US Dollar’s Global Reserve Currency Status Diminishing, Warns S&P Global Economist
In a significant statement, a renowned economist at S&P Global, the world’s largest credit ratings agency, has expressed concern over the declining status of the US dollar as the global reserve currency. Paul Gruenwald, Chief Economist at Standard and Poor’s Global, delivered this message during a conference held in London, emphasizing that the dollar’s influence is not as formidable as it once was, according to Reuters.
Gruenwald shed light on the ongoing “fragmentation around the edges,” attributing it to the US’ stringent sanctions imposed on Russia in response to their conflict. These sanctions have led several countries worldwide to explore alternatives to the dollar and actively consider diversifying their currencies for international trade, while also bolstering their gold reserves.
The economist remarked, “We are witnessing significant developments outside the realm of the dollar.”
Gruenwald drew attention to the growing prominence of trade conducted in Chinese yuan and the appealing financing options offered by Chinese banks such as the Asia Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB). Notably, the latter institution was established by the BRICS economic coalition comprising Brazil, Russia, India, China, and South Africa.
While Gruenwald acknowledged that the US dollar will persist as a prominent global currency, he anticipates that it will no longer maintain its position as the dominant reserve currency.
This sentiment echoes the concerns voiced earlier this month by former House Speaker, Paul Ryan, who highlighted the jeopardy the US dollar faces due to the escalating national debt. Ryan, a former representative of Wisconsin, cautioned that the country is edging closer to a debt crisis, which could severely impact the dollar’s preeminent status in the global reserve currency landscape.
Ryan criticized the lack of action taken by leaders in addressing the impending debt crisis, asserting that their inaction jeopardizes the nation’s ability to retain its reserve currency status. By neglecting to confront this issue, the US government may unintentionally steer the country towards a potential financial catastrophe.
It is evident that experts from diverse backgrounds are raising concerns about the future of the US dollar’s global reserve currency status. The combination of evolving geopolitical dynamics, alternative currencies gaining traction, and mounting debt burdens poses significant challenges to the dollar’s long-standing dominance.
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