The US government is beginning to take notice of the global de-dollarization campaign by friends and foes alike. Treasury Secretary Janet Yellen recently appeared before the House Financial Services Committee and was asked by both sides of the aisle if there should be concern over the growing number of countries abandoning the greenback. Her response: Do not lose sleep over it tonight, but the dollar will soon see its status as the chief international reserve currency diminish. “We should expect over time a gradually increased share of other assets in reserve holdings of countries—a natural desire to diversify,” Yellen said. “But the dollar is far and away the dominant reserve asset.” But the latest developments should be raising some eyebrows.
The Latest De-Dollarization News
In his recent address at the Djibouti parliament, Kenyan President William Samoei Ruto urged his fellow African nations to wave goodbye to the buck when conducting intracontinental trade. Ruto rejected the notion that countries need to rely on the US dollar for trade transactions, especially when nations worldwide are running out of dollars. He also endorsed the growth of the Pan-African payment and settlement system, a mechanism that supports payment settlements in local currencies. The key roadblock for African states, particularly smaller ones, is the demand for non-dollar-denominated settlements. If Kenya primarily engages in shillings and others depend on the buck, how would this help Nairobi in its quest to kick its dollar dependence?
Pakistan, experiencing a devastating economic collapse, recently generated international headlines for making a non-dollar payment to Moscow. According to an exclusive Reuters report, Pakistan paid for discounted Russian crude oil in the Chinese yuan. The country acquired 100,000 tons of black gold, with nearly half arriving at the Karachi port last week.
Egypt is aiming to abandon the dollar and utilize local currencies to cover its Chinese, Indian, and Russian imports. Is this a passive proposal to join the BRICS (Brazil, Russia, India, China, and South Africa) bloc ahead of this summer’s annual summit in Johannesburg? The leadership is hinting it. “Nothing of the sort has been implemented, but there are discussions so that we can trade in local currencies of countries like India, Russia or China,” Egyptian Supply Minister Ali Moselhy told the newswire.
At a recent 51st Asian Clearing Union meeting with 11 countries in Tehran, Iranian officials campaigned for de-dollarization, arguing that transitioning away from the greenback is no longer a “voluntary choice.” Vice President Mohammad Mokhber explained that anti-dollar efforts are the “inevitable response to the ‘weaponization project of the dollar.'” It is no secret that Tehran has advocated de-dollarization, recently connecting to Moscow’s SPFS, an alternative to SWIFT.
A French Wildcard
All eyes will be on the BRICS event in August. Officials have revealed that the headline discussion will surround the creation of a new basket-style currency that would chip away at the dollar hegemony. Indeed, many experts have dismissed the efficacy of a BRICS monetary system, but the coalition accounts for 40% of the world’s population, and member countries have exceeded their G7 counterparts in global GDP purchasing power parity (the price of goods and services in different nations).
French President, Emmanuel Macron (Photo by Christian Liewig – Corbis/Corbis via Getty Images)
Of course, the wildcard could be France. Reports everywhere have noted that French President Emmanuel Macron has requested an invite to the festivities in South Africa. While it has yet to be confirmed, Macron has hinted that Paris is prepared to accept a BRICS currency, telling Politico in April that the “extraterritoriality” of the greenback hurts European countries. “If the tensions between the two superpowers heat up, we won’t have the time nor the resources to finance our strategic autonomy, and we will become vassals,” Macron stated.
France welcoming a BRICS-style currency would be a massive blow to America’s stranglehold on international finance. It would undoubtedly pave the way for other advanced economies to accept a world without the US dollar controlling every aspect of the global economy. August will be a huge month.
Washington Wakes Up
The de-dollarization initiative has been a decade in the making. However, Russia’s invasion of Ukraine accelerated the worldwide anti-dollar putsch, with governments everywhere learning about the power the US government possesses. The United States can confiscate wealth, destroy economies, and punish leaders if Democrats and Republicans disapprove of a foreign country’s actions. Who is to say Kenya, Argentina, or Pakistan would not be next? But officials are starting to wake up to the reality that the king dollar will eventually be dethroned through the dumping of Treasury securities or the long goodbye to the greenback. “There is no trap so deadly as the trap you set for yourself.”
