By Alex Newman
The trend away from the U.S. dollar in global trade and finance is accelerating rapidly as inflation persists, government debt levels explode, and the Chinese Communist Party (CCP) roams the planet negotiating deals in other currencies.
The economic and political implications of the dollarâs possible loss of its prized status as global reserve currency are hard to overstate, according to experts.
In fact, such a developmentâif and when it occursâcould prove catastrophic to U.S. consumers as their spending power evaporates, economists are warning amid debt-ceiling negotiations that have sent tremors around the world.
Numerous analysts who spoke with The Epoch Times warned that the CCP and other U.S. adversaries were actively advancing the global effort to undermine the dollar.
However, current and former U.S. lawmakers and policymakers also placed much of the blame on the Biden administration, U.S. government spending, and the Federal Reserveâs monetary policies.
âThe dollar is clearly at risk from foreign enemies who wish to challenge American power and domestic fools who believe the American credit card has no limits on spending,â explained Kevin Freeman, host of the Economic War Room and an authority on economic warfare.
In comments to The Epoch Times, Freeman, who has briefed top U.S. military officials and policymakers, pointed to CCP strongman Xi Jinping and Russiaâs Vladimir Putin as foreign adversaries seeking to undermine the dollar.
The Saudis and numerous powers across Africa and Latin America have joined the âanti-dollar cabalâ in recent months, he added.
But the U.S. government deserves some of the blame for the developments, he said.
âSadly, we are making it easy for them with massive debt increases, an erratic foreign policy, and Washingtonâs arrogance that ignores the threat,â said Freeman, who also serves as a senior fellow at the Center for Security Policy.
Multiple members of Congress who spoke with The Epoch Times echoed the concerns about the Biden administrationâs role in the accelerating shift away from the dollar.
Rep. Paul Gosar (R-Ariz.) pointed to the president himself. âJoe Bidenâs war mongering, runaway inflation, and irresponsible spending sprees have threatened our currencyâs value,â he said.
A broad range of experts who spoke with The Epoch Times were divided on when or even if the U.S. dollar might lose its status as global reserve currency, and what that could mean for the U.S. economy and the American people.
While many are warning of calamity, some even said there may be a âsilver liningâ to the U.S. dollar losing its global position.
But regardless of when or how the saga plays out, the significance of the trends surrounding the U.S. dollar and its role in the world will be profound and highly disruptive at the very least, experts said.
De-dollarization
Thanks to the unchallengeable supremacy of the United States in the aftermath of World War II and the dollarâs nominal backing by gold at the time, and later its endorsement by oil exporters as the âpetro-dollar,â the American currency has reigned supreme among currencies for over 70 years.
The dollar still benefits from what is known as the ânetwork effectâ as well as the fact that U.S. capital markets are the deepest and most liquid in the world, experts told The Epoch Times.
But if current trends away from the dollar and political instability continue, analysts say the American currencyâs coveted status as the global reserve could be shaken or even lost for good. In fact, the process is already underway, some experts warned.
The dollarâs share of global reserves just two decades ago was at about 75 percent, according to experts and analysts. Today, estimates suggest it is under 50 percent and shrinking fast.
Speaking at the 2023 Milken Institute Global Conference, International Monetary Fund (IMF) chief Kristalina Georgieva highlighted the trend.
âThere has been a gradual shift away from the dollar,â she said, adding that the euro, the British pound, and the CCPâs yuan were all gaining ground.
While Georgieva said she did not anticipate an imminent rise of a viable alternative as âwe may migrate to central bank digital currencies massively,â that does not mean it will not come eventually.
Non-Western central banks are also buying gold in record quantities, and analysts expect that demand to remain strong.
âWe think this trend of central bank buying is likely to continue amid heightened geopolitical risks and elevated inflation,â Swiss bank UBS said in a note.
âIn fact, the US decision to freeze Russian foreign exchange reserves in the aftermath of the war in Ukraine may have led to a long-term impact on the behavior of central banks.â
Even traditional U.S. allies have been conducting deals in non-dollar currencies. In late March, for example, the French government completed its first cross-border liquified natural gas deal in Chinese yuan.
Also in March, authorities in Brazilâan economic powerhouse that historically has had close relations with the United Statesâalso inked a deal with the CCP to trade in domestic currencies rather than the dollar.
The trends are accelerating. According to a recent note by prominent currency analyst Stephen Jen at Eurizon SLJ, the dollar lost market share in 2022 at 10 times the pace as during the previous 20 yearsâa trend he says most analysts have missed.
