In the past 15 years, the United States has used its financial hegemony to frequently impose economic sanctions on many countries. Since 2008, the United States has repeatedly sanctioned Iran , which directly led to the continued return of Iran's total cross-border trade and investment, and the economy has fallen into trouble and has not recovered yet. After the outbreak of the Ukrainian crisis in 2014, the United States imposed sanctions on Russia many times, directly putting Russia's economy into recession and has not yet returned to its 2013 level.
The world has been bitter and beautiful for a long time! After the situation in Russia and Ukraine deteriorated, Russia declared that unfriendly countries could only purchase the country's energy using rubles, which gave many people hope to disintegrate the hegemony of the dollar. However, the US dollar hegemony has been established since World War II and , and it has experienced ups and downs during this period. The game behind it is very fierce, but the United States eventually retained the US dollar hegemony, so many people are also discouraged, believing that the situation in Russia and Ukraine cannot dissolve the US dollar hegemony. Let me discuss with you the content of this issue. Will the situation in Russia and Ukraine collapse the hegemony of the US dollar? Can the dollar hegemony be restored again?
First we need to understand the history of the US dollar game, which can help us answer questions. After World War II, the United States supported European countries through loans, allowing the US dollar to be promoted and used in more regions, which made the US dollar a dominant international currency, and the US dollar really ushered in a hegemony. However, at this time, the US dollar was not the only hegemony, and the Soviet currency was also the currency, but its status was not as high as the US dollar. By the 1970s, the US economy began to decline, the economy of Japan and Western Europe began to perform strongly, and the yen and other positions began to rise. The Soviet Union and the Middle East countries also used the dominant position of oil to make their currencies more valuable. If you still remember this history, you should be clear. This is the second stage of US-Soviet battle for hegemony. The United States is on the weak side and the Soviet Union is on the strong side. One of the key points is that the Soviet Union made more money by relying on high oil prices and produced more nuclear weapons and gained an advantage over the United States.
00s and early 1970s, many countries in the Middle East were actually pro-Soviet. They widely used the Soviet currency, which expanded the influence of the Soviet currency. The first oil crisis influenced the Western economy led by the United States suffered a heavy blow. It can be said that this period was the second crisis of US dollar hegemony. Because of the strength of the Soviet Union, the hegemony of the US dollar began to decline, but one thing is certain, that is, the US dollar is still in the leading position.
of course, the United States cannot tolerate this situation, so it began to actively win over countries in the Middle East, and at the same time differentiate and disintegrate and suppress the independence tendencies of countries in Western Europe. For example, in the early 1970s, it began to win over Egypt and became ally with Egypt in the 1980s. You should know that Egypt was the boss of the Arab League back then, and his change in attitude directly affected a large number of Arab countries. The United States wooed Egypt in fact attracted most of the Arab region.
In 1972, the United States successfully convinced Saudi Arabia to export oil to only collect US dollars, while the United States promised Saudi Arabia to provide military protection. Since Saudi Arabia is the leader of OPEC , more oil-producing countries have followed suit. So from this moment on, in fact, buying more oil can only be used in US dollars. Although the Soviet Union also exports oil, the output and price cannot be compared with OPEC at all. This means that the US dollar is linked to oil, which lays the foundation for the future global financial order. In 1976, the Jamaica Agreement signed by the US-led IMF officially came into effect two years later, which formed a new pattern of international monetary system . In fact, this is also the United States consolidating the US dollar oil system.
The United States binds oil through the US dollar, and to be precise, it binds OPEC's oil exports, which eventually expands the scope of use, seizes the large market of the Middle East, and is the most critical market, which makes the dominant position of the US dollar very stable. In the 1980s and 1990s, Latin American countries fell into debt crisis, and the economic crisis broke out in Asia, and the Soviet Union collapsed and Eastern Europe underwent drastic changes. The United States took the opportunity to promote its own neoliberalism. These countries gave up their previous currencies, as well as the Japanese yen, and instead used a large amount of US dollar, which further expanded the scope of use of the US dollar.
