According to Goldman’s latest report, among the challenges facing the dollar “is the fact that the United States has a relatively small share of world trade compared to the dollar’s dominance in global payments,” as well as a “position of net foreign assets” that is deteriorating, with growing foreign debts” and “faces geopolitical problems, such as Russia’s war in Ukraine”.
Economists still say that “the US’s large debts from being a large importer of goods may be a particular problem.” According to them, “international investors became increasingly reluctant to hold the British pound after the country ran up huge debts in World War II.”
“If a reserve currency issuer’s debt grows relative to GDP, eventually foreigners may be reluctant to hold more,” they said.
Genial Investimentos had already pointed out that the Ukraine War could represent “the end of the dollar”. According to the Brazilian broker, this would happen because “the dollar, like other fiduciary currencies, represents a sovereign debt between a given government and the entity that was willing to retain the currency in its portfolio.”
“If, for any reason, the issuing government of the fiat currency refuses to honor this debt, as in the case of prohibiting access to funds deposited in banks under its jurisdiction, the credibility of this currency is clearly affected,” they say. the analysts.
At the same time, it points out that events such as the humanitarian crisis caused by the invasion of Ukraine, the exclusion of Russia from Swift – which processes the financial operations of 11,000 banks around the world and is one of the pillars of the world economy – and the Northern sanctions Americans made to the Russian economy could cement the decline of the world’s most important currency. On Friday, April 1, the US currency closed at its lowest value in the last two years.
Source: Ambito
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