This is big.
According to a plan just published, Russia seeks to de-dollarize its economy by 2024.
Apparently, at the core of the plan, Russian exporters who use rubles instead of dollars would get huge tax benefits including quicker VAT returns and other incentives to ditch the greenback, reports RT.
This is an intriguing plan. If Russian exporters demand to be paid in rubles, this will result in the counterparties to the exporters going out and purchasing rubles on foreign exchange markets to complete their payments. Perhaps even holding some cash balances in rubles.
No doubt, China and the EU will both be carefully observing Russian efforts in this direction. All are unhappy with the US dollar as a reserve currency since the US has more economic power to muscle these countries with its currency dominant.
If anything triggers the abandonment of the US dollar as the world's reserve currency, this could trigger years of higher price inflation in the United States as the dollars arrive back on US soil.
The US best be very careful with how it flexes the power generated by global dollar dominance. Abandonment of the dollar by countries as a reserve currency would be very painful for US consumers. In time, it could even lead to a major dollar collapse on foreign exchange markets,
-RW
"If anything triggers the abandonment of the US dollar as the world's reserve currency, this could trigger years of higher price inflation in the United States as the dollars arrive back on US soil."
ReplyDeleteWhere are these dollars currently sitting? If the current holders don't use them to buy US exports or invest in US securities or assets, and don't hold them in USD deposits, are they just holding them in boxes under their beds?
They use them to buy commodities from other countries -- especially oil. The US dollar has generally been considered more stable and safer than other countries' currencies. As much as 50% of all US dollars are used for transactions having nothing to do with assets held in the US.
DeleteThis has allowed the US to print dollars almost at will without triggering massive inflation. Other countries are getting wise to the scam -- or at least the US scammers are outdoing other countries' currency manipulations.
That's not a full answer. What do the sellers of oil do with the USD they receive?
DeleteI would bet a significant chunk are held for currency conversion investing where banking absorbs dollars when the currency is up and local conversion is profitable. Institutional maneuvering is likely a part of it the parked dollar.
ReplyDeleteOf course since the velocity of the currency is such that it can handle trade velocity for purchase and conversion it is still very hard to beat the biggest game in town.
I am surprised none of the BRICS have started rumoring a gold backed replacement! Both China and Russia hold a lot of gold and should they announce a gold back ... most of the rest of the world would flock to them. The biggest question is why have they not floated it as of yet even if it was a basket of currencies.