Fewer nations are willing to hold the U.S. dollar as America’s share of the global economy shrinks while China’s role in international trade expands, noted billionaire Ray Dalio. The founder of the world’s largest hedge fund also said Western sanctions on Russia have highlighted new risks associated with holding dollar assets.
“The dollar is debt”, central banks are less inclined to hold it
The importance of US fiat in international trade is diminishing and as a result the dominance of the dollar is fading, said billionaire investor Ray Dalio in recent Youtube interviews. He also pointed out that the sanctions imposed on Russia following its invasion of Ukraine revealed new threats to governments holding assets in US currency.
Central banks around the world are less inclined to hold the greenback, Bridgewater Associates founder REMARK at the Julia La Roche Show last week. “Dollars are debt. In other words, when you own a dollar — a central bank — you own a debt asset,” he said, according to excerpts cited by Business Insider on Tuesday.
Dalio explained that previously, nations were willing to expose themselves to such debt in order to be able to trade globally, as the dollar has been widely used in international transactions. However, with China encouraging the use of its currency, the yuan, in trade deals with countries like Brazil, Kazakhstan and others, the need for the dollar may decrease in the future.
At the same time, Western financial restrictions on Moscow pushed the Russian economy towards the yuan while Russia also saw $330 billion in foreign exchange reserves frozen, further preventing it from transacting in dollars or currencies. euros. Dalio believes that the sanctions have increased the perceived risks associated with dollar assets. He concluded :
So, for these reasons, there is less desire to hold debt denominated in US dollars, which means yes, less US dollars. So the supply and demand picture is deteriorating, especially since we have to keep selling them overseas to finance the deficit.
In a interview for Tom Bilyeu’s Youtube channel published on Saturday, Ray Dalio again highlighted the militarization of the US dollar as a factor in its diminishing role. “The greatest weapon of the United States to use, as opposed to the military weapon, is sanctions. So the sanctions mean that you freeze the assets, those assets are the bonds. It happened with Russia and there are threats with other countries, China, etc. “, he explained.
A number of public figures have recently acknowledged that sanctions policies can hurt greenback hegemony, from Fox News host Tucker Carlson to US Treasury Secretary Janet Yellen. Over the next decade, the US dollar will play a much less dominant role than it does today, in part because of its militarization, noted economist Jeffrey Sachs said earlier in April. Their comments come as part of the “de-dollarization” efforts led by the BRICS, of which Russia and China are members.
What are your expectations for the future role of the US dollar in global trade and economic relations? Share them in the comments section below.
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