Saudi Arabia just said they are now ‘open’ to the idea of trading in currencies besides the US dollar — does this spell doom for the greenback? 3 reasons not to worry

Saudi Arabia has just said it is now 'open' to the idea of ​​trading in currencies other than the US dollar - does this mean destroying the greenback?  3 reasons not to complain

Saudi Arabia has just said it is now ‘open’ to the idea of ​​trading in currencies other than the US dollar – does this mean destroying the greenback? 3 reasons not to worry

The 2023 World Economic Forum has been underway for just a few days and we are already seeing what the world’s experts have in mind for us all.

Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, stunned reporters in Davos when he said the oil-rich country is ready to trade with a currency other than the US dollar for the first time in 48 years.

“There is no problem negotiating how we settle our trade, whether it’s in US dollars, euros, or Saudi riyals,” Al-Jadaan said.

His comments are the latest sign that world powers are seeking to “de-monetize” the global economy.

This is why ditching the dollar is popular and why ditching the greenback is easier said than done.

Don’t miss it

Rebellion against the dollar

The dominance of the dollar in world trade and economic growth since the last 80 years. Over the past eight decades, the US has become the world’s largest economy, the most powerful political force, and the most powerful military force.

Also Read :  Biden says deal averting rail worker strike avoided ‘real economic crisis’

However, international economists are increasingly concerned that the country has “weaponised” this position in recent years, according to the CBC. The US uses sanctions to punish countries that are in conflict, and threatens to destroy its economy to win trade wars and use them to support its economy at the expense of the rest of the world.

Unsurprisingly, this move has fueled the pushback of China, Russia and other prominent countries.

At the 14th BRICS summit last year, Russian President Vladimir Putin announced plans to create a “global currency standard”. Meanwhile, China has been urging oil producers and exporters to accept the yuan as a form of payment.

This rebellion against the US dollar may undermine its strength, but there are reasons to believe that the greenback’s dominance will continue.

Also Read :  U.S. tax competitiveness remains steady this year ahead of big changes afoot for 2023

Converting dollars can be difficult

The strength of the US dollar is limited. By the end of 2022, the greenback will hold 59.79% of foreign reserves. By comparison, the Euro accounts for 19.66%, while the Chinese renminbi is only 2.76% of global reserves.

China can increase its market share by twenty and I am still left with the US dollar and the border.

In short, converting US dollars into foreign reserves is easier said than done.

READ MORE: 4 easy ways to protect your money from inflation (without being a market expert)

Some countries have more to catch

Savings rates are closely related to the economic growth of the issuing country. In other words, large assets often have savings.

In the 1800s, the British pound was the world’s reserve currency because the territories of the British Empire needed it for trade and commerce. For the past century, the US dollar has dominated because America’s economy is so large.

Also Read :  Treasury Secretary Janet Yellen's fall: Not unlike the economy's

China’s growth has slowed in recent years and some believe it will never catch up to the U.S. Meanwhile, Russia was the 11th largest economy before the start of Ukraine, although it was much smaller than California or Texas alone.

And India is growing fast, but it needs to grow 628% to match the GDP of the US today. This may take 25 years.

America’s economic prosperity is unsustainable.

The US will still be fine

The final reason Americans shouldn’t worry about the dollar losing its strength is that the worst-case scenario isn’t so bad. Some experts believe that the future may be multinational.

The US may lose power in some areas of the world economy but not lose power everywhere. For example, the Chinese yuan may be important for trade and border payments, but the dollar may still be the reserve currency of the central banks of developed countries.

This is not far from a financial crisis for Americans.

What you can read next

This article provides information only and should not be considered as advice. It is offered without warranty of any kind.

Source

Leave a Reply

Your email address will not be published.