Review of the history of US dollar expansion, firstly it is mainly used in the United States and Western European countries, secondly it is popular in a small number of Japan, South Korea, Southeast Asia, Australia, Canada and Mexico, and then gradually promoted to the Middle East, and finally it is widely used in Eastern Europe, Latin America, Southeast Asia, Japan and other countries. It can be said that around the mid-1990s, the dominance of the US dollar reached its peak. By the way, you can see that Japan has two times. Japan started to trade internationally. In the 1970s and 1990s, Japan's economy became strong and the yen became strong. The yen was once very influential in Southeast Asia and East Asia, and also competed with the US dollar. As a result, the United States used the square agreement to build Japan. In the early 1990s, the Japanese economy collapsed and the yen was in a slump. The yen market was soon stolen by the US dollar. Japan's foreign trade was also forced to return to its post-World War II state and began to use the US dollar in large quantities. The Soviet Union and Japan have challenged the hegemony of the US dollar one after another, but they both failed. The reason for the failure is that the economy cannot beat the United States, or to be precise, the industry cannot beat the United States.
The euro was born on January 1, 1999. From the moment of its birth, 11 countries used the euro, and it was mainly economically developed in Western Europe. Their use of the euro means that the trading volume of the US dollar will decrease and the scope of use will also decrease, which means that the status of the US dollar has begun to decline again, and the euro area is still expanding. In order to prevent the rise of the euro, the United States bombed the Confederacy of Yugoslavia a few months later. France and Germany had not yet woken up and actually actively supported the military operations of NATO . As a result, after the war depreciated, the US dollar became strong and stabilized again, and France and Germany realized that they were deceived by the United States. But everyone should be clear that many countries in the euro zone have strong industries, which can support the strong position of the euro in the long run. So shortly after the war stopped, the euro began to gradually become stronger, impacting the dominant position of the US dollar. In fact, from the moment the euro was born, the US dollar could no longer return to its peak moment in the 1990s. What the US dollar had to do was to stop the euro from stealing its own market share.
In early 2000, Iraq had a bad relationship with the United States. Saddam decided to use the euro to settle the export of oil, which indirectly helped the euro rise. Iraq has benefited a lot of euros, which made more oil-producing countries interested in following this. The rise of the euro again poses a substantial challenge to the US dollar, and this time it threatens the foundation of the US dollar. In fact, the US dollar's status can be stable in the long run. In addition to having strong industrial support, another key is oil support. Although the euro has strong industrial support, it lacks oil support. Therefore, once oil-producing countries turn to the euro zone, the euro zone will pose a fatal threat to the US dollar. Of course, the United States cannot accept the rise of the euro. In 2003, the United States launched the Iraq War . As you can see this war, it is mainly because the United States and Britain took the lead in fighting. This time, Germany and France actively opposed it, but their strength was too weak after all. The Iraqi authorities were overthrown, the euro suffered a heavy blow, the US dollar became strong again, and the euro failed to challenge the dominance of the US dollar for the second time. The dollar's status has been restored and consolidated again.
Seeing this, many people may want to ask, if the RMB wants to rise in the future, does it require strong industry and a large amount of oil support? A strong industry is certainly inseparable from it, but it does not necessarily require a large amount of oil support, and it can be replaced by more electricity.
In 2006, the United States broke out in the subprime mortgage crisis , and the US dollar depreciated again and strengthened the euro. The situation in the United States was serious at that time. The situation in Europe was still controllable, but the Americans were too smart. They found that our large amount of foreign exchange reserves were the US dollar rather than the euro, so they wanted us to work together to protect the US dollar. Secondly, the United States actively studied the shortcomings of the eurozone system and found that the economic development of various countries was unbalanced. Therefore, they criticized the relatively high debt Greece , Spain and other countries, and also asked the rating agency to cooperate to downgrade them, deliberately triggering the European debt crisis. As a result, the euro quickly depreciated the US dollar and successfully survived the disaster.
