The major credit rating for the US government was downgraded from AAA to AA on Tuesday by the global standing agency Fitch. Additionally, Fitch repeatedly engaged in down-to-the-wire debt-ceiling negotiations that put the government’s ability to pay its charges in jeopardy and predicted financial decay over the following three years.
There are serious, legitimate questions to be asked about the long-term trajectory of the dollar because this is the second major rating agency( after Standard & amp, Poor’s) to deprive the US of its triple-A rating.
Read also: The$ 3.2 trillion in Asia is at risk due to Fitch’s lowering of the US.
Past firmly teaches us that little lasts permanently, despite the fact that no one can predict the future. Previously, global supply economies have come and gone. It may occur once more.
In fact, I think we are seeing the world start to leave a dollar-dominated economic program in real time.
This is due, among other things, to the huge amount of desperate money printing that has been done to monetize these debts and the astronomical levels of debt that have resulted in a significant decline in the long-term value of the currency.
As Russia and Saudi Arabia pursued the Taiwanese yuan for fuel deal earlier this year, I was one of the first to raise concerns about the US currency’s supremacy.
One of the most significant and frequently traded commodities worldwide, crude has historically been priced and traded in US cents. Due to the fact that nations that want to buy oil must first obtain US dollars to do so, this has given the US money a strong position in international financial markets.
The desire for the money may be drastically reduced if petrol trading shifted away from the US dollar, which may result in a decline in the value and dominance of the greenback.
For Asian markets, a transition away from the impact of the money may be advantageous.
Asian nations stand to gain from reduced reliance on the dollar as the most populous and commercially diverse region in the world. & nbsp, It would give them more freedom to choose their monetary policies.
Now, several Asian nations, including China, must consider the US Federal Reserve’s actions when deciding on their own interest rates and financial policy measures. They would be able to implement policies that are more suited to their home economic conditions if their reliance on the dollar was reduced, probably fostering stability and growth.
Asian economies may probably diversify their reserve currencies as the dollar lost its hold, opening up more opportunities for local trade and investment. & nbsp,
A international currency system would encourage the widespread use of local currencies like the Indian rupee, Chinese yuan, and Japanese Yen, increasing the accessibility and effectiveness of trade within Asia. This would strengthen intra-regional economic cooperation and lessen the dangers of being exposed to a single strong money.
Asia has long struggled with the fluctuations of the dollar, which can have a negative effect on their cash flows and business balances. A lessening of the dollar’s potency may result in more stable exchange rates, lowering the uncertainty and uncertainty of cross-border transactions.
Eastern companies could therefore make more confident plans and investments, which improved the region’s financial stability and growth.
Additionally, as a precautionary measure, Asian economies have frequently accumulated sizable foreign exchange reserves, mainly in dollars, due to the dollar’s dominating status. This practice does have an opportunity cost, though, as those resources could be used to invest in more profitable home projects or different currencies.
Asian nations may be encouraged to diversify their reserve holdings as the dollar’s dominance declined, which would improve resource allocation and boost investment in creative industries.
Adopting a more varied and balanced currency system, in my opinion, could be crucial to realizing the full potential of Asia’s active economies as the world becomes more connected and multipolar.
Nigel Green is the CEO and founder of deVere. Follow him @ nigeljgreen on Twitter.