{"id":239557,"date":"2023-04-25T19:52:51","date_gmt":"2023-04-25T14:22:51","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=239557"},"modified":"2023-04-26T18:16:13","modified_gmt":"2023-04-26T12:46:13","slug":"why-dollars-losing-its-shine","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/why-dollars-losing-its-shine\/","title":{"rendered":"Why Dollar\u2019s Losing Its Shine"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the article\u00a0\u201cWhy Dollar\u2019s Losing Its Shine<\/strong>\u201d published in The Times of India <\/strong>on\u00a025th<\/sup> April 2023<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 Economy \u2013 Money and Banking<\/strong><\/p>\n

Relevance: <\/strong>measures taken adopt alternatives to dollar dominance<\/strong><\/p>\n

News<\/strong>: Countries around the world are looking for an alternative to the weakening US dollar.<\/p>\n

What are the alternatives being adopted?<\/strong><\/h2>\n

Central banks of most countries are now buying gold as an alternative to dollars<\/strong>. As per the estimate, gold currently accounts for a record 33% of monthly global demand.<\/p>\n

This buying boom has helped push the price of gold to near record levels, more than 50% higher than what predicted by models based on real interest rates.<\/p>\n

Moreover, countries like Russia, China, Brazil and India are<\/strong> also looking for a new currency to challenge the dollar. Their goal is to trade with one another directly, in their own coin.<\/p>\n

Why are these countries looking for alternatives to dollars for trading?<\/strong><\/h2>\n

Global trade has been based on the dollar since the end of World War II.<\/strong> However, the US has used its dollar dominance against countries to put financial sanctions.<\/p>\n

As per the report, 30% of all countries now face sanctions from the US, the EU, Japan and the UK<\/strong>, which has gone up from 10% in the early 1990s.<\/p>\n

The recent one is sanctions against Russia for its invasion of Ukraine. This cuts off Russian banks from the dollar-based global payment system.<\/p>\n

This implied that in future any developing nation could be a target.<\/strong><\/p>\n

What are other measures being taken to promote non-dollar-based trading?<\/strong><\/h2>\n

The Philippines and Thailand<\/strong> are now looking to non-dollar-based trading. India has also been discussing with the UAE<\/strong> the idea of conducting non-oil trade in rupees.<\/p>\n

Further, dollar as forex reserves has also seen decline since the launch of Russia sanctions<\/strong>. As per the report, the dollar share of central bank reserves is down to 47% from 73% two decades ago.<\/strong><\/p>\n

Further, there are many central banks that are looking to launch their own digital currency.<\/strong> The number has tripled since 2020, representing 95% of the world\u2019s gross domestic product.<\/p>\n

Many are testing these digital currencies for use in bilateral trade<\/strong> which again is a challenge to dollars.<\/p>\n

What does this imply for the US?<\/strong><\/h2>\n

The shift from the dollar to other forms of currencies in trade increases risk for America.<\/p>\n

This is because a dominant dollar matters for the US economy as high demand for the currency tends to lower the cost of borrowing abroad,<\/strong> which is a privilege for America.<\/p>\n

Moreover, among the top 20 developed economies, America now has the second highest fiscal and current account deficits.\u00a0<\/strong>Further, the country\u2019s ability to pay its debts is also slipping<\/strong>, as its reliance on foreign funding keeps growing.<\/p>\n

Hence, the shift from the dollar towards other currencies will affect overall America\u2019s economy.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cWhy Dollar\u2019s Losing Its Shine\u201d published in The Times of India on\u00a025th April 2023. Syllabus: GS 3 \u2013 Economy \u2013 Money and Banking Relevance: measures taken adopt alternatives to dollar dominance News: Countries around the world are looking for an alternative to the weakening US dollar. What are… Continue reading Why Dollar\u2019s Losing Its Shine<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[11499,216,10496],"class_list":["post-239557","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-dedollarisation","tag-gs-paper-3","tag-times-of-india","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/239557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=239557"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/239557\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=239557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=239557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=239557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}