Video with Transcript: De-dollarization is growing: Even the US Federal Reserve (reluctantly) admits it
Countries around the world are seeking alternatives to the US dollar. IMF economists say de-dollarization is "broad-based". The Federal Reserve reluctantly admits that it is happening. Ben Norton analyzes the latest research.
Topics
0:00 Examples of de-dollarization around the world
3:11 IMF paper on decline of dollar dominance
6:39 Dedollarization is "broad based", IMF says
8:07 Western sanctions lead central banks to de-dollarize
8:56 Gold: Why central banks are buying it up
12:37 US Federal Reserve acknowledges dedollarization
13:18 (Clip) Fed governor on de-dollarization "challenges"
14:28 Fed governor's speech on de-dollarization
15:38 Bitcoin & crypto are NOT an alternative to the dollar
17:29 CBDCs: China-led mBridge system challenges dollar hegemony
18:58 Fed governor discusses de-dollarization examples
20:21 Fed paper on de-dollarization
24:22 Outro
Transcript
Examples of de-dollarization around the world
0:00
the US dollar has been the global
0:02
Reserve currency since the
0:04
1940s but that system is rapidly
0:08
changing countries all across the planet
0:11
are seeking alternatives to the US
0:14
dollar in a global movement that is
0:16
referred to as
0:18
dollarization there are so many examples
0:21
for instance China and Brazil are
0:24
trading using their local currencies
0:26
China and Russia have already dollarized
0:30
more than 90% of their bilateral trade
0:33
Iran and Russia are also using their
0:36
local currencies in bilateral trade
0:39
China has bought liquefied natural gas
0:42
from the United Arab Emirates using its
0:44
own currency the rimi also known as Yuan
0:48
the African continent has created a new
0:51
system that's known as the panafrican
0:53
payment and settlement system which will
0:56
allow African countries to settle
0:58
crossborder trade using their own local
1:01
currencies bypassing the US dollar the
1:04
countries of Southeast Asia in Assan
1:07
have also created a system for
1:10
crossborder payments using local
1:12
currencies which reduces their
1:14
dependence on the US dollar and in June
1:18
even longtime us allies Saudi Arabia
1:21
joined in these dollarization efforts
1:24
Saudi Arabia's Central Bank officially
1:27
joined the mbridge system which is a
1:31
system connecting the central banks of
1:35
China the United Arab Emirates and
1:37
Thailand and now Saudi Arabia and the
1:40
central banks can use cbdcs Central Bank
1:44
digital currencies in order to settle
1:47
trade imbalances without the need for US
1:51
Dollars and even more striking was a
1:54
trip that Russian President Vladimir
1:56
Putin took to North Korea in June he met
2:00
with the North Korean leader Kim junun
2:02
and in an article that Putin published
2:05
in a North Korean newspaper he said that
2:08
pongyang and mosow will quote develop an
2:12
alternative settlement system that is
2:15
not controlled by the west and together
2:18
they will jointly oppose illegitimate
2:21
Western
2:23
sanctions so pretty much everywhere you
2:25
look from Latin America to Africa to
2:29
Asia to Eastern Europe we see attempts
2:32
to create alternative Payment Systems
2:35
deals being signed to D dollarized trade
2:39
and central banks holding other assets
2:42
not just US Dollars everywhere you look
2:45
you can see
2:47
dollarization and this is now being
2:49
acknowledged even by us dominated
2:52
financial institutions like the
2:54
international monetary fund the IMF and
2:57
even the US Central Bank the Federal
3:00
Reserve has reluctantly admitted that
3:04
dollarization is happening today I'll be
3:07
looking at some of these statements from
3:10
fed officials but first I want to
IMF paper on decline of dollar dominance
3:12
analyze a research paper that was
3:14
published by the IMF in June that shows
3:18
how US dollar dominance is
3:21
declining This research paper noted a
3:25
quote ongoing gradual decline in the
3:27
dollar share of allocated foreign
3:30
reserves of central banks and
3:32
governments strikingly the reduced role
3:35
of the US dollar over the last two
3:37
decades has not been matched by
3:40
increases in the shares of the other big
3:43
four currencies that is the Euro Yen and
3:47
pound instead what we've seen is a
3:50
