The large-scale sanctions imposed by the West on Russia have caused some countries to worry about their dependence on the US dollar. Ray Dalio, founder of Bridgewater, the world‘s largest hedge fund, warned that the world‘s willingness to hold dollars is declining. On the one hand, the mainland continues to expand the influence of the renminbi in international trade; The situation makes people reflect on the risk of excessive investment in US dollars.
Business Insider reported that Dalio said in an interview last week that the sanctions against Russia exposed the risk of holding the US dollar, and that the US dollar’s importance in global trade has gradually declined, weakening its dominant position. “Countries are less willing to hold dollars,” he said.
Dalio said, “The U.S. dollar is debt. In other words, global central banks holding U.S. dollars are holding debts. Therefore, holding Congress thinks that ‘I have over-bought U.S. dollar-denominated debt’ will naturally reduce the willingness to buy U.S. dollars. “
The widespread use of the U.S. dollar in international trade has made countries willing to take on debt for trade use, but as the mainland expands the influence of the RMB in international trade, demand for the U.S. dollar may weaken in the future.
To this end, the mainland is actively deploying non-dollar transactions, and has recently reached trade agreements with countries such as Brazil, Kazakhstan, and Pakistan that are settled in their own currencies.
At the same time, Russia has been excluded from the international financial system by the West, and its foreign exchange reserves of 330 billion US dollars have all been frozen. The country’s economy has gradually moved closer to the RMB. Dalio said the sanctions had raised concerns that debt assets, like Russia, were at risk of being frozen.
Dalio continued that for these reasons, the willingness of countries to hold dollar-denominated debt has begun to decline, which also means that the demand for dollars has decreased.
A recent report by asset management company Eurizon SLJ warned that last year, the dominance of the US dollar as an international reserve currency was eroded 10 times faster than it was two decades ago.
(Cai Zonglun, China Times News Network)
further reading
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Yellen: Economic Sanctions Could Harm Dollar Hegemony
Bridgewater founder warns of three major seismic shifts ahead
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