After the outbreak of the epidemic, the US economy encountered serious difficulties, and the euro became strong again. For example, in October 2020, the euro once again became the most paid currency in the world. The previous time was 8 years ago, which made the United States completely scared, because although the US dollar accounts for about 40% of the global payment ratio, the euro is not low, and it has been hovering around 34%-37% for a long time. The gap between the two is getting smaller and smaller. Moreover, after China and Russia announced that it would expand the use of the euro, the United States could not sit still. Therefore, the United States actively urged the situation in Russia and Ukraine, which caused a large amount of European funds to flow to the United States, but also caused the euro to depreciate and suffer heavy losses, while the US dollar successfully appreciated again. Through this war, the whole world discovered something that the EU has no strength to protect itself, and the euro is not safe at all. If a currency is not safe, the holders will feel worried and naturally reduce their reserves. Therefore, after this incident, more non-Eurozone countries will reduce their reserves in large quantities in the future, and the vacant market will be seized by other currencies.
The same is true, the situation in Russia and Ukraine has made people all over the world recognize a problem. The US dollar is no longer a hard currency, and the US dollar is no longer safe. For example, in the past, the US dollar could use the US dollar to buy energy all over the world, but this time Russia announced that unfriendly countries bought it with rubles, which tear off the disguise that the US dollar is a hard currency. In addition, the United States unscrupulously freezes other people's assets, so those who hold the US dollar feel unsafe. Therefore, the situation in Russia and Ukraine this time has a great impact on the US dollar. It will definitely make people reduce their holdings of the US dollar and reduce the use of the US dollar. This has a good start for the collapse of the US dollar hegemony. Note that the situation in Russia and Ukraine has only opened a moment to collapse the US dollar hegemony. It cannot immediately collapse the US dollar hegemony. I will put this issue into the international currency settlement system, so that it will be easier for everyone to understand. Then another question is, after the dollar dominance begins to decline, will it return to its dominance again through a series of operations like before? The answer is almost impossible, why say so?
In the past, the United States was strong in its national strength and dominated the global industrial chain and major oil supply. Therefore, after the US dollar's status decline, it can use some means to make the US dollar rise. But not only now, the US national strength has plummeted, but the global industrial chain is also in the hands of China, which has caused the US dollar to lose a major foundation, and the role of oil is gradually declining, while China relies on the layout of power to try to break the situation. Moreover, the situation in Russia and Ukraine has made oil-producing countries such as Saudi Arabia sober. They have decided to take more attempts, such as exporting oil from other countries to continue to use the US dollar, so as to avoid angering the United States, but if you can try RMB when trading with China. Why does Saudi Arabia do this? Because the United States wants to freeze other countries' property, the Middle East's oil-producing countries are afraid. The IMF has released a report saying that the frequent use of sanctions sticks in recent years has made many countries feel scared. They have begun to reduce their US dollar reserves and use, one-quarter of which chooses RMB and three-quarters chooses small currencies. This trend will intensify in the future, which will further disrupt the dominance of the US dollar.
In the past, the United States advocated that private property is inviolable and would not freeze the assets of other countries for no reason, so many countries are confident in using the US dollar. In recent years, the United States has done nothing and has lost the credit they have built over the past few decades. When people all over the world lose confidence in the US and no longer believe in the US, who is willing to use the US dollar to reserve US dollars? Of course they will abandon the US dollar, which will disintegrate the dollar hegemony and make it difficult to restore to its former status. So the question is, will the dominance of the US dollar decline soon? The answer is no. To answer this question, you need to understand the international currency settlement system, such as SWIFT and CIPS, etc. There is too much content involved, so I will not talk about it in this issue. I will use the content of one issue to explain it separately.
