Why taking down the US dollar is easier said than done - part one

From the moment the US weaponised the dollar to impose near-unprecedented financial sanctions on Russia after its invasion of Ukraine it was obvious that other countries, most notably China, would try to reduce their own vulnerability to similar sanctions.

A recent spate of agreements that China has struck to use its currency directly in trade deals, and similar efforts by less-developed economies to substitute their currencies for transactions that have more commonly been executed with dollars, have intensified discussion about the end of the US dollar’s dominance.

Since the invasion of Ukraine and their seizure of about half of Russia’s $US640 billion ($944 billion) of dollar-denominated foreign exchange reserves, China and Russia have been conducting most – about two-thirds – of their significantly increased trade in their own currencies. The yuan is now the most traded currency in Russia and Russia also now holds about a third of the world’s yuan-denominated foreign exchange reserves.

China has struck a deal with Saudi Arabia to pay for oil purchases in yuan – the first time in nearly half a century that the Saudis have been prepared to accept anything but the dollar in exchange for their oil. It is seeking similar deals with other Middle Eastern oil producers.

Last week, China’s China National Offshore Oil Company and France’s TotalEnergies struck the first deal for a LNG cargo denominated in yuan.

Also last week, China and Brazil announced they would use their own currencies to settle trade and that Brazil would connect to China’s fledgling international payment system, its alternative to the US-dominated SWIFT international payments and messaging system.

India is trying to do more direct deals that reduce its exposure to the dollar. And in Latin America and South-East Asia, countries are also trying to circumvent the use of the dollar by doing more deals in their own currencies.

There’s even been talk of the creation of a “BRICs” (Brazil, Russia, China and India) reserve currency, perhaps backed by a basket of commodities.

The sudden surge in interest in what has been a perennial topic, the erosion of the dollar’s status as the world’s reserve currency and the global hegemony that confers, and China’s central role in most of the de-dollarisation that is occurring, has led some to believe that the end of the dollar’s post-war dominance is within sight.

While it is likely that, as has been the case since the turn of the century, the pervasiveness of the dollar in global trade and financial transactions will continue to wane, it is improbable that the end of dollar dominance will occur any time soon.That dominance is built on a number of critical foundations that no other economy has. The US runs large trade deficits and therefore creates more dollars than its domestic economy requires, it has very deep and liquid markets to absorb the savings of those countries with big trade surpluses, the dollar floats freely with very limited capital controls and it has a legal system that the rest of the world generally trusts.

Anonymous 

Why taking down the US dollar is easier said than done - part Two

While China is seen as the major threat to the continued dominance of the dollar, it has none of those things and is most unlikely to change its economic model to run large trade deficits to absorb the rest of the world’s savings, or completely liberalise its financial markets, or abandon its managed exchange rate policy or its capital controls, or create a transparent and trusted judicial system.
That’s probably why, even though the dollar’s share of global foreign exchange has fallen from about 72 per cent at the turn of the century to about 59 per cent, China’s currency accounts for just under 3 per cent of those reserves.

Only about 2 per cent of global trade is conducted in yuan/renminbi against more than 40 per cent for the dollar. The dollar dominates global foreign exchange transactions with a share of almost 90 per cent and about two-thirds of all global securities issuance is in dollars.

The reality is that there is no conventional alternative to the dollar as the world’s reserve currency and, while China might have ambitions to chip away at that dominance, it is inconceivable that the Communist Party would surrender the tight control of its financial system, economy and even society that would be the price of a real tilt at grabbing that status.

Europe (about 20 per cent of foreign exchange reserves) might once have held ambitions for the euro but the disparate and at times dysfunctional nature of its individual economies and the nature of its trade policies – historically the European Union has run significant trade surpluses – has worked against it.

The trade issue is a fundamental one. While the dollar’s dominance benefits the US financial sector and enables the US government (and America more broadly) to borrow more cheaply than it might otherwise be able to do, it makes US non-financial businesses less competitive and has wiped out traditional jobs as they have shifted to developing economies such as China and India.

