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De-Dollarization: A Reshuffling of Global Power



Recently, there has been a lot of discussion and controversy about de-dollarization. It is obvious that the global economy is seeing a shift in its reliance on the US dollar as the world's reserve currency and medium of international transactions as numerous experts and institutions weigh in on the issue.


The US dollar has been the main medium of exchange for international trade and the world's reserve currency for a long time. The United States has benefited greatly economically and politically from this status. The US was able to finance its debt and exercise influence over other nations thanks to the ability to issue the dollar as a reserve currency. Washington might also inflict economic sanctions on countries by barring them from participating in the dollar-based system of international trade.


The dynamics of the world economy have changed noticeably in recent years, sparking discussions about dedollarization. The sustainability of dollar supremacy has begun to be questioned by prominent voices from a variety of sectors, including academics, think tanks, and media outlets.


A growing tendency away from the dollar is highlighted by Russian President Vladimir Putin's declaration in favour of utilising the Chinese yuan for settlements between Russia and nations in Asia, Africa, and Latin America. This is in addition to China's growing usage of the yuan in trade settlements.


Additionally, nations under American sanctions have looked for other trade channels, such as using barter systems or relying more on non-dollar currencies.


The loss of the dollar as the primary reserve currency would have significant effects on world politics, economics, and military strength. Such a change would alter the geopolitical environment in ways that have not occurred since the Cold War or even World War II.


The US emerged as the world's preeminent power after World War II, and the dollar was established as the gold-backed reserve currency. However, the gold backing was dropped in 1971, and the dollar started to float freely as a result of economic pressures, particularly those brought on by the Vietnam War.


By securing its position as the world's top oil buyer thanks to its relationship with Saudi Arabia, the US strengthened its position as the world's economic leader. The so-called "petrodollar system" enabled nations that export oil to amass enormous sums of money, which they frequently invested in U.S. Treasury securities or the purchase of weaponry.


The petro-weapondollar era may be in serious trouble, according to recent events. The erosion of dollar supremacy is a result of several reasons, including China's growing economic and technological might, the United States' dwindling manufacturing base, and the fading appeal of the American growth model to the Global South.


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