International Movement to Dethrone the US Dollar Gains Steam

Speaker of the House Kevin McCarthy (R-Calif.) (C) speaks at a press conference with a group of bipartisan U.S. lawmakers, including Rep. Ryan Zinke (R-Mont.), after they met with Taiwanese President Tsai Ing-wen on April 5, 2023, in Simi Valley, California. Mario Tama/Getty Images

It has been nearly a decade since China and Russia fired the opening salvo in their quest to dismantle the U.S. dollar’s standing as the chief international reserve currency.

These de-dollarization efforts have accelerated over the past 12 months, with more countries joining Beijing and Moscow’s anti-dollar crusade.

As many governments attempt to undermine the greenback and potentially dethrone the king dollar, more prominent individuals are beginning to pay attention—from former President Donald Trump to House Speaker Kevin McCarthy (R-Calif.).

United States $1 bills are seen on a light table at the Bureau of Engraving and Printing in Washington on Nov. 14, 2014. Gary Cameron/Reuters

The House Speaker, currently in the midst of a debt ceiling standoff with the Biden administration, on April 17 said that soaring U.S. government debt will erode the dollar’s standing as the chief international reserve currency, not what other countries are doing.

McCarthy said at a New York Stock Exchange event that “we should not ignore the movement away from the dollar.”

But he argued that the only way the U.S. dollar loses its role as the world’s reserve currency would be the growing national debt.

“Spending too much money and putting ourselves in $31 trillion of debt is a greater threat than Brazil using the yuan than the dollar,” he said.

Following his prepared remarks on the stock exchange, McCarthy said in an interview that countries’ de-dollarization efforts would not affect the greenback but rather what the federal government is doing.

Debt Will Hurt Dollar: McCarthy

“There’s an attack on the dollar,” he told CNBC. “What Brazil and these other countries do won’t knock the dollar off the world currency. It is what we do. If we continue to have debt at 120 percent, we will crumble.”

According to the White House fiscal year 2024 budget proposal, the national debt is projected to account for 110 percent of GDP.

In addition, the International Monetary Fund’s (IMF) recent Fiscal Monitor report forecasts that the debt-to-GDP ratio will exceed 136 percent by 2028.

So far this year, there have been many developments in the global de-dollarization campaign.

Last month, Brazil and China established an agreement that would effectively bypass the U.S. dollar when paying for bilateral trade and will favor the yuan and reals in settlements.

Brazilian President Inacio Lula da Silva criticized the dollar supremacy at an April 13 event in China.

“Why should every country have to be tied to the dollar for trade? Who decided the dollar would be the world’s currency?” Lula said at a ceremony in Shanghai.

“Why can’t a bank like the BRICS bank have a currency to finance trade between Brazil and China, between Brazil and other BRICS countries? Today, countries have to chase after dollars to export, when they could be exporting in their own currencies.”

Beijing also recently settled its first liquefied natural gas (LNG) transaction in yuan. The Iraqi government confirmed that the country would conduct more trade in the yuan. India proposed offering regional nations rupees in response to the dollar crunch. The yuan is now the most popular currency in Russia.

Sen. Marco Rubio (R-Fla.) does not find the latest developments surprising since the current administration has focused “on a radical progressive agenda” rather than prosperity.

“Instead of promoting economic prosperity, the Biden administration continues to focus on a radical progressive agenda focused on emissions reduction and transgender activism,” the senator told The Epoch Times.

“It should surprise no one that nations worldwide are opting to develop a secondary economy, totally independent from the U.S. dollar. This administration is making our country an international laughingstock, which will soon be held hostage at the hands of a genocidal regime in Beijing.”

Even a former president is weighing in on this subject.

Trump: Like ‘Losing a World War’

In a recent interview with Fox News host Tucker Carlson, former President Donald Trump briefly touched upon the escalating anti-dollar campaign adopted by many of America’s adversaries and allies.

The real estate mogul, who is running for another term as president in 2024, dismissed the notion that the United States will never lose the dollar standard, listing the growing number of countries that wish to change the currency standard—such as China, Iran, Russia, and South American nations.

Former President Donald Trump appears in court at the Manhattan Criminal Court in New York on April 4, 2023. Steven Hirsch/Pool/AFP via Getty Images

He warned that the United States would be a “second-tier country” if the king dollar is ousted from its throne.

“We’re losing. If we lose our currency, that’s the equivalent of losing a world war,” Trump said. “Our currency is what makes us powerful and strong.”

In a recent Truth Social post, Trump made similar remarks, accusing China of “trying to displace” the greenback as the top global currency, something that was “unthinkable three years ago.”

“If this happens, and under Biden’s leadership it probably will, this would be the biggest defeat for our country in its history,” he said.

In addition, Trump referenced the “crashing” dollar in his speech in Mar-a-Lago after his arrest.

“Our currency is crashing and will soon no longer be the world standard which will be our greatest defeat frankly in 200 years; there will be no defeat like that. That will take us away from being even a great power,” he said.

The U.S. Dollar Index (DXY), which measures the greenback against a basket of currencies, is down about 1.4 percent year-to-date.

Yellen Warns of Consequences

The U.S. government weaponizing the U.S. dollar in international markets could backfire and undermine the dollar hegemony, according to Treasury Secretary Janet Yellen.

Over the past year, the economic and financial sanctions and export controls imposed on Russia have forced Moscow and its allies, like China and Iran, to search for alternatives to the dollar.

But while this campaign has found some success, Yellen believes it is “not easy” because of how liquid and safe U.S. Treasurys are in global financial markets.

“Dollars are widely used. We have very deep capital markets and rule of law that are essential in a currency that is going to be used globally for transactions,” Yellen said in a CNN interview aired on April 16.

“And we haven’t seen any other country that has the basic infrastructure—institutional infrastructure—that would enable its currency to serve the world like this.”

However, she acknowledged that there is a risk that sanctions would erode the dollar’s role as the chief international reserve currency.

“So, there is a risk when we use financial sanctions that are linked to the role of the dollar, that over time it could undermine the hegemony of the dollar,” Yellen stated.

“But this is an extremely important tool we try to use judiciously.”

A Long-Term Trend

The consensus among economists and market analysts contends that initiatives to displace the U.S. dollar will take a long time to materialize, if at all.

Data from the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) still shows that the greenback represents approximately 60 percent of world forex reserves.

Moreover, the dollar accounts for roughly 80 percent of trade finance contracts and more than 40 percent of global payments.

“Even as great economic powers rise and fall, their currencies’ reserve status tends to survive well past the peak of their influence,” wrote UBS economists in a research note.

“All in all, we think the dollar’s reign will live on. At the same time, it will likely make some room for competitors along the way.”

Fisher Investments does not believe it would be a “disastrous” turn of events if the dollar lost its reserve currency and trade status.

“Exorbitant privilege doesn’t confer any advantage. So we doubt losing it would be a disadvantage, much less ruinous for America,” the company wrote in its market commentary.

“The dollar is convenient because of the US’s big economy—which produces goods and services consumed globally—with deep, liquid, and open financial markets facilitating that trade. That is why dollars remain in demand. Those factors don’t look set to change any time soon.”

Peter Earle, an economist at the American Institute for Economic Research (AIER), averred in a recent report that the dollar “in some shape or form” will endure for many years to come.

But the anti-dollar crusade occurring across the globe “will proceed.”

“And slower or more quickly, the dollar will lose ground abroad,” he said.