The reserve status is therefore both an “exorbitant privilege” and an increasingly exorbitant burden because running persistent large trade deficits – and America is probably the only economy and financial system that could absorb such a large share of the world’s trade surpluses – means increasing trade and fiscal deficits and debt and the winnowing out of much of the country’s less sophisticated elements of its industrial base.

It is conceivable that, decades down the track, the world’s trade will have more of a multipolar appearance to it as various blocs develop trade in their own currencies. It is also conceivable that regional or international digital currencies, backed by gold and other assets with low volatility, might emerge.

It is difficult, however, to see anything emerging that ticks all the prerequisites required to either displace the dollar as the world’s reserve currency or be a genuine alternative. If it did, it would require a dramatic, traumatic and probably quite destructive reconstruction of the global economy and trade.

Anonymous

Singapore is going to be an Angmoh tua kee country

SINGAPORE: A large majority of Singapore-born citizens believe that an English test should be part of the country's citizenship application process, according to a CNA poll.

About 80 per cent of the 500 respondents were in favour of the test, following a suggestion in Parliament last month that has sparked spirited public discussions.  CNA

80% of 500 respondents wanted English test for citizenship application. Who are these 500?  Are they representative of the Singapore population? Presumably, since the poll was conducted by CNA and in English, the respondents are all English educated.

I asked 100 ah peks and ah sohs in the kopitiams and markets and 100% said no to English as a requirement. So how? Are the ah peks and ah sohs representatives of the Singapore population? 

Can the Chinese media conduct a similar poll and see what kind of result would it get? 

Just less than 40 years ago, China was still a very poor and underdeveloped country and many Asean countries looked down on China and the Chinese language was even banned in some Asean countries. Today, Asean countries are still developing countries, but China is already a super power, the number two economic power and going to be number one. The Chinese language is going to be one of the most important language. Some Asean developing mentality and mindset still cannot see how far they have been left behind by China and still think so highly of themselves and still thinking China and Chinese are below them. What simpleton!

The China Space Station is using Chinese and foreign astronauts would have to learn Chinese. And here we have simpletons still living in the 20th Century and thinking the world has not changed, and wanting English as a must language to be a citizen? Some even have the same mindset as those in Hong Kong, wanting Singapore to be like a British colony, speak English, the language of the colonial masters and be very proud of it. By the way, the colonial masters are now heading to oblivion. They are being wiped out from the continent of Africa.

It is ok for India to stick to English as they did not have a common language to communicate with each other. Singapore chose to be a multi lingua society to capitalise on our ability to speak more languages. In the region, Malay is equally important to communicate with our neighbours. English is convenient but must not be raised to a status to determine citizenship. 

PS. Italy banning the use of English in their country while Singapore is so proud to make a non native language a must to be a citizen.  What is the meaning of pride of one's own language and culture?

EU country’s ruling party fights ‘anglomania’

The Italian government is considering a ban on the use of foreign words in official communication.
A group of legislators from the ruling Brothers of Italy party has proposed banning the use of foreign words and terms in Italian public administration, schools, and universities.

Pitching India's democracy against China's communism

India is following the tactics of the Anglo Saxon Whites. Keep Bhutan and Kashmir poor and it will be easier to control them. And keep neighbours poor as well, so that India can be seen as better off. Just look at Sri Lanka and Bangladesh as examples. And India would certainly not like Pakistan to be better. But China crashed the Indian party, racing so far ahead that the Indians are extremely jealous and vindictive. They refused to joing the BRI and RCEP when given the chance. Well, let us see.

On the other hand, China's policy is to help neighbours and other countries get rich with infrastructure developments, so that they grow and progress and in the process China can do more trade with them under a win win situation. The BRI was conceived for that purpose, and faced immediate demonisation and condemnation, highlighting its ills, debt traps and trying to sabotage its implementation, using terrorism to create problems particularly across Central Asia.

