The end of the Dollar Hegemony is not just a monetary policy. It is a social and political reality. The currency has become the world’s reserve currency since World War II. This monetary function has allowed the United States to print unlimited money, and spend it around the world. American hegemony has been achieved by using this monetary function to build military arsenals and buy influence around the world.
El Salvador adopting bitcoin as legal tender
El Salvador is one of the first countries to officially adopt bitcoin as a legal tender. However, the country’s citizens have been skeptical about the technology. During a recent survey conducted by the Central American University Jose Simeon Canas, 71.2 percent said that they still preferred using dollars for their payments. Moreover, 66.7 percent said that the new law should be reversed.
President NayibBukele of El Salvador announced last year that the country would adopt Bitcoin as a legal tender. The move is a significant step for the country, as it would help people make remittances faster and cheaper. It would also free up the country from its reliance on the U.S. dollar, which is responsible for about 20% of the GDP. El Salvador will also be a leader in adopting cryptocurrency.
However, the adoption of bitcoin has been criticized by international financial regulators. The World Bank and the IMF have expressed concerns that adopting cryptocurrency could leave the country vulnerable to money laundering and illicit financial activities. The government has also faced international criticism for its recent court ruling, widely considered unconstitutional. El Salvador’s judges concluded that Bukele can serve another term in 2024 – despite the fact that the country’s constitution prohibits second terms.
The government has spent a lot of resources on the process of adopting Bitcoin as a legal tender. The government has set up a trust with $150 million of public funds to facilitate the conversion of digital currency into dollars. The government has also launched a digital wallet called “Chivo” (in Salvadoran slang for “cool”) to help people use the currency. The country has already installed 950 Athena Pay terminals in shops and other businesses.
China’s rise as largest trading partner
Russia & China have grown closer in recent years, particularly as trading partners. This is despite the new sanctions against Russia in response to its invasion of Ukraine. Last year, total trade between the two countries rose by 35.9% to $146 billion. China is Russia’s largest trading partner by imports and exports, and trade with the country is in surplus.
Although China remains an important trading partner, its economy is increasingly reliant on domestic demand. Chinese exports have declined rapidly in recent years, while imports have increased faster. This erodes China’s export share in the global economy. Furthermore, increasing labour costs in China have hurt the country’s global competitiveness. As a result, global production will likely move to lower-cost nations. In the meantime, highly competitive economies will continue to eat away at China’s trade.
China is the largest trading companion of many countries. This relationship has increased US exports and increased imports by over 300% in 2016. Moreover, the trade between the two countries supports 2.6 million American jobs. Furthermore, it allows US companies to tap into a huge new market of Chinese consumers, who are expected to outnumber the US population by 2026. This in turn, boosts economic growth and employment in the US.
The rise of China as the universe’s largest trading partner has major implications for the United States. China’s growth has benefited American firms, but its unfinished transition to a free market has created a host of harmful policies. These policies include industrial policies and theft of intellectual property. This report provides background on China’s rise as an economic powerhouse and discusses the challenges China faces in maintaining its growth and the implications for the United States.
U.S. government’s sell-off of reserve assets
While the Dollar Hegemony has long been the currency of choice, recent developments have raised questions about its viability. As its role in the sanctioning of Russia suggests, it has weakened in the face of ever-growing competition from other global powerhouses. Swiss banks, for example, have been forced to turn over sensitive data to the U.S. government in a bid to identify tax cheats. This act has weakened the dollar’s role as the de facto medium of global trade. Since the completion of the Second World War, other countries have started to reduce their reliance on the dollar.
This move is highly dangerous. Not only would it weaken the dollar, it would threaten U.S. economic security and slash government revenues for domestic spending. Moreover, a run on the bank is very likely. This could lead to currency controls and a sharp shock to the dollar.
The dollar has always had a geopolitical origin. Even before Bretton Woods, the Dollar Hegemony has always been based on geopolitical interests. As Russia is reneging on its obligations under the social contract, the U.S. government should use its assets as collateral to force the bad actors to pay up. The sequestration of Russian assets not only sets a bad example, it also reinforces the need for supply chain collateral.
Selling reserve assets may also reduce overall reserve levels and threaten the Dollar Hegemony. However, the impact of such a move will depend on investment and import locations as well as the global web of portfolio flows.