The latest one is with Brazil Brazil and China are ditching the dollar from now on they’ll use their own currencies for trade so China is pushing the Yuan what about the Indian rupee it’s not far behind the Indian rupee is also emerging as a serious contender and why are these Trends significant
Because currencies Drive Commerce the dollars dominance gives the U.S an outsized influence on the global economy and a shift away from the dollar will only hurt America it will also hasten the rebalancing of the global economy in the next few minutes we’ll look at this trend and where this is going first
The events in Brazil Brazil announced the deal yesterday and it did not come out of the blue the agreement had been in the works for a while a preliminary pact was signed in the month of January it laid the foundations of the final agreement and it’s a fairly simple deal
Earlier Brazil and China used the US dollar for trade now they will deal in their native currencies China will use the Yuan and Brazil will use the Brazilian realize how does it help it will save costs look at the official statement from Brazil this is what it
Says the expectation is that this will reduce costs promote even greater bilateral trade and facilitate investment China is Brazil’s biggest trading partner last year the bilateral trade was worth over 150 billion dollars so it makes sense for Brazil to ditch the dollar but what’s in it for China
Beijing is on a mission it wants to internationalize the Yuan it is building a large Coalition of Partners these are countries that will use the Yuan instead of the US dollar and Beijing has made considerable progress in this direction it has secured bilateral pacts with 41 countries so far the total value of
These agreements is more than 500 billion dollars so the yuan is gaining International acceptance and the Petro yuan is rising now what is the petrol Yuan it’s not a different currency petrol yuan is simply using the Yuan to settle oil bills just like the petrol dollar and China is making an aggressive push
For this it is finding takers in oil producing Nations Russia for instance it has embraced the Yuan so have Iran Venezuela and some African nations now report says Saudi Arabia is also considering the switch the switch from the dollar to the Yuan and this is going to be a very important development we
Know that Riyadh has been at odds with Washington and is getting closer to Beijing but ditching the dollar will be a decisive move meanwhile the Indian rupee is also competing in this race last year India’s Reserve Bank made a move it allowed International Trade settlements in the
Indian rupee it’s still early days but India has made progress banks in 18 countries have shown interests they’ve opened special accounts and these accounts will help them settle trade payments in the Indian rupee and these are the countries we’re talking about they’re ditching the dollar they want to use the Indian rupee
For trade with India earlier this year Brazil and Argentina floated an idea they’re thinking about a common currency for South America halfway across the world southeast Asia too is losing patience with the US dollar in Africa countries like Kenya are dumping the dollar they’ll use the Kenyan Shilling for oil imports
So here’s a question why is all of this happening now why is there a global Rebellion against the dollar also how did the dollar become the world’s Reserve currency it happened after the second world war in the year 1944. 44 Allied countries met at Bretton Woods in the U.S 44
Countries came together they wanted to avoid another Financial turmoil so they created a system a set of rules that would shape the global economy as we know it today it led to the creation of the international monetary fund the IMF also the World Bank the Allies also agreed to
A new exchange rate system each country pegged the value of its currency to the US dollar and that’s how the American dollar gained its dominance the Bretton Woods conference gave the U.S immense power to dominate the global economy it created two financial institutions the IMF in the World Bank largely controlled by America
And they’re still quite powerful and still led by the U.S as for the dollar it is still widely used both inside and outside the U.S about one trillion dollar notes are in circulation outside America some 40 percent of the world’s debt is issued in U.S dollars nearly 60 percent
Of the Global Currency reserves are in U.S dollars and close to 90 percent of All Foreign Exchange Trade involves the US dollar the world economy is hooked to the dollar but now it wants to give up this addiction but it will not happen overnight the Dollar’s downfall though has begun
