How Will “Global Reserve Currency” Affect Dollars Economy?
Vladimir Putin, the president of Russia, declared the organization's plan to create a new global reserve currency during the 14th BRICS meeting in June. BRICS is a global alliance made up of Brazil, Russia, India, China, and South Africa.
The move is probably made to challenge the US dollar's dominance of the global currency market, a situation that has existed for almost 80 years. Foreign Minister Sergei Lavrov has said that the dollar's days as the dominant currency are limited. Russian authorities have made no secret of their mistrust of this status quo.
He recently visited Ethiopia and remarked, "Honestly speaking, the reliance on the dollar as the tool supporting the world economy is not very promising.
"More and more nations are switching to utilizing alternative currencies, switching to use national currencies, and this trend will be gaining steam," he continued.
Even while it still controls most currency reserves and exchanges, the dollar is losing influence. In terms of total amount of exports and imports, the U.S. behind the euro zone and China in international commerce, according to IMF data.
Even if none now looks prepared to dethrone the dollar from its throne, it seems like a good idea to analyze the top alternatives.
When it comes to the dollar, all is not well. There are several causes for both its ascent and decline, just as there are numerous causes for both. Some of them are:
- The FED is printing too much money. The value of the currency decreases when the government issues more money than normal since more money is being spent on the same items, therefore boosting their demand. In addition, it causes inflation.
- Trade disputes with powerful economies like China. The US has already incurred substantial losses because of the trade war, and it is not changing soon. In 2019, the trade war affected more than $460 billion worth of goods and increased consumer expenses by $57 billion.
- Changes being made to the currency used as the reserve. Many nations have made an effort to unseat the US Dollar as the world's reserve currency, with China and Russia leading the charge. China has long been lowering its reliance on the US dollar, and more recently, both China and Russia have been increasing their gold holdings.
Overall, it appears like the US Dollar is now starting to suffer. In addition to facing enormous hurdles in the near term from probable inflation and the trade war, the US may also lose its position as the world's reserve currency.
Due to their debt and economic policies, if that were to occur, there would be such a massive decline in trust in the US Dollar that the Dollar might very well drop to previously unheard-of levels.