The USA and the West had used brainwashing techniques to demonise communism as backward and not progressive and can never lift its citizens out of poverty compared to democracy for decades. They created wars to destroy communism, in Vietnam, the Korean Peninsula, and managed to succeed in Europe, with the Soviet Union and East Germany falling apart. Well, today, that has been proven a myth and a lie.

But they were so confident of themselves that they took their eyes off China, thinking that China, like every other communist country, can never overtake them. Now they have seen what is before them and what others have also seen in fueling China's rise. Does the changing world not aware of what is going on? Even the Africans, dubbed the 'Dark Continent' saw the benefits and are now following the right path.

And democracy, the system itself, is breaking up. Many democratic countries are actually now actually more autocratic than democratic in name only. 

 

 Anonymous 

The warmongers are the real Axis of Evil

And who is the number three evil warmonger making up the real 'Axis of Evil?' The third member of AUKUS of course. Set up to make this region the next theatre of conflict, after the Middle East and Europe, its purpose has been defined clear as daylight, and that is to counter China.

Iran, Iraq, Libya, Syria, Saudi Arabia, Yemen and Palestine were the main players during the Middle East turmoil, with Israel the catalyst being inserted there for the purpose of destablising the region by the Warmonger in Chief. Now Israel's position is losing relevance for the Warmonger in Chief, and is facing chaos for not condemning Russia. This is hardly surprising.

In Europe, the conflict in Ukraine was created by the Warmonger in Chief, using Russia as the scapegoat, with Little Britain the main instigator and Nato the cheerleader from behind that started the ball rolling first, by planting the idea of a move to allow Ukraine to join Nato, which is the Red Line that Russia would not allow Ukraine to cross.

Now in East Asia, the Warmonger in Chief already roped in Australia and Japan to spearhead the confrontation with China, using Taiwan as the scapegoat. The Philippines' attempt to realign its foreign policy obviously met with very serious threats, such that Marcos Jr had to backtrack and bow to the demands of the Warmonger in Chief, even allowing them to have four more bases in the Philippines to station more troops for countering China.

Duterte had said, when he was President, in no uncertain terms, that he may not survive the CIA if he continues with his overture towards improving relations with China. Now, they are fabricating crimes against him using the ICC over his crackdown on the drug menace in the Philippines. Trying to get rid of the drug lords is being investigated as a crime? Someone obviously had so much to lose that it becomes a crime to kill off those drug lords. Question is, who is going to arrest Duterte should such a warrant of arrest by the ICC is made against Duterte? My feeling is that Marcos Jr will be forced to do it, as he has no sway over the military unlike his father. Marcos Jr is coming across as a 'Lame Duck' President.

 Anonymous 

PS. A San Jose police union chief accused of importing and reselling deadly synthetic opioids from suppliers in half a dozen countries to customers all over the US turned herself in on Friday, according to local media. Joanne Marian Segovia faces up to 20 years in prison for attempting to unlawfully import valerylfentanyl, a Schedule I synthetic fentanyl analogue.

Segovia allegedly spent nearly a decade of her tenure as executive director of the San Jose Police Officers’ Association trafficking in the deadly drugs, using police resources to move pills and powders around the country.

Using her personal and office computers, she ordered thousands of pills at a time from China, Hong Kong, Hungary, and India, receiving at least 61 such shipments at the union office and her home between October 2015 and January 2023 labeled as party favors, makeup, chocolates, and other innocuous items, according to the US Department of Justice’s criminal complaint. She then used the union’s UPS account to ship the synthetic narcotics to domestic customers right out of her office, taking payment via CashApp.  RT

Now you know who were behind the drug smuggling in the Philippines and why they are against Duterte for wanting to put an end to the drug problem. The drugs came from them, to make money and also to poison the Pinoys, just like the opium in 19th century China. They wanted to drug the Pinoys and weaken the country, easy to manipulate and control when the Pinoys are drug addicts.