diversification of the assets held by
3:52
central banks around the world not only
3:55
are they holding so-called
3:57
non-traditional currencies from other
4:00
countries but they're also significantly
4:02
increasing their Holdings of gold now
4:05
what's important about this IMF research
4:07
paper is that it has two different
4:09
charts one of which is more useful than
4:12
the other now the chart I'm looking at
4:14
here is not that useful because what it
4:17
does is it shows the currency share of
4:21
Foreign Exchange reserves of central
4:23
banks around the world but it uses
4:26
market exchange rates so it makes it
4:29
look like the dollar share of Central
4:32
Bank Reserves is larger than it actually
4:34
is according to this chart the dollar
4:37
share in global foreign reserves has
4:40
decreased from a a bit over 70% in 2000
4:44
to now under 60% as of
4:48
2022 however this is a bit misleading in
4:52
2022 and 2023 the US Central Bank the
4:56
Federal Reserve significantly raised
4:58
interest rates which meant that the US
5:01
dollar significantly increased in value
5:04
against other currencies and many
5:06
economists say today that the US dollar
5:08
is overvalued which makes it seem
5:11
stronger than it actually is and that
5:14
means that if you don't adjust for the
5:16
exchange rate it looks like the dollar
5:19
share of foreign reserves is higher than
5:21
it actually is higher than the
5:23
purchasing power of the dollar is when
5:26
you adjust for exchange rates of
5:28
different currencies
5:30
you can actually see as is shown in the
5:33
other chart in this IMF paper that the
5:36
Dollar's weighted share of global
5:40
foreign exchange reserves has fallen
5:42
from a bit over 70% in 2000 to Just
5:45
Around
5:47
55% as of
5:49
2022 and in 2023 and 2024 the dollar
5:53
share fell even further so the article
5:56
points out how it's important to keep in
5:59
mind exchange rate fluctuations that can
6:02
have an independent impact on the
6:04
currency composition of central bank
6:06
reserve portfolios and it emphasized
6:09
that this recent trend of dollarization
6:13
is all the more striking given the
6:16
Dollar's strength so given that the
6:18
dollar has become stronger because of
6:21
rising interest rates you would think
6:23
that the dollar share of Foreign
6:25
Exchange reserves would increase but it
6:27
has continued decreasing because again
6:30
this is not only being driven by the
6:33
strength of the dollar this is
6:35
geopolitical not simply the result of
6:38
Market forces in this IMF paper the
Dedollarization is "broad based", IMF says
6:41
economists acknowledge this they point
6:43
out that some analysts have suggested
6:46
that what we have characterized as an
6:48
ongoing decline in dollar Holdings and
6:51
the rise in the reserve share of
6:52
non-traditional currencies in fact
6:55
reflects the behavior of a handful of
6:57
large Reserve holders like Russia for
7:00
instance which has geopolitical reasons
7:02
to dollarize because of Western
7:04
sanctions and because the US and the EU
7:07
froze $300 billion in Euros worth of the
7:11
Russian Central bank's reserves however
7:14
this research from the IMF shows that
7:17
even when you exclude countries like
7:19
Russia and Switzerland from the
7:21
aggregate data using data published by
7:25
central banks we still find little
7:28
change in the overall trend of
7:31
dollarization and as the IMF Economist
7:34
said quote this movement is quite broad
7:39
they identified 46 different central
7:41
banks around the world that are actively
7:45
diversifying their reserves so it's not
7:47
just Russia and a few allies they
7:50
referred to this as the IMF economists
7:53
refer to this as a broad-based shift the
7:58
falling dollar share is evident even
8:00
after the removal of large Reserve
8:03
holders showing that the shift is Broad
8:06
based the IMF economists also found that
Western sanctions lead central banks to de-dollarize
8:10
Financial sanctions have induced central
8:13
banks to shift their Reserve portfolios
8:16
modestly away from currencies in favor
8:19
of gold what does that mean in simple
8:22
English it means that as the US imposes
8:24
more sanctions on countries around the
8:26
world not just the sanctioned countries
8:28
but in general enal central banks are
8:31
