Experts Warn of Dangers Posed by U.S. Dollar Hegemony, Call for Diversification of International Monetary System
In a recent international online report, experts from various countries have highlighted the risks associated with the hegemony of the U.S. dollar and emphasized the need for the diversification of the world economic and monetary system. The consensus among many figures is that promoting the use of multiple currencies is in the interest of all countries and is a general trend in global economic development.
The discussions surrounding this issue gained traction after the release of the “Johannesburg Declaration of the 15th BRICS Leaders’ Meeting” in August. The declaration called for research on local currency cooperation, payment tools, and platforms among BRICS countries, reigniting the conversation on “de-dollarization” within the international community.
Gustavo Ng, founder of Argentina’s “Contemporary” magazine, highlighted the detrimental impact of U.S. dollar debt on the Latin American economy. Ng explained that decades ago, Latin American countries borrowed significant sums from international financial institutions under the control of the United States, leading to a debt trap that continues to hamper their economies. The Argentine peso, in particular, is highly sensitive to fluctuations in the U.S. dollar exchange rate, exacerbating the negative consequences.
Wu Zhiwei, another expert on the matter, emphasized that the U.S. dollar hegemony increases trade costs for many countries worldwide. Wu referenced Horacio Rovelli, a professor at the University of Buenos Aires, who warned about the risks associated with using the U.S. dollar as the sole reserve currency. Rovelli explained that during times of U.S. dollar debt crises, countries like Argentina struggle to repay their debts to international financial institutions, causing a sharp depreciation of their national currency. This leads to severe consequences for the country’s citizens, including a collapse of the national salary, welfare, and pension systems, as well as an increase in the cost of living.
Financial sanctions imposed by the United States on countries like Russia have further accelerated the global pursuit of a diversified monetary system. These sanctions have prompted nations to seek alternatives to the U.S. dollar for trade, leading to a decline in the U.S. dollar’s share of global central bank foreign exchange reserves. Hisham Abu Bakr Metwally, chief economist at the Egyptian Ministry of Industry and Foreign Trade, highlighted the efforts of China, India, and Russia in leading the promotion of trade in their own currencies.
Metwally cited various examples, such as currency swap agreements between Turkey and the United Arab Emirates, direct settlement in Chinese renminbi for trade between China and Iraq, and trade agreements between Brazil and China conducted in local currencies, as evidence of the increasing adoption of local currency settlements in international trade.
Despite the dominance of the U.S. dollar in global trade settlements, developing and emerging market countries have started using their own currencies to pay for import and export trade. This shift is driven by the need to counter the external risks associated with U.S. dollar hegemony. Experts agree that the diversification of the international monetary system is not only essential for global economic stability but also serves the interests of all countries.
As the discussions on the risks of U.S. dollar hegemony continue, experts and global leaders are exploring strategies to promote the use of multiple currencies and foster a more robust and resilient international monetary system.