Why is the World Moving Away from the US Dollar?
Historically speaking, the US Dollar has been the currency of choice for nations around the world for decades. Because of this, it has made the United States one of the most powerful countries, economically speaking.
In recent years, however, there has been talk from some world leaders that there is a major need to move away from the US Dollar as a whole. The biggest reasons for this shift are to reduce the power the U.S. has in the global economy and to increase the value of other countries.
Are you curious about why the world may be moving away from the US Dollar? Keep reading to find out more.
What is De-Dollarization?
By definition, de-dollarization is the process by which the US Dollar becomes less dominant in the global economy. This means that various countries around the world will shift away from using this currency as much as they have in the past.
In most cases, the reason for this is to reduce the dependence on the United States as a whole and to allow other countries to rise in the ranks of the global economy. Because of this call to action, many countries are actively searching for ways to move away from using the US Dollar as their main currency.
Why Some Countries are Calling for a Shift Away From the US Dollar
Several countries around the world are set on making a move away from using the US Dollar as their main currency. The reasons for this shift are primarily due to many reasons including wanting to increase the value of their currency.
Since World War II, the US Dollar has been the primary currency that has been used globally for trade and other transactions. The reason for this is largely due to the financial stability of the United States as well as the geopolitical power that the country has had for decades.
However, in recent years, many other countries have brought up specific reasons why they should seriously consider building up their currency in the world market. Some countries, such as China and Russia, have even banded together to find other sources of currency.
Related: Why Do Governments Lie About Inflation Rates?
Concerns about Inflation
One of the reasons why some countries want to move away from the US Dollar is because of the rising interest rates and cost of doing business. Most people know that the Federal Reserve Bank has had to engage in a drastic hike in the interest rates for the US Dollar to combat inflation on the home front.
Plus, during COVID the US printed lots of money, inflating an already inflated dollar which had been steadily lowering in value since the US left the gold standard in the 1970s.
Due to this, many countries have been directly affected by this which has caused many problems in their local economies. While it is not unheard of for inflation to cause rates to go up, for some countries this has been the basis to reconsider using the US Dollar.
The United States as a World Power
Most people know that the United States has been one of the most powerful countries both economically and politically. Because of this, many countries have relied on the US for support in both monetary and political ways.
Being the biggest economy worldwide, many countries have come to rely on the United States in many different ways. Oil is a commodity that is often priced using the US dollar and is needed worldwide, which is another reason why countries have considered the U.S. to be the one to call on in times of need.
But, is the U.S. becoming less of a World Power? Some countries believe this to be true, which is why they wish to make the change from the dependence on the US Dollar as they believe another country will soon rise to be the prominent political power. They’re trying to get ahead of the game by lowering their dependance on a currency they believe will soon not be as widely accepted.
Related: Inflation Around the World: Is Russia Exempt?
Geopolitical Reasons
Another largely believed reason behind many countries who are choosing to move away from the US dollar is geopolitical reasons. This means that these same countries have not been happy with the way certain political events have been handled.
A good example of the geopolitical reasons behind de-dollarization is when the United States froze the foreign currency reserves of Russia after it attacked Ukraine. With the help of several allied countries, there has been a significant amount of currency that has been frozen since the beginning of the conflict.
The result of this action forced Russia to begin searching for new ways to survive economically speaking. Amid this action, the country had to find other ways to trade, which led them to trade in gold.
Several countries have given the United States some backlash for this type of control by joining Russia in the movement to de-dollarize the country.
Should the United States be Concerned about the Shift?
While this is a widely hot topic in recent months, the attitude of most leaders in the economic world is not as concerned. The largest reason for this belief that the US dollar is safe from being done away with is because there is nothing viable to replace it with.
But the reality is, the US should be concerned. Not only is our dollar rapidly losing value, but many countries are not admiring the US as they once were. This could lead to poorer trade agreements as well as a difficulty in acquiring certain products.
Globally, the world has begun to frown on the US. It’s political leaders, environmental and social policies, and tactics. If you ask us, it probably won’t happen during this lifetime, but the US is likely to become a hated country at some point. Time will only tell if this comes to fruition.
The bottom line when it comes to the world moving away from the US Dollar is that it has not gotten to the point where there should be a major concern. Most of the world still considers the United States to be a dominant figure in both economic realms as well as geopolitical areas which means that dependence on the US Dollar has not truly ended, just yet.
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