The US dollar is tightening its grip on the global financial system at the expense of the euro, entrenching American hegemony and rendering the US Federal Reserve more powerful than at any time in history.
…the dollar’s share of the $5.1 trillion in foreign exchange trades each day has continued rising to 87.6pc of all transactions.
Roughly 60pc of the global economy is either in the dollar zone or closely tied to it through currency pegs or ‘dirty floats’, and the level of debt issued in dollars outside US jurisdiction has soared to $9 trillion.
It is much the same picture for the foreign exchange reserves of central banks, a good barometer of global trust. The dollar share has recovered to 63.6pc, roughly where it was a decade ago.
Outside of the dollar, basically the Chinese yuan has increased share at the expense of the Euro, which has lost share.
What isn’t happening? The world isn’t walking away from the dollar. Despite China, Russia, Iran and others establishing bilateral trade in their own currencies, despite the establishment of alternative global institutions such as the Asian Infrastructure Investment Bank, despite the dollar losing 96% of its value in the last 100 years…the needle hasn’t moved in any meaningful manner.
As I recall, once Rome started seriously devaluing the coinage it took a couple of centuries to hit bottom.
You might mark the beginning of this path for the dollar in 1913, with creation of the Federal Reserve. It strikes me that the more appropriate mark would be 1971 and Nixon’s closing of the gold window.
Either way, we have a long way to go.