moving toward gold and dropping their
8:34
Holdings not only of dollars but of
8:36
currencies in general so gold is
8:38
becoming more important in the reserves
8:42
held by central banks around the world
8:44
and although it's still at a relatively
8:47
low level compared to for instance the
8:49
1960s which was the peak it can very
8:52
quickly reach that level and it is
8:55
accelerating and the financial times
Gold: Why central banks are buying it up
8:57
acknowledg this in a report published in
9:00
June titled rich countries plan to buy
9:03
more gold despite record price now this
9:07
report is very important because it
9:09
shows that it's not just developing
9:11
countries in the global South that are
9:13
targeted by Western sanctions but even
9:16
the wealthy countries in the global
9:18
North the colonial countries even they
9:21
are buying more and more gold in their
9:25
Central Bank Reserves this report notes
9:27
that almost 6 % of rich country central
9:31
banks believe that gold share of global
9:34
reserves will rise in the next 5 years
9:37
that is up from just 38% in
9:40
2023 that's a massive increase in just
9:43
one year furthermore 133% of advanced
9:47
economies plan to increase their gold
9:49
Holdings in the next 5 years up from 8%
9:52
the year before and they're following
9:55
the lead of Emerging Market central
9:57
banks that is in the global South
9:59
a rising proportion of advanced
10:02
economies 56% up from 46% in the
10:06
previous year think the dollar share of
10:09
global reserves will fall now again I
10:12
need to stress how important this is
10:14
because this is a poll not only of the
10:18
countries in the global South the
10:19
formerly colonized countries which are
10:22
dollariz much more quickly obviously
10:25
because they're afraid of Western
10:26
sanctions but even the wealthy central
10:30
banks in the rich colonizing countries
10:34
they are also dollariz and adopting more
10:39
gold this report quotes a financial
10:43
analyst who said quote it's not just the
10:46
emerging market economies evaluating
10:49
these factors less but Advanced markets
10:52
catching up to how Emerging Markets feel
10:55
about gold and the financial times notes
10:58
that a Rec record share of central banks
11:00
since the survey began 5 years intend to
11:03
increase their gold reserves over the
11:06
next 12 months
11:08
29% of central banks plan to buy more
11:11
gold and in Emerging Markets nearly 40%
11:16
of central banks plan to buy more gold
11:19
and one of the reasons for this is of
11:21
course us sanctions on Russia's dollar
11:24
denominated assets and also Euro
11:26
denominated assets prompted a rush on
11:29
among nonwestern official financial
11:31
institutions for gold the dollar share
11:35
of global foreign exchange reserves
11:37
excluding gold has plummeted from More
11:39
than 70% in 2000 to around 55% as of
11:44
2023 and they cited the IMs study
11:47
however we should keep in mind that
11:50
these statistics only look at the dollar
11:53
share of currencies in foreign exchange
11:57
reserves if you also include gold in the
12:00
reserves of central banks you can now
12:03
see that the US dollar share of global
12:06
reserves has dropped to below
12:09
50% below half this is a very important
12:13
detail because when you look at most of
12:15
this data even in this IMS study it's
12:17
looking at the US dollar share of
12:20
Foreign Exchange reserves in terms of
12:23
currencies but what we see is that
12:25
central banks are not only diversifying
12:28
the hold of currencies that they have in
12:30
their reserves but they're also buying
12:32
gold so dollarization is happening
12:36
quickly and even the US Central Bank the
US Federal Reserve acknowledges dedollarization
12:39
Federal Reserve has reluctantly
12:41
acknowledged this in May the FED held a
12:45
conference on the international role of
12:48
the US dollar this conference featured
12:51
remarks by Christopher Waller who is a
12:54
member of the Board of Governors of the
12:57
Federal Reserve System and he was
12:59
previously the Executive Vice President
13:01
and director of research at the St Louis
13:03
fed here is a clip of these remarks by a
13:07
top fed official in which he
13:09
acknowledges that there are growing
13:11
challenges to the dominance of the US
