Post-World War II, the UN, World Bank, IMF and WTO buttressed US hegemony through a unipolar, Dollar-dominated world. That makes the US dollar the most important global currency.
In fact, the greenback is still very much considered a safe-haven currency in spite of the fact that the country's federal debt ($31.2 trillion and rising) to GDP ratio is 121%. It is an anomaly that a country with an annual budget deficit of $1.2 trillion with annual spending of $6.1 trillion still has any credit at all.
But there’s no doubt that de-dollarization has already begun and gaining momentum in countries across Asia, Africa and South America. These countries are trying to untangle their dependence on the USD so as to insulate themselves from economic shocks including falling currency, high inflation and debt burden.
BRICS countries have been actively examining possibilities of creating an alternative international currency. On January 25, 2023, Russian Foreign Minister Sergey Lavrov said that Brazil, Russia, India, China, and South Africa – BRICS countries – will discuss creating a common currency at the BRICS Summit, set to take place in South Africa this August.
"Serious, self-respecting countries are well aware of what is at stake, see the incompetence of the 'masters' of the current international monetary and financial system, and want to create their own mechanisms to ensure sustainable development, which will be protected from outside dictates.
It is in this direction that the initiatives that have been voiced recently... about the need to think about creating our own currencies within the framework of BRICS", he had explained.
We all know that Russia had been ousted from Swift, the international payment system used by thousands of financial institutions. Simply put, the Dollar was weaponized in order to hit the country's banking network and its access to funds via Swift, which is pivotal for the smooth transaction of money worldwide.
But it is not only Russia that was driven to de-dollarization. Brazil, China, India, Iran, Libya, North Korea, South Africa, Syria and Venezuela are all interested in de-dollarization, even if for different reasons. Taking the argument to a global level allows the consideration that the Ukraine conflict has indeed accelerated the movement away from the Dollar and prepared the way for the creation of an alternative or alternatives to the US currency.
For sure, we can expect to see the creation of a bipolar financial world where the USD is confronted with another system of exchange. Meaning, Australia, Canada, the EU, Israel, New Zealand and maybe a couple of other countries constitute along with the US one bloc that is separate from the rest of the world.
Of course, the US Dollar is unlikely to collapse any time soon as the major global currency – but I reiterate here again, the process of de-dollarization is already ongoing.
Many countries are aware that the undue hold of the American Dollar is making them powerless in exercising control over the macroeconomic processes. And the unbridled flow of Dollars is distorting many economies, sullying stock markets and national debts are making countries poorer.
Sure, the entire process will be gradual – but one cannot rule out black swan events and a faster rate of de-dollarization. What is clear is that we are in the midst of tectonic global geopolitical shifts that will have deep and lasting effects on international finance.
In any case, I am sure the world sans the US and its vassals, will, no doubt, welcome de-dollarization. It's part of the process of the remaking of a new world order.
