The trend away from the U.S. dollar in global trade and finance is accelerating rapidly as inflation persists, government debt levels explode, and the Chinese Communist Party (CCP) roams the planet negotiating deals in other currencies.
The economic and political implications of the dollar’s possible loss of its prized status as the global reserve currency are hard to overstate, according to experts.
In fact, such a development—if and when it occurs—could prove catastrophic to U.S. consumers as their spending power evaporates, economists are warning amid debt-ceiling negotiations that have sent tremors around the world.
Numerous analysts who spoke with The Epoch Times said the CCP and other U.S. adversaries were actively advancing the global effort to undermine the dollar.
However, current and former U.S. lawmakers and policymakers also placed much of the blame on the Biden administration, U.S. government spending, and the Federal Reserve’s monetary policies.
“The dollar is clearly at risk from foreign enemies who wish to challenge American power and domestic fools who believe the American credit card has no limits on spending,” said Kevin Freeman, host of the Economic War Room and an authority on economic warfare.
In comments to The Epoch Times, Freeman, who has briefed top U.S. military officials and policymakers, pointed to CCP strongman Xi Jinping and Russia’s Vladimir Putin as foreign adversaries seeking to undermine the dollar.
The Saudis and numerous powers across Africa and Latin America have joined the “anti-dollar cabal” in recent months, according to Freeman.
But the U.S. government deserves some of the blame for the developments, he said.
“Sadly, we are making it easy for them with massive debt increases, an erratic foreign policy, and Washington’s arrogance that ignores the threat,” said Freeman, who also serves as a senior fellow at the Center for Security Policy.
Multiple members of Congress who spoke with The Epoch Times echoed the concerns about the Biden administration’s role in the accelerating shift away from the dollar.
Rep. Paul Gosar (R-Ariz.) pointed to the president himself.
“Joe Biden’s warmongering, runaway inflation, and irresponsible spending sprees have threatened our currency’s value,” he said.
A broad range of experts who spoke with The Epoch Times were divided on when or even if the U.S. dollar might lose its status as the global reserve currency and what that could mean for the U.S. economy and the American people.
While many are warning of calamity, some said there may be a “silver lining” to the U.S. dollar losing its global position.
De-dollarization
Thanks to the unchallengeable supremacy of the United States in the aftermath of World War II and the dollar’s nominal backing by gold at the time and later its endorsement by oil exporters as the “petro-dollar,” the American currency has reigned supreme among currencies for more than 70 years.The dollar still benefits from what’s known as the “network effect,” as well as the fact that U.S. capital markets are the deepest and most liquid in the world, experts told The Epoch Times.
But if current trends away from the dollar and political instability continue, analysts say the American currency’s coveted status as the global reserve could be shaken or even lost for good. In fact, the process is already underway, some experts warned.
The dollar’s share of global reserves just two decades ago was at about 75 percent, according to experts and analysts. Today, estimates suggest that it’s below 50 percent and shrinking fast.
Speaking at the 2023 Milken Institute Global Conference, International Monetary Fund (IMF) chief Kristalina Georgieva highlighted the trend.
“There has been a gradual shift away from the dollar,” she said, noting that the euro, the British pound, and the CCP’s yuan were all gaining ground.
While Georgieva said she didn’t anticipate an imminent rise of a viable alternative as “we may migrate to central bank digital currencies massively,” that doesn’t mean it won’t come eventually.
Non-Western central banks are also buying gold in record quantities, and analysts expect that demand to remain strong.
“We think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation,” Swiss bank UBS said in a note.
“In fact, the US decision to freeze Russian foreign exchange reserves in the aftermath of the war in Ukraine may have led to a long-term impact on the behavior of central banks.”
Even traditional U.S. allies have been conducting deals in non-dollar currencies. In late March, the French government completed its first cross-border liquified natural gas deal in Chinese yuan.
Also in March, authorities in Brazil—an economic powerhouse that historically has had close relations with the United States—also inked a deal with the CCP to trade in domestic currencies rather than the dollar.
The trends are accelerating. According to a recent note by prominent currency analyst Stephen Jen at Eurizon SLJ, the dollar lost market share in 2022 at 10 times the pace as during the previous 20 years—a trend he says most analysts have missed.
