[ad_1]
How many times have people heard Dollar Are we now in an inevitable downward spiral?Technological competitors – e.g. Cryptocurrency– Otherwise the currency of the great rival country will bring him down. The gradual decoupling of Western economies from those of China and its allies will lead to a less dollarized world. Russia invades Ukraine marks the beginning of its end. This narrative is not new. It is being heard in more and more places. Interestingly, it also seems to be getting it wrong more and more.
Whatever the metric, the fact is that the North American currency’s influence on global finance is almost unshakable and, in some cases, is growing. According to the Bank for International Settlements (BIS), about 90% of foreign exchange transactions involve Dollar.he EUROn the contrary, it has been losing strength in this market, and RMB Chino Transaction volume is 13 times less than transaction amount Dollar58% of global international reserves are in US dollar-denominated assets Dollar (It has dropped only three percentage points since 2012.) EUR It dropped by four percentage points over the same period. RMB They are only 2% and falling. 70% of the world’s foreign currency debt is still Dollar Since 2010, more than half of global trade continues to be conducted in Fed currency—taking into account trade European Union It accounts for only 11% of global trade. And, outside of specific applications (such as remittances), Cryptocurrency They remain essentially speculative assets. Dollar It seems to be in a fairly comfortable position as the dominant currency (it is worth noting that the Peruvian sol has retained almost all of its relative value relative to this giant over the past two and a half decades, while the currencies of Chile, Brazil, Mexico and Colombia have depreciated by more than 50%).
There are at least four reasons to explain green power. The first is the network effect. That is, the fact that other countries are already using the currency for exchange and accumulation is enough to justify using it. Changing the economics of a network usually requires a coordinated effort, but at the current scale, this may be impossible to achieve. The most serious efforts are BRICSbut even this group has abandoned the idea of creating a common currency to focus more on RMB In some bilateral exchanges, there is no real threat.
Second, and related to the above, Dollar The liquidity and depth of its financial markets are unrivalled. Sell and buy assets Dollar It is simple and cheap. In addition, they are immediately available in large quantities and can use a variety of efficient tools. There are probably no two markets in the world that can accommodate such a deep space.
also, Dollar It has the role of the world’s main safe-haven asset. During times of international turmoil, the market turns to liquid assets. Dollar Protect yourself and try to avoid steep falls. Paradoxically, even when European Union It is a direct or indirect cause of global unrest.
Finally, at some point European Union Increased political polarization, doubts about the stability of its system, and its potential competitors finding their economies or institutions in weaker conditions. Lack of predictability and application of capital controls China – Some of the positions in 2014 and 2015 were surprising – and spooked investors. India, Brazil o Russia They are still far from the necessary institutional and economic development. EURFor its part, it has had problems in recent decades gaining traction in an economy that is much less dynamic than that of the U.S. It is also more internally dysfunctional as a group of countries.
European UnionTo be clear, China is not defending its currency with sufficient resolve. The massive public debt it carries is a huge risk, as is the eventual removal of the institutional lock on its currency or financial management in a self-destructive political game. But, at least for now, there is no reason to think the Benjamin Franklins will lose circulation or influence.
[ad_2]
Source link
