Recently, there have been a series of signs of turmoil on the global economic stage, the most notable of which is the escalation of the dollar crisis.
In the face of the increasingly grim situation, the United States had to urgently send high-level visits, including the Secretary of State in June, the Secretary of the Treasury in July, and the Secretary of Commerce in August. Visits from high-level US officials have never been so intensive.
It is already clear that even if the United States is willing to lose the prospect of losing the dollar, it will be difficult to find a passing target for the impending economic crisis.
The fundamental reason behind the continuous status of the US dollar is not that countries have abandoned the US dollar, but that the economic foundation of the United States itself has been damaged.
In the past, the U.S. dollar was able to achieve hegemony because the U.S. continued to grow in national power, forming a positive cycle that complemented the U.S. dollar's status.
However, the real economy of the United States is now facing many challenges, and its apparent strength is reduced to relying on the dollar and US debt to sustain it, and it is gradually becoming hollowed out.
Faced with this situation, the position of the dollar naturally and inevitably began to decline.
On the one hand, U.S. foreign policy and U.S. finances are factors.
The United States has always relied on debt to maintain domestic fiscal spending and economic growth, which has led to the expansion of debt and the increase in the risk of default.
Now, due to the foreign sanctions imposed by the United States, many countries have begun to de-dollarize, not only reducing the use of dollars, but also reducing confidence in investing in US bonds.
On the other hand, the real economy of the United States is suffering from various problems.
For a long time, the United States has been overly dependent on the financial industry, while the development of the real economy has lagged behind. The recession in manufacturing, the instability of the labor market, and the lag in infrastructure are all undermining the competitiveness and resilience of the U.S. economy.
At the same time, the real economy of other countries is constantly catching up, making the relative advantage of the United States gradually weaken.
Now, in order to revitalize the country's manufacturing industry, the United States** has proposed a number of relevant measures to attract companies back to the United States.
Biden has also made active efforts in this regard, signing various bills to guide high-tech companies to invest and set up factories in the United States.
However, it is not easy to actually promote the reshoring of manufacturing, and the United States faces several problems that are difficult to solve.
First of all, the continuous increase in labor costs has become a major obstacle to the return of manufacturing.
In the past two years, the unemployment rate in the United States has been very low, resulting in the continuous hourly wage of workers, which makes the labor cost of setting up a factory in the United States relatively high.
The latter is more attractive to investment than emerging markets with cheap labor.
Second, the Fed's interest rate hikes have led to rising Treasury yields, and corporate lending rates are tied to this, so the cost for companies is also increasing.
For manufacturing companies, the increased cost of borrowing will increase their operating costs, which in turn will affect their viability to set up a factory in the United States.
With the exchange rate of the U.S. dollar, the competitiveness of products produced in the United States in the international market has declined, which has created an export dilemma for U.S. manufacturing companies, limiting their competitiveness in the global market.
Undoubtedly, the status of the dollar has become inevitable. If the United States is taking the gamble of the century, it is clear that the dollar has been put on the table.
The question now is only which currency will eventually prevail over the dollