### Summary
Global dedollarization efforts are facing a credibility challenge as currencies such as the Russian ruble, Chinese yuan, and Argentine peso suffer significant declines, highlighting the perceived stability and reliability of the US dollar.
### Facts
- 📉 The Chinese yuan, Russian ruble, and Argentine peso have all experienced significant declines in value recently, causing their respective central banks to take measures to stabilize their currencies.
- 🌍 These declines come at a time when countries like Russia and China are actively trying to reduce their reliance on the US dollar in trade and investments, a trend known as dedollarization.
- 💰 However, the recent exchange-rate turmoil and instability of these currencies against the US dollar could undermine the dedollarization efforts and raise questions about the feasibility of finding a common currency to combat the dominance of the dollar.
- 💱 Dedollarization efforts in Argentina have been limited, with some even advocating for adopting the US dollar as the local currency to combat hyperinflation.
- 🌎 While the share of the US dollar in global reserves has decreased over the years, it still makes up nearly 60% of the world's foreign-exchange holdings, highlighting its long-standing dominance as the world's reserve currency.
Note: The text provided is truncated, so the summary and bullet points may not capture the complete context of the original text.
### Summary
The strength of the U.S. dollar against other currencies, such as the Nigerian naira and Zimbabwean dollar, has made it difficult for local consumers to buy foreign goods, leading to economic troubles in these countries.
### Facts
- 💰 The strength of the U.S. dollar has pushed the price of foreign goods beyond the reach of local consumers in Nigeria.
- 💸 Many developing countries are unhappy with the dominance of the U.S. dollar in the global financial system.
- 🌍 The BRICS bloc, which includes Brazil, Russia, India, China, and South Africa, will discuss their grievances against the dollar at a meeting in Johannesburg, South Africa.
- 💵 The alternatives to the U.S. dollar, such as the euro and China's yuan, have not been able to rival its dominance.
- 🇦🇷 In Argentina, a presidential candidate is calling for the U.S. dollar to replace the country's troubled peso.
- 💼 In Zimbabwe, the U.S. dollar is widely used in transactions due to the instability of the Zimbabwean dollar.
- 💸 Vendors in Zimbabwe are even mending damaged U.S. dollar bills for a small fee due to a shortage.
### Credit
By: Dionne Searcey and Constant Méheut
Source: The Washington Post
### Summary
The recent downgrade of US government debt by Fitch highlights concerns over political brinkmanship, lack of fiscal reform, and rising debt levels. This time, the downgrade may have more significant repercussions due to factors such as broken supply chains, shifting global perceptions of the dollar, and the rise of new non-US dominated geopolitical organizations.
### Facts
- Fitch downgraded US government debt from Triple A to AA+ due to concerns over US fiscal governance standards and the unlikelihood of serious fiscal reform.
- The markets have historically forgiven the US for higher levels of fiscal mismanagement compared to other countries, but the question remains if this can continue indefinitely.
- The US debt-GDP ratio is well above the median for AAA and AA-rated countries, and it is projected to worsen in the coming years.
- Factors such as broken supply chains, inflation, and rising interest rates may lead to a US economic slowdown or recession.
- Many countries are shifting away from holding large dollar reserves and seeking alternatives to the dollar, impacting the US's ability to manage its fiscal situation.
- Geopolitical power is shifting towards new organizations that are not US-dominated, such as BRICS, which could lead to a decline in US political and economic influence.
- The ongoing Ukraine war and the US's financial involvement in it may raise questions from voters regarding the benefits for the US.
- The assumption that the US can print money endlessly to solve economic problems may be questioned as the world seeks new geopolitical anchors and becomes less willing to hold assets in dollars.
### :heavy_check_mark: Bulletpoints
- 📉 Fitch downgraded US government debt from AAA to AA+ due to concerns over fiscal governance standards and lack of serious fiscal reform.
- 🌍 Factors such as broken supply chains, inflation, and rising interest rates may lead to a US economic slowdown or recession.
- 💰 Many countries are shifting away from holding large dollar reserves, seeking alternatives to the dollar, and questioning the benefits of US financial involvement.
- 🌐 Geopolitical power is moving towards non-US dominated organizations, impacting US influence.