The speed at which this is happening is dramatic, too. âAdjusting for these price changes, the dollar, we calculate, has lost some 11 percent of its market share since 2016 and double that amount since 2008,â added Jen, who previously worked at Morgan Stanley.
Much of the recent acceleration has to do with U.S. policy on Ukraine. âThis erosion in the USDâs reserve currency status has accelerated precipitously since the start of the war in Ukraine,â noted Jen, pointing to âexceptional actionsâ against Russia that âstartledâ large reserve-holding countries.
âWhat we witnessed in 2022 was sort of a âdefund-the-global-policeâ moment, whereby many reserve managers in the world disagreed with the conduct of both Russia and the US.â
CCP Agenda
Calls for a new global monetary system and reserve currency are not new, though. Even a decade ago, the CCP was promoting the idea through its propaganda machine.
âWhat may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States,â Liu Chang wrote in an opinion piece for Xinhua, a CCP propaganda and intelligence-gathering operation.
Analysts said the Xinhua editorial was undoubtedly approved by senior CCP officials and clearly reflected Beijingâs views.
One benefit of such a policy would be to âencourage Washington to play a much more constructive role in addressing global affairs,â the CCP piece continued, calling for a âde-Americanizedâ so-called ânew world order.â
It was hardly the first time the CCP touted the idea. In a 2009 report by Peopleâs Bank of China chief Zhou Xiaochuan dubbed âReform the International Monetary System,â the CCP called for an âinternational reserve currency that is disconnected from individual nations and is able to remain stable in the long run.â The proposed global currency could be issued by the IMF, he said.
In other words, almost 15 years ago, the highest echelons of power in Beijing were plotting a global currency to replace the dollar as the world reserve.
When asked about the idea at a Council on Foreign Relations event, then-U.S. Treasury Secretary Timothy Geithner shocked observers. âWeâre actually quite open to that,â he said, causing the dollar to plunge.
Many of the same policymakers from the Obama administration in 2009 who were supportive of the idea remain in positions of influence in the Biden administration today.
And as The Epoch Times reported in 2021 amid the CCP virus crisis, the IMF has been moving in that direction with its special drawing rights, a sort of proto-global currency issued by the global financial institution.
Former U.S. Assistant Secretary of State for International Organizations Kevin Moley, a leading voice warning of the CCPâs agenda, said the shift away from the U.S. dollar was âone of the most dangerous developments in the post-war era.â
While he blasted the Biden administration for angering and alienating U.S. allies, he pointed to the CCPâthe âgreatest existential threat to the Republic since 1776ââas the main driver of the ongoing shift.
âThis is all part and parcel of their plan to dominate the world,â he said. âIt is Chinaâs intention to become the dominant superpower of the 21st century.â
Key members of the Biden administration have publicly celebrated the CCPâs growing role on the world stage.
For example, senior Biden administration diplomat Bathsheba Crocker, who served as assistant secretary of state for international organization affairs during the Obama administration, was quoted by CCP paper China Daily as saying she was âparticularly pleasedâ to see Beijing taking more responsibility in the United Nations.
Previous presidential administrations, which Moley said were âmisledâ by their own âarrogance,â have also contributed to the CCPâs ongoing push to dethrone the dollar, he said.
With House Republicans revealing evidence of CCP money being funneled to Biden family members in suspicious transactions, questions about CCP influence in Washington continue to grow.
Domestic Causes
But while the CCP may be hoping to see the dollar replaced as the global reserve, that would be much more difficult to accomplish if not for the policies pursued by the federal government and the federal reserve,â lawmakers told The Epoch Times.
Gosar, for instance, told The Epoch Times that âwar mongeringâ by Biden along with ârunaway inflation and irresponsible spending spreesâ have contributed in a major way to the dollarâs escalating woes.
âAmericans have taken for granted that most countries try to do business using U.S. dollars,â he said. âOur dollar has historically been seen as stable, reliable, and useful. This benefits our nation greatly.â
Now, however, U.S. financial dominance is âunder threatâ because of Bidenâs âincompetence,â the GOP lawmaker told The Epoch Times.
âCountries like Russia, China, and India are now looking at using other currencies because Biden has abused our currency and banking system,â he said, pointing to legislation he and others introduced to link the dollar to gold again as a way to rein in the problems.
Former Congressman Ron Paul, a longtime advocate for monetary reform who served in key congressional positions relating to currency and banking, also pointed to U.S. policy as a leading cause of the shift away from the dollar.
While itâs true that foreign governments and central banks right now appear to be âganging upâ on the dollar, Dr. Paul told The Epoch Times that much of the blame belongs with U.S. policy makers.
