Published Wed, Oct 30 20197:27 PM EDTUpdated 4 hours ago https://www.cnbc.com/2019/10/31/de-...eu-are-motivated-to-shift-from-using-usd.html Eustance Huang@EustanceHuang Key Points The U.S. dollar has been the world’s major reserve currency for decades, but that status could come under threat as “very powerful countries” seek to undermine its importance, warned Anne Korin, from the Institute for the Analysis of Global Security. Korin says China, Russia and the European Union are some “major movers” behind this push. One of those reasons driving their shift away from the dollar is the prospect of being subject to U.S. jurisdiction if they transact in dollars. There’s strong motivation to ‘de-dollarize,’ says expert The U.S. dollar has been the world’s major reserve currency for decades, but that status could come under threat as “very powerful countries” seek to undermine its importance, warned Anne Korin, from the Institute for the Analysis of Global Security. “Major movers” such as China, Russia and the European Union have a strong “motivation to de-dollarize,” said Korin, co-director at the energy and security think tank, on Wednesday. “We don’t know what’s going to come next, but what we do know is that the current situation is unsustainable,” Korin said. “You have a growing club of countries — very powerful countries.” To be sure, the dollar is seen as one of the safest investments in the world, and it rises during times of economic or political tumult. But one factor curbing countries’ enthusiasm for the greenback is the prospect of being subject to U.S. jurisdiction when they transact in dollars. When the U.S. dollar is used or transactions are cleared through an American bank, entities are subject to U.S. jurisdiction — even if they have “nothing to do with the U.S.,” Korin told CNBC’s “Squawk Box.” Korin cited Washington’s unilateral withdrawal from the Iran nuclear deal in 2018, which was followed by the restoration of sanctions on Tehran. That situation left European multinational companies vulnerable to punishment from Washington if they continued to do business with Iran. “Europe wants to do business with Iran. It doesn’t want to be subject to U.S. law for doing business with Iran, right?” she said. “Nobody wants to be picked up at an airport for doing business with countries that the U.S. isn’t happy that they’re doing business with.” As a result, countries have a “very, very strong motivation” to shift away from using the greenback, she said. ‘Petro-yuan’ may be an early warning But if the dollar declines in influence, other currencies could fill the role traditionally played by the greenback — especially China’s yuan. In recent years, China has tried to internationalize the use of its currency, the Chinese yuan. Such moves have included the introduction of yuan-denominated crude oil futures and reports that China is preparing to pay for imported crude in its own currency rather than the U.S. dollar. Yuan-denominated oil futures — also referred to as “petro-yuan” — could serve as an early warning sign for the dollar’s waning dominance, Korin said. “I think it’s a canary in the coalmine. Look, 90% of ... oil is traded in dollars,” she said. “If you have a sort of a beginning to crumble away (at) the dominance of the dollar over oil trade, that’s a nudge in the direction of de-dollarization.” However, she added that while the petro-yuan may be a “necessary” condition for the international abandonment of the dollar, it’s “not sufficient” to make it happen on its own.
Much like when the British Empire got "too big for its britches" and the Pound Sterling was supplanted as the world's reserve currency.... similar considerations today to the USA and the "all-mighty dollar". Not so simple as to just "replace" it.... must come up with a substitute the world will agree upon. Lots of folks touting the "crash of the dollar"... but it won't simply crash into a vacuum. It will decline in relative value to something other. (The Pound, Yen, Euro, Yuan all all too small to be the replacement. Perhaps a basket of currencies? Perhaps Bitcoin?... yes, Bitcoin's a joke. For trade considerations, everybody wants their own currency to be weak. So... how does everybody wanting their own currency to be competitively weak against everybody else... come up with a strong currency to replace the dollar? Seems a logical point is being missed. If you think about it, you can come up with a scenario where the $USD gets MUCH stronger as other countries trash their currencies in the "race to the bottom". IOW... some other countries are pressured by US financial sanctions/$USD and would like to get "out from under that thumb"... but they don't relish the thought of it being necessary for their own currency to get stronger to escape the Dollar.) Somebody's "oxen gets gored" in these revampings, and nobody wants to be on the short end of things. I don't have any predictions about how all of this will unfold, but replacing the $USD as world reserve currency will be no easy task. Expect a rocky ride.
This is a joke, right? The Yuan is a proxy Dollar because the People’s Bank of China (the Chinese Communist Party) refuses to let it float on the international markets like the Dollar or Euro or Yen. The cornerstone of the Chinese economic model is to artificially peg the Yuan low versus the Dollar and in a narrow trading range. Oh, and ask wealthy Chinese citizens how easy it is to move their native currency out of the Country.
1. One financial pundit predicts the dollar will rise as a safe haven in the ensuing financial panic before its ultimate collapse. 2. re: no easy task. it is an easy task with a slow decline year after year, The US is insolvent.
Just one of several reasons Trump is a huge danger to the best long term interests of the United States!
If we can manage not getting into yet another regime change war I’ll be thankful. And no I didn’t vote for him.
That would, in general, be a step in the right direction. Interjecting ourselves into internal civil affairs and conflicts of other nations, has yielded mixed results, generally bad I would say. There is a fairly long list. Cuba, Philippines, Iran, Chile, Vietnam, Iraq II, Libya, etc. I must be leaving out at least a half dozen others.
They all have one things in common the US did not have the resolve to finish the job. Chile was an exception.