Experts weigh in on the concerns about the de-dollarization trend
The de-dollarization of the American dollar has been making headlines recently, leading to worries about the stability of the currency. This issue prompted a caller named Zack from Alabama to seek advice from finance personality Dave Ramsey on his show.
Ramsey’s response, delivered in his characteristic straightforward manner, aimed to dismiss the caller’s fears. He stated that China, Brazil, and Russia already do not use the U.S. dollar as their basis for international trade. While these countries and potentially others, including some from the Middle East, aim to create their joint currency, Ramsey emphasized that this does not mean a new international currency will replace the U.S. dollar.
To replace the dollar, a new currency would need widespread international adoption. Currently, the U.S. dollar is involved in the majority of foreign exchange trades, with estimates showing that a significant percentage of trade invoicing worldwide is conducted in USD. Moreover, global trust in the dollar remains strong, as affirmed by Treasury Secretary Janet Yellen.
Ramsey drew parallels to previous concerns over the Euro and emphasized that any new currency would ultimately convert to the U.S. dollar. He clarified that the combined GDP of countries considering alternative currencies, such as China, Brazil, and Russia, is not sufficient to overpower the dollar. Ramsey’s analysis illustrated that the GDP of just Texas alone surpasses Brazil’s GDP. China, while having a sizeable GDP, still has a lot of catching up to do compared to the U.S.
Ramsey’s team asserted that the fear of de-dollarization is often sensationalized by online media outlets seeking views. Ultimately, they advised listeners that there is no need to alter their saving and investing strategies due to the potential emergence of a new currency.
In summary, concerns about the de-dollarization of the U.S. dollar should be approached with skepticism. The current dominance and global trust in the dollar indicate its durability. While the creation of alternative currencies is being discussed, the economic strength of the countries involved does not pose a significant threat to the dollar’s supremacy.
Sources:
– Bank for International Settlements
– World Bank data
Disclaimer: This article does not provide financial advice and is for informational purposes only.