In a recent study scrutinizing role of the U.S. dollar in global trade, local financial analyst, Joel Bhagwandin acknowledged that there is a decline in U.S. dollar reserves worldwide. He stressed however that this is not indicative of a deliberate de-dollarization trend. The analyst said it is a consequence of rising global debt.
For readers unfamiliar with the term de-dollarization, it describes a process of moving away from reliance on the U.S. dollar (USD) for trade. It is also an effort driven by a growing number of countries to reduce the role of the U.S. dollar in international trade.
Countries like Brazil, Russia, India, China, and South Africa (BRICS), are actually seeking to set up trade channels using currencies other than the almighty dollar. BRICS has also been a proponent of de-dollarization to reduce dependency, diversify reserves, minimize exposure to U.S. policy changes, and strengthen their own currencies’ roles in global markets.
Bhagwandin’s comprehensive analysis, as presented through his company, SphereX Analytics, urges that stakeholders resist falling prey to the perception that the movement by BRICS is actually taking root. He posits that there are more global factors that have to be given due consideration.
Bhagwandin asserted, “The decline in the U.S. dollar reserves globally is not attributed to de-dollarization per se.” He emphasized that this descent is linked to countries wrestling with mounting current account deficits and escalating global debt, of which a substantial 80% is denominated in U.S. dollars.
In his executive summary, Bhagwandin highlighted the continued dominance of the U.S. dollar even as China surpasses the U.S. economy in 2022 based on World Bank-adjusted Gross Domestic Product (GDP) for Purchasing Power Parity (PPP).
Citing another critical factor, Bhagwandin noted that at the end of 2022, the U.S. stock markets represented 43% of the total global stock market values, underscoring the nation’s economic strength. Additionally, he noted that the U.S. total banking sector assets outstripped those of the BRICS countries combined, thereby reinforcing the study’s assertion of the enduring supremacy of the U.S. dollar on the global stage.
Bhagwandin said the foregoing matters, among others, without a doubt, challenge the notion of a straightforward de-dollarization trend.