âOther governments are ditching the dollar because of our foreign policy causing so much harm to them and also our warmongering policy, which is not healthy for the world or our own peace,â said the veteran lawmaker and author of the best-selling book âEnd the Fed.â
David Stockman, director of the Office of Management and Budget (OMB) in the Reagan administration, said he was not surprised at the global trend away from the U.S. dollar considering U.S. financial and monetary policies.
âFor years, the Federal Reserve has been flooding the financial system with dollars,â he said. âAs a result, people are looking for alternatives that have a better chance of maintaining their value over time.â
Another expert, prominent financial forecaster and economic analyst Charles Nenner, cited his models and macro trends to suggest that the looming âmajor de-dollarizationâ was tied to the end of a 250-year âsuper cycle.â
âThe United States has such a big deficit that it is leading to the start of longer-term inflation,â said the former Goldman Sachs analyst, whose Charles Nenner Research Center advises hedge funds, banks, brokerage firms, family offices, and individual clients.
âThe world has lost confidence in the leadership of the USA,â he added.
Amid those trends, governments and central banks of the BRICS nationsâBrazil, Russia, India, China, and South Africaâare currently creating what Nenner described as an âanti-dollar economy.â
âWe expect most of the world to follow the alternative currency that BRICS countries are trying to develop,â he said.
Indeed, former Goldman Sachs chief economist Jim OâNeill openly called on the BRICS governments to deliberately counter the dollar.
âThe U.S. dollar plays a far too dominant role in global finance,â he wrote in the journal Global Policy.
Effects
This shift away from the dollar could lead to huge outflows from the U.S. bond market, an âenormous rise in inflation,â and other problems for the U.S. economy, Nenner explained.
Obviously, there would be major implications for the purchasing power of the dollar, too, as the cost of imports and commodities measured in dollars soared.
It would also accelerate the ongoing global shift toward central bank digital currencies (CBDCs), said Nenner, who has worked with numerous leading banks around the world.
On the geopolitical front, Nenner suggested, the world may be rapidly approaching the end not just of dollar supremacy but of the global dominance of the United States, with the collapse of the dollar merely one symptom of a broader trend.
Historically, the average age of empires has been about 250 years, Nenner said, pointing to the rise and fall of the Roman, Dutch, and British empires as examples.
âThe USA shows the same symptoms as these previous empires showed right before their downfall including the loss of trust from other nations,â he said.
In other words, the loss of the dollarâs status appears to be an important part ofânot just a cause ofâa broader geopolitical realignment with profound implications for the world.
Paul, a three-time presidential contender who for decades warned about what was happening to the U.S. currency as well as what he viewed as the danger of an interventionist foreign policy, told The Epoch Times in a wide-ranging interview that the United States was already facing an âinflationary depression.â
âAnd itâs going to get worse as the dollar continues losing ground,â he said, arguing that prices would rise dramatically. âThere will be so much pain and suffering when they have to give up on the dollar.â
While many analysts are âcluckingâ about the trend being potentially catastrophic for America, Stockman suggested it may not necessarily be a bad thing for the United States over the long term, as it would force Congress to act more responsibly.
âThis is just a gift to Congress that allows them to spend and spend and build up the public debt to the point that weâre at $31 trillion today, to the point that weâre having a debate about paying our bills and not cutting any spending,â he said, sounding flabbergasted.
It will be very painful and Americans will have to accept a significantly reduced standards of living, Stockman said.
But the âsilver liningâ of the U.S. dollar losing its global-reserve status is that âit will wake up the politicians and policymakers to understand that weâve been living way, way beyond our means, and weâre going to have to pay the piper,â he said.
âItâs about time for us to face the factsâthe realityâand change policy quite dramatically,â he added.
In economic terms, the loss of global reserve status will mean Americans will have to export more to be able to import the same amount, explained Dr. Thorsten Polleit, chief economist at Degussa, Europeâs largest precious metal trading house.
In comments to The Epoch Times, the honorary professor of economics at the University of Bayreuth said this means a decline in living standards.
âMoreover, as capital inflows would most likely also decline, there would be lower investments and lower economic growth in the U.S. going forward,â he said.
Ultimately, the world may even end up divided between a âdollar blockâ and a ânon-dollar blockâ as a more âmultipolar world currency systemâ emerges and other currencies such as the yuan and the euro gain ground.
Experts who spoke with The Epoch Times had widely divergent views on whether the transformation would be sudden or gradual, as well as on how long it might take for the dollar to lose its prized status.
Neither the U.S. Treasury nor the IMF responded to requests for comment.