IMF sees dollar giving way to other reserve currencies

The IMF admits that geopolitical tensions bode badly for the dollar. The BRICS want to cut ties. Why not adopt Bitcoin?

Dollar and geopolitics

The war in Ukraine is only the tip of the iceberg. The BRICS want to rebuild the international monetary order, which greatly irritates Washington.

IMF Vice-President Gita Gopinath conceded this half-heartedly in a paper entitled “Impact of geopolitics on international trade and the dollar”. She declares that we have to go back to the era of the Cold War to observe such a shift in global economic ties.

“Countries are reassessing their trading partners based on their economic and security concerns. Foreign investment flows are also redirected according to geopolitical alliances. Some countries are reassessing their heavy dependence on the dollar in their international transactions and their reserves »she said.

The Indian Foreign Minister will not say otherwise. For Subrahmanyam Jaishankar, “US dominance, which began after the end of the Cold War, has ended” :

That said, despite increasing geopolitical risks, the dollar remains dominant. “Probably because much of the commodity trading continues to be invoiced and settled in dollars », says Gita Gopinath. #petrodollar…

The greenback also represents 58% of foreign exchange reserves. However, the trend is strongly downward. The share of China's holdings of US Treasury bonds, for example, increased between 2015 and 2023 “from 44% to 30% of its foreign exchange reserves”.

To be more precise, Chinese reserves of US Treasury bonds fell from $1.2 trillion in 2018 to $775 today (-35%).

Gold Standard…

The most notable recent development in global foreign exchange reserves is the increase in gold purchases by central banks.

“Gold is generally considered a politically neutral asset that can be stored at home, protecting it from sanctions or seizure. It can also serve as a hedge against inflation, but cannot be easily used in transactions »can we read in the paper.

If fragmentation deepens, the IMF warns that the “global payment system could fragment according to geopolitical alliances which will lead to the emergence of new payment systems with limited or non-existent interoperability. Additionally, foreign exchange reserves could evolve to reflect new economic ties and geopolitical risks.”

The Vice-President of the IMF, however, believes that a “a global system with several reserve currencies could have several advantages, including the diversification of foreign exchange reserves”.

Finally, Gita Gopinath did not forget to mention that many countries are closely following the ongoing discussions on the potential use of the Russian state's euro reserves to support Ukraine. For her, it is important that “any action rests on sufficient legal bases and does not compromise the functioning of the international monetary system”.

In other words, the IMF warns that seizing the 220 billion euros of Russian reserves (+ 6 billion dollars and 40 billion $ in yen, francs, etc.) would be opening a Pandora's box.

It is certain that China and Saudi Arabia will be worried about being next in line. It would be the end of globalization and the beginning of an extremely inflationary era. On this subject, don’t miss our article: Bitcoin and endless inflation.

BRICS and Bitcoin

Gita Gopinath's analysis is reminiscent of that of Bruno Martarello De Conti. The Brazilian professor warns that weaponizing currency is a dangerous game.

“We all know that the dollar is used as a weapon. The international monetary and financial system is totally dysfunctional. This is a problem for Russia, but also for the rest of the world.”he declared on the microphone of Sputnik:

“It is really necessary for BRICS to build alternatives to the dollar. For example through the use of local currencies for bilateral trade. This is what Russia is doing with China. Developing some sort of common currency is also a good idea. It’s a complex project that isn’t happening right away, but it needs to be discussed.”.

Equally important is the creation of a new payment system. For the teacher, “the SWIFT payment system is similarly used as a weapon.”

As such, Sputnik recently relayed the “Unit” project a little quickly, presented as a “apolitical form of currency influenced by no political agenda”.

We can also read on their site:

“Currently, BRICS are not ready to launch their own currency. The need for an independent and reliable international financial and monetary system is nevertheless urgent. The UNIT ecosystem offers BRICS+ countries a unique framework, which can fully take into account exchanges between blocks.

UNIT (token) is a unit of account in the UNIT ecosystem. It represents a proportionate share of the underlying UNIT basket, which contains 40% gold and local currencies. »

Be serious. There are already thousands of shitcoins… Bitcoin is only invented once. It is the currency at the same time as the payment system (two-in-one) dreamed of by the BRICS. Why search from noon to two p.m.?

Truly stateless and uncensorable, bitcoin is a solution that has proven itself for over 15 years and is ready to use

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