Over the last few weeks, it has seemed that you can’t turn a page, blink at a pixel, or hear a news report without some form of de-dollarization headline shrieking at you. From Brazil to Saudi Arabia, and from India to Argentina, and increasing number of nations are ‘reportedly’ shifting away from the dollar hegemon.
Some recent headlines;
“No Reason” For Malaysia To Rely On US Dollar, PM Warns As Yuan Influence Grows
De-Dollarization Just Got Real
Here Are 7 Signs That Global De-Dollarization Has Just Shifted Into Overdrive
De-Dollarization Has Begun
Eyeballing the Dollar Index (or some other broad index of fiat relativity) drops modest hints but the nature of the relationship of one un-backed currency against another makes that comparison worthless in the longer-term.
But below the surface, the dollar’s fecal matter is striking rotating objects at an increasing pace and Stephen Jen – infamous for his coining of the ‘dollar smile’ while at Morgan Stanley which posits that the US Dollar tends to do well when the economy is soaring or slumping – recently quantified just how rapidly the de-dollarization is ocurring.
Jen, who now runs money at Eurizon SLJ, warned in a recent briefing note, that the dollar is losing its reserve status at a faster pace than generally accepted as many analysts have failed to account for last year’s frantic swings in exchange rates.
As The FT reports, Jen estimates that if you adjust for price changes the dollar’s share of official global reserve currencies has gone from about 73 per cent in 2001 to around 55 per cent in 2021.
Then, last year, it fell to 47 per cent of total global reserves.
Jen and Freire go on to ominously explain that the USD is losing its market share as a reserve currency at a much faster rate than is commonly believed.
This is suddenly serious, as Jen and Freire argue that .
The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions.
Moreover, as Jen stresses, there are actually two pillars that make the US dollar so mighty: its role as the reserve currency of choice, and its dominant use in global finance and trade. “Investors ought not be confused by these two different concepts,” he argues.
Still think it won’t or can’t happen, here’s George Soros… from 2009…