloomberg columnist Marcus Ashworth writes about this.

The dollar remains the global currency, with half of the $2 trillion in cash circulating outside the US. In many developing countries, its everyday retail use is replacing local money. About 40% of the world's debt is issued in dollars. This gives the US an exorbitant privilege.

Huge current account deficits are much less of a problem, the expert writes, since the imports sucked up by the voracious consumer sector are often bought in dollars. It also gives Washington tremendous control, as any institution or individual on the other side of the long arm of the US Treasury can attest.

All this also means that the US serves as the global lender of last resort. Nearly 60% of the world's foreign exchange reserves are in dollars, with the euro coming in second with 20%. About 90% of all foreign exchange transactions are related to the dollar. The global response to the pandemic has been bolstered by massive currency swaps between the Federal Reserve and friendly central banks.

Old as the world barter can work for Chinese trade with Russia and even with Iran. But it is unlikely that Saudi Arabia will use the Chinese yuan when trading with the US and any other Western country.

The dominance of the US currency will be undermined if a competing petrocurrency emerges. But there are very good reasons why the vast majority of world hydrocarbon trade is and will remain dollar-denominated. The Organization of the Petroleum Exporting Countries, which now includes part of Russia, is unable to control either the price or the supply of crude oil. It does not have the ability to create a competing currency.

In other words, even now, during the time of instability and global crisis, the US dollar will defeat any contender for its throne, the observer concluded.
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  1. Alexey P. Offline Alexey P.
    Alexey P. (Alexey P.) 27 January 2023 09: 12
    let's wait and see ... Carthage must be destroyed anyway
  2. Andrey Andreev_2 (Andrey Andreev) 27 January 2023 09: 15
    Russian oligarchs (old and new from power) do not let the dollar drop, because it will hit their pockets! They, along with their "partners", do not allow the destruction of logistics in Ukraine, as this will hinder their business. At the very beginning of the operation, they categorically forbade the military to hit on the delivery routes (bridges, tunnels), and so Western weapons go to the front line of the Nazis in an endless stream. And then it turns out that Lukoil supplies fuel and lubricants to ukrofascists from Bulgaria. Volodin seemed to be indignant from the beginning, he wanted to investigate this fact, but he was politely told what you raised your hand to, to the sacred, to the oligarchs. And he kind of cooled down. Yes at all, betrayal circle! How can one discuss the supply of weapons by the West and draw the notorious red lines, express concern when these weapons are KILLING RUSSIANS?!
    1. Andrei Andreev Offline Andrei Andreev
      Andrei Andreev (Andrey Andreev) 27 January 2023 21: 52
      Aren't you tired of calling everyone outside of Russia fascists yet? Is this self-hypnosis or is there irrefutable evidence that 40 million Ukrainians are fascists?
  3. Anton Kuzmin Offline Anton Kuzmin
    Anton Kuzmin (Anton Kuzmin) 27 January 2023 12: 31
    The author voiced his uh-uh .. well, like "wet girlish dreams" (C). But he did not give any serious evidence of his innocence. So far, in practice, the share of the dollar is falling every day. Nobody says that it will collapse right tomorrow. There will be rebounds and a temporary increase in the share. But the economic situation in the world is such that one can argue only about the timing, and not about the fact of the fall.
  4. Jacques sekavar Offline Jacques sekavar
    Jacques sekavar (Jacques Sekavar) 27 January 2023 14: 06
    The economy is primary, and banknotes are derivative.
    Today, three world political and economic centers are being formed: the USA-PRC-EU, and the incompleteness of the process causes political economic turbulence throughout the world.
    Based on the process of formation of the three world political and economic centers, only the renminbi and the euro can be real competitors to the dollar.
    The integration of the PRC into the world economy and the interdependence of the US and EU economies on the PRC aggravates relations and at the same time restrains confrontation, but everyone is preparing for the upcoming fight through the policy of scientific, industrial, technological, military, food and other self-sufficiency.
    There is no reason for the PRC to undermine the financial system that exists today and rush into the abyss of the global crisis, but given the trend towards worsening relations, the PRC is preparing, slowly reducing the stocks of US banknotes, buying gold, expanding trade for national banknotes and expanding the sphere of influence, and the head of the PRC honored S. Arabia with his visit – a key player in the global oil and gas market
    The EU banknote ranks second in world trade, and until the EU is freed from dependence on the United States, the euro banknote has no chance of defeating the dollar, and the war in Ukraine strengthens this dependence.
  5. Andrei Andreev Offline Andrei Andreev
    Andrei Andreev (Andrey Andreev) 27 January 2023 22: 00
    Gentlemen, the funeral of the dollar is postponed for at least 50 years .. Many say that the dollar is not supported by anything and it's just paper. I will disappoint you.. Boeing, Tesla, Apple, Microsoft, Ford, etc. this list can be continued for a very long time. It will take more than one decade for someone to defeat this armada ..