RuchirSharma pointed out that what happened twenty years ago showed that the dollar was closer to a peak than to further rise. 21 years ago, the U.S. stock market plummeted due to the bursting of the Internet bubble , but the U.S. dollar continued to rise. However, in 2002, the rise reached its peak and the U.S. dollar entered a six-year decline period. Now, US stocks and have already entered a bear market, but the US dollar is still rising. This situation is very similar to 20 years ago. Therefore, Ruchir Sharma believes that a similar turning point is coming, but this time, the dollar's decline will last longer.
Whether or not adjusted for inflation, the dollar's value against other major currencies is 20% higher than its long-term trend and higher than the peak reached in 2001. Since the 1970s, the dollar's rising cycle has averaged about seven years at a time. The current rising cycle has lasted for 11 years.
In addition, the fundamentals of the U.S. economy are not favorable to the United States. When a country's current account deficit continues to be higher than 5% of the country's GDP, the risk of a financial crisis is higher. The current U.S. current account deficit is very close to the 5% “red line.” Since 1960, the U.S. current account deficit has only exceeded the red line once in 2001, and the U.S. dollar entered a recession the next year.
In addition, the total foreign debt owed by the United States has reached 18 trillion U.S. dollars, accounting for 73% of the U.S. GDP. Generally speaking, if the total debt exceeds 50% of GDP, there is a high risk of currency crisis.
Finally, when U.S. economic growth slows relative to the rest of the world, investors tend to stay away from the U.S. dollar. In recent years, although the economic growth rate of the United States has been significantly higher than the median growth rate of other developed economies, as the Federal Reserve continues to tighten monetary policy, the growth rate of the United States is expected to be slower than that of other developed economies in the next few years. nation.
The probability of the U.S. dollar falling is increasing, but the question is whether this downward period is long enough and deep enough to threaten the hegemony of the U.S. dollar.
Although the dollar has been boosted recently by weakness in its competitors, such as , the European Union, and the United Kingdom, both of which have suffered severe currency devaluations due to energy crises. But alternatives to the dollar are making progress.
In addition to the four major currencies of the United States, Europe, Britain, and Japan, "other currencies" such as the RMB, Canadian dollar, Australian dollar, Swiss franc, etc. currently account for about 10% of the total foreign exchange reserves of all countries in the world. In 2001, these The proportion is only 2%. The U.S. dollar's share of total foreign exchange reserves has dropped to 59%, the lowest level since 1995. Although the digital currency has been hit hard recently, in the long run, it still has a substitute for the US dollar.
At the same time, the US sanctions against Russia are showing the negative influence of the United States on the dollar-driven world, which has prompted many countries to accelerate the pace of choosing alternatives. In the future, the foreign exchange of various countries will no longer have a single reserve currency model, but will move towards a "currency bloc".
For example, multiple economies in Southeast Asia are increasingly settling directly with each other. Central banks from East Asia to the Middle East are establishing bilateral currency swap systems, and China also uses the renminbi to pay for countries in financial difficulties. assistance. The world is becoming less dependent on the U.S. dollar.
Today, just as it did 21 years ago, the dollar appears to be benefiting from its safe-haven status, with capital continuing to pour in. But investors don't seem to be buying U.S. assets; they're holding on to cash. This is not a vote of confidence in the U.S. economy. So don’t be fooled by the strong dollar, the post-dollar era is coming.
Text | Wei Lai Title | Huang Zixin Review | Li Zepu