13:13
dollar and in particular he mentioned
13:16
some of the geoeconomic challenges while
(Clip) Fed governor on de-dollarization "challenges"
13:19
recognizing that the US dollar May face
13:21
some challenges to its dominance in the
13:23
future we as policy makers are also
13:26
attuned to the potential potential
13:29
Financial stability challenges the the
13:31
current broad use of the US dollar can
13:34
pose Four Financial systems in the
13:36
United States and the rest of the world
13:39
for instance one of those challenges is
13:41
the complex relationship between the
13:44
dollar and geoeconomics commonly defined
13:48
as the interplay between economic and
13:51
geopolitical tools and
13:53
objectives Rising geopolitical tensions
13:56
sanctions against Russia China his
13:59
efforts to bolster usage of the RMB and
14:02
economic
14:03
fragmentation all can affect the
14:05
international use of the dollar most
14:08
visibly as a store of value and
14:10
reflected in its use in official foreign
14:13
exchange
14:14
reserves these same factors can also
14:17
affect the Dollar's role as a medium of
14:19
exchange for example with its use in
14:21
trade invoicing global banking
14:24
International debt issuance and foreign
14:26
exchange
14:27
transactions now this fed official
Fed governor's speech on de-dollarization
14:30
Christopher Waller made similar remarks
14:32
back in February in a speech at a
14:35
conference and the transcript of this
14:37
was posted also on the FED website he
14:40
noted that quote recent commentary
14:42
warning of a possible decline in the
14:44
status of the US dollar raises concerns
14:47
about the effects of sanctions against
14:49
Russia us political dysfunction the rise
14:53
of digital assets and China's efforts to
14:56
bolster usage of the ren Mini other
14:59
commentary has warned of geoeconomic
15:02
fragmentation of course this official
15:05
works at the fed his his role is to
15:07
defend the US dollar and in this speech
15:10
he did try to downplay some of these
15:12
criticisms and argue that the dollar is
15:15
in a better position than many people
15:17
think he did acknowledge however that
15:20
going forward there are potential
15:22
challenges to the Dollar's International
15:24
status and some recent developments have
15:26
the potential to boost the international
15:29
use of other currencies one of those is
15:32
he acknowledged the growth of digital
15:34
currencies in particular Central Bank
15:37
digital currencies he was very skeptical
Bitcoin & crypto are NOT an alternative to the dollar
15:40
of cryptocurrencies in Bitcoin because
15:42
he pointed out that most trading in
15:45
so-called decentralized Finance involved
15:48
trade using stable coins which link
15:51
their value on to one to the US dollar
15:53
and that's because so-called
15:55
cryptocurrencies are not actually
15:57
currencies they are speculative
16:00
Financial assets that are used for
16:03
instance as inflation Hedges but they
16:05
are not currencies and data from
16:08
multiple countries shows that at most 2%
16:13
of people use crypto to actually buy
16:17
goods and services that is to say 98% of
16:21
people simply speculate on bitcoin and
16:25
other so-called cryptocurrencies which
16:27
are not currencies because the the
16:29
reason that they hold them is as
16:31
speculative Investments they want to get
16:34
richer and Bitcoin is always measured in
16:37
US Dollars it is not an alternative to
16:40
the US dollar and the fact that the Wall
16:43
Street Investment Company Black Rock
16:45
which is the world's biggest asset
16:47
manager now manages the biggest Bitcoin
16:50
fund on Earth A2 billion exchange traded
16:55
fund in ETF for Bitcoin this
16:57
demonstrates that Bitcoin is not an
17:00
alternative to the US dollar it is not a
17:03
currency it is a financial asset and
17:06
investment Banks and asset managers on
17:09
Wall Street can clearly see that and
17:11
they are buying up Bitcoin on behalf of
17:14
their wealthy clients not because they
17:17
think it's going to challenge the US
17:18
dollar the exact opposite so I just want
17:21
to make that very clear and the Federal
17:23
Reserve itself is not afraid of crypto
17:27
as you can see in these comments
CBDCs: China-led mBridge system challenges dollar hegemony