Saudi Arabia just said they are now ‘open’ to the idea of ​​trading currencies in addition to the US dollar – does this spell doom for the dollar? 3 reasons not to worry

Saudi Arabia just said they are now 'open' to the idea of ​​trading currencies in addition to the US dollar - does this spell doom for the dollar?  3 reasons not to worry

Saudi Arabia just said they are now ‘open’ to the idea of ​​trading currencies in addition to the US dollar – does this spell doom for the dollar? 3 reasons not to worry

The World Economic Forum 2023 is only a few days away and we are already getting a glimpse of the future that the global elites envision for all of us.

Saudi Arabia’s finance minister, Mohammed Al-Jadaan, stunned reporters in Davos when he said the oil-rich country was open to trading currencies in addition to the US dollar for the first time in 48 years.

“There are no problems discussing how we handle our trade deals, whether in the US dollar, the euro or the Saudi riyal,” Al-Jadaan said.

His comments are the latest signal that powerful countries around the world are plotting a “de-dollarization” of the global economy.

This is why substituting the dollar is gaining popularity and why dethroning the greenback is easier said than done.

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Rebellion against the dollar

The dominance of the dollar in world trade and capital flows goes back at least 80 years. For the past eight decades, the US has been the world’s largest economy, most influential political entity, and most powerful military force.

However, economists from other countries are increasingly concerned that the country has “weaponized” this position of power in recent years, according to the CBC. The US enforces sanctions to punish conflicting countries, threatens to devalue its own currency to win trade wars, and uses its currency to support its own economy at the expense of the rest of the world.

Unsurprisingly, these moves have drawn backlash from China, Russia and other prominent countries.

At the 14th BRICS Summit last year, Russian President Vladimir Putin announced measures to create a new “international currency standard”. Meanwhile, China is urging oil producers and major exporters to accept yuan as payment.

This revolt against the US dollar could erode some of its influence, but there are reasons to believe that the greenback’s dominance will continue.

Replacing the dollar would be difficult

The dominance of the US dollar is undervalued. At the end of 2022, the dollar will account for 59.79% of total foreign reserves. In comparison, the euro represents 19.66%, while the Chinese renminbi represents only 2.76% of global reserves.

China can increase its market share with twentyfold and are still well behind the US dollar.

Simply put, replacing the US dollar with foreign reserves is easier said than done.

READ MORE: 4 Easy Ways To Protect Your Money From Red-hot Inflation (Without Being A Stock Market Genius)

Other countries have a lot to catch up on

Reserve currency status is closely related to the size of the issuing country’s economy. In other words, the largest economy usually has reserve currency status.

During the 19th century, the British pound was the world’s reserve currency because the colonies of the British Empire needed it for trade and commerce. For the past century, the US dollar has dominated because the US economy is by far the largest.

China’s growth has slowed in recent years and some believe it will never catch up with the US. Meanwhile, Russia was the 11th largest economy before it invaded Ukraine, despite being smaller economically than just California or Texas.

And India is growing fast, but it would need to grow 628% to match current US GDP. That could take 25 years.

America’s economic lead is simply insurmountable.

The US will be fine

The final reason Americans shouldn’t worry about the dollar losing influence is that the worst-case scenario isn’t that bad. Some analysts believe the future could be more multilateral.

The US may be losing influence in some segments of the global economy, but not its dominance everywhere. For example, the Chinese yuan could become more important for trade and cross-border payments, but the dollar could remain the reserve currency of choice for developed country central banks.

That’s far from an economic nightmare for Americans.

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This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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