The speed at which this is happening is dramatic, too.
“Adjusting for these price changes, the dollar, we calculate, has lost some 11 percent of its market share since 2016 and double that amount since 2008,” said Jen, who previously worked at Morgan Stanley.
Much of the recent acceleration has to do with U.S. policy on Ukraine.
“This erosion in the USD’s reserve currency status has accelerated precipitously since the start of the war in Ukraine,” he said, pointing to “exceptional actions” against Russia that “startled” large reserve-holding countries.
“What we witnessed in 2022 was sort of a ‘defund-the-global-police’ moment, whereby many reserve managers in the world disagreed with the conduct of both Russia and the U.S.”
CCP Agenda
Calls for a new global monetary system and reserve currency aren’t new, however. Even a decade ago, the CCP was promoting the idea through its propaganda machine.Analysts said the Xinhua editorial was undoubtedly approved by senior CCP officials and clearly reflected Beijing’s views.
One benefit of such a policy would be to “encourage Washington to play a much more constructive role in addressing global affairs,” the CCP piece states, calling for a “de-Americanized” so-called new world order.
It was hardly the first time that the CCP touted the idea. In a 2009 report by People’s Bank of China chief Zhou Xiaochuan dubbed “Reform the International Monetary System,” the CCP called for an “international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.” The proposed global currency could be issued by the IMF, he said.
In other words, almost 15 years ago, the highest echelons of power in Beijing were plotting a global currency to replace the dollar as the world reserve.
When asked about the idea at a Council on Foreign Relations event, then-U.S. Treasury Secretary Timothy Geithner shocked observers.
“We’re actually quite open to that,” he said, causing the dollar to plunge.
Many of the same policymakers from the Obama administration in 2009 who were supportive of the idea remain in positions of influence in the Biden administration today.
Former U.S. Assistant Secretary of State for International Organization Affairs Kevin Moley, a leading voice warning of the CCP’s agenda, said the shift away from the U.S. dollar was “one of the most dangerous developments in the post-war era.”
While he blasted the Biden administration for angering and alienating U.S. allies, he pointed to the CCP—the “greatest existential threat to the Republic since 1776”—as the main driver of the ongoing shift.
“This is all part and parcel of their plan to dominate the world,” Moley said. “It is China’s intention to become the dominant superpower of the 21st century.”
Key members of the Biden administration have publicly celebrated the CCP’s growing role on the world stage.
For example, senior Biden administration diplomat Bathsheba Crocker, who served as assistant secretary of state for international organization affairs during the Obama administration, was quoted by CCP paper China Daily as saying she was “particularly pleased” to see Beijing taking more responsibility in the U.N.
Previous presidential administrations, which Moley said were “misled” by their own “arrogance,” have also contributed to the CCP’s ongoing push to dethrone the dollar, he said.
Domestic Causes
But while the CCP may be hoping to see the dollar replaced as the global reserve, that would be much more difficult to accomplish if not for the policies pursued by the federal government and the federal reserve, lawmakers told The Epoch Times.Gosar, for instance, told The Epoch Times that “warmongering” by Biden along with “runaway inflation and irresponsible spending sprees” have contributed in a major way to the dollar’s escalating woes.
“Americans have taken for granted that most countries try to do business using U.S. dollars,” he said. “Our dollar has historically been seen as stable, reliable, and useful. This benefits our nation greatly.”
Now, however, U.S. financial dominance is “under threat” because of Biden’s “incompetence,” the Republican lawmaker told The Epoch Times.
“Countries like Russia, China, and India are now looking at using other currencies because Biden has abused our currency and banking system,” Gosar said, pointing to legislation he and others introduced to link the dollar to gold again as a way to rein in the problems.
Former Congressman Ron Paul, a longtime advocate for monetary reform who served in key congressional positions relating to currency and banking, also pointed to U.S. policy as a leading cause of the shift away from the dollar.
While it’s true that foreign governments and central banks right now appear to be “ganging up” on the dollar, Paul told The Epoch Times that much of the blame belongs with U.S. policymakers.
“Other governments are ditching the dollar because of our foreign policy causing so much harm to them and also our warmongering policy, which is not healthy for the world or our own peace,” said the veteran lawmaker and author of the best-selling book “End the Fed.”
David Stockman, director of the Office of Management and Budget in the Reagan administration, said he wasn’t surprised at the global trend away from the U.S. dollar considering U.S. financial and monetary policies.
“For years, the Federal Reserve has been flooding the financial system with dollars,” he said. “As a result, people are looking for alternatives that have a better chance of maintaining their value over time.”
Another expert, prominent financial forecaster and economic analyst Charles Nenner, cited his models and macro trends to suggest that the looming “major de-dollarization” was tied to the end of a 250-year “super cycle.”
“The United States has such a big deficit that it is leading to the start of longer-term inflation,” said the former Goldman Sachs analyst, whose Charles Nenner Research Center advises hedge funds, banks, brokerage firms, family offices, and individual clients.
“The world has lost confidence in the leadership of the USA.”
Amid those trends, governments and central banks of the BRICS nations—Brazil, Russia, India, China, and South Africa—are currently creating what Nenner described as an “anti-dollar economy.”
“We expect most of the world to follow the alternative currency that BRICS countries are trying to develop,” Nenner said.
Indeed, former Goldman Sachs Chief Economist Jim O'Neill openly called on the BRICS governments to deliberately counter the dollar.
Effects
This shift away from the dollar could lead to huge outflows from the U.S. bond market, an “enormous rise in inflation,” and other problems for the U.S. economy, Nenner said.Obviously, there would be major implications for the purchasing power of the dollar, too, as the cost of imports and commodities measured in dollars would soar.
It would also accelerate the ongoing global shift toward central bank digital currencies (CBDCs), according to Nenner, who has worked with numerous leading banks around the world.
On the geopolitical front, Nenner suggested, the world may be rapidly approaching the end not just of dollar supremacy but of the global dominance of the United States, with the collapse of the dollar being merely one symptom of a broader trend.
Historically, the average age of empires has been about 250 years, Nenner said, pointing to the rise and fall of the Roman, Dutch, and British empires as examples.
“The USA shows the same symptoms as these previous empires showed right before their downfall including the loss of trust from other nations,” he said.
In other words, the loss of the dollar’s status appears to be an important part of—not just a cause of—a broader geopolitical realignment with profound implications for the world.
Paul, a three-time presidential contender who for decades warned about what was happening to the U.S. currency as well as what he viewed as the danger of an interventionist foreign policy, told The Epoch Times in a wide-ranging interview that the United States was already facing an “inflationary depression.”
“And it’s going to get worse as the dollar continues losing ground,” he said, arguing that prices would rise dramatically. “There will be so much pain and suffering when they have to give up on the dollar.”
While many analysts are “clucking” about the trend being potentially catastrophic for America, Stockman suggested that it may not necessarily be a bad thing for the United States over the long term, as it would force Congress to act more responsibly.
“This is just a gift to Congress that allows them to spend and spend and build up the public debt to the point that we’re at $31 trillion today, to the point that we’re having a debate about paying our bills and not cutting any spending,” he said, sounding flabbergasted.
It'll be very painful, and Americans will have to accept a significantly reduced standards of living, according to Stockman.
But the “silver lining” of the U.S. dollar losing its global-reserve status is that “it will wake up the politicians and policymakers to understand that we’ve been living way, way beyond our means, and we’re going to have to pay the piper,” he said.
“It’s about time for us to face the facts—the reality—and change policy quite dramatically.”
In economic terms, the loss of global reserve status will mean that Americans will have to export more to be able to import the same amount, according to Thorsten Polleit, chief economist at Degussa, Europe’s largest precious metal trading house.
In comments to The Epoch Times, the honorary professor of economics at the University of Bayreuth said this means a decline in living standards.
“Moreover, as capital inflows would most likely also decline, there would be lower investments and lower economic growth in the U.S. going forward,” he said.
Ultimately, the world may even end up divided between a “dollar block” and a “non-dollar block” as a more “multipolar world currency system” emerges and other currencies such as the yuan and the euro gain ground.
Experts who spoke with The Epoch Times had widely divergent views on whether the transformation would be sudden or gradual, as well as on how long it might take for the dollar to lose its prized status.
Neither the U.S. Treasury nor the IMF responded to requests for comment.