- 🛡️ The ongoing Ukraine war raises questions about the US's involvement and its financial impact.
- 💵 The assumption that the US can continually print money to solve economic problems may be questioned as the world seeks new geopolitical anchors.
A group of developing countries known as BRICS, including Brazil, Russia, India, China, and South Africa, is determined to challenge the dominance of the US dollar in global finance and trade through the process of de-dollarization, which they believe is irreversible and gaining pace. The shift away from dollar dominance is driven by recent geopolitical tensions and the desire to have more choices in global financial interactions, rather than being anti-West or anti-dollar. However, experts believe that the dollar will remain the dominant global currency for the foreseeable future.
Economists discuss the state of the U.S. economy, effects of Bidenomics, inflation outlook, and more.
The strong U.S. economic growth and potential rate hikes by the Federal Reserve could pose global risks, potentially leading to a significant tightening of global financial conditions and affecting emerging markets and the rest of the world.
The U.S. is currently experiencing a prolonged high inflation cycle that is causing significant damage to the purchasing power of the currency, and the recent lower inflation rate is misleading as it ignores the accumulated harm; in order to combat this cycle, the Federal Reserve needs to raise interest rates higher than the inflation rate and reverse its bond purchases.
The biggest risk of de-dollarization is that the US could lose a key tool it's used to fight past economic crises, according to JPMorgan.
Europe's struggle with inflation and economic growth contrasts with the United States, as the European Central Bank's aggressive tightening risks pushing the euro zone into a downturn, with the manufacturing and services sectors already showing signs of contraction.
The rising U.S. dollar is causing concern among foreign officials and investors, but it remains uncertain if anything can be done to stop its rise or if it will negatively impact U.S. equities.
The US Treasury Secretary, Janet Yellen, expressed concerns about China's economic challenges and its potential impact on the global economy, while also noting that China has the policy tools to address these challenges.
The US Dollar performed strongly against major currencies, with the Euro experiencing its 8th consecutive weekly loss and the Chinese Yuan performing poorly, while global market sentiment was negative and stock markets weakened. In the coming week, market focus will be on the US inflation report, UK employment and GDP data, Australian employment data, and the ECB rate decision.
The US dollar's dominance as the world's reserve currency is at risk due to growing debt in the US, according to economist Barry Eichengreen, highlighting the importance of controlling debt to maintain the dollar's global role.
The resilient growth of the US economy is fueling a rebound in the dollar and causing bearish investors to rethink their positions, although the currency's rally may face challenges from upcoming data and the Federal Reserve's meeting this month.
Developing countries, including the BRICS alliance, are looking to end reliance on the US dollar due to increasing debt and the threat of inflation, which could lead to a decline in the dollar's value and a rise in prices. Economist Peter Schiff warns of a tragic ending for the US dollar if other countries continue to move away from it.
The BRICS bloc, including countries like India, China, and Russia, is slowly reducing its dependency on the US dollar and using their local currencies for trade, which could potentially weaken the US dollar's position as the dominant global currency.
The US economy's growing debt and slow growth may lead to a "long, slow grind," while regional blocs in Asia and Europe pose a threat to the dollar's status as the global currency.
The U.S. dollar is gaining strength, causing concerns about interest rates and negatively impacting the S&P 500.
The U.S. economy's strength poses a risk to the rest of the world, leading to higher interest rates and a stronger dollar, while global trade growth declines and inflation persists, creating challenges for emerging markets and vulnerable countries facing rising debt costs.
The dollar’s status as the world's reserve currency is at risk unless the US controls its spending, warns bond market expert Jeffrey Gundlach. High interest rates and the growing US debt could lead to out-of-control inflation and jeopardize the future of the US dollar.
China may continue to cut its US debt holdings amid worries over shrinking liquidity and safety risks, as well as efforts to diversify foreign exchange reserves. China has reduced its US debt holdings for five consecutive months, while Japan and the UK have increased theirs. Experts believe China's actions are driven by the poor performance of US Treasury bonds, the need for more sophisticated foreign exchange reserve management, and concerns over geopolitical risks. The abuse of the dollar's hegemony status by the US has also damaged global trust in the greenback and contributed to a trend of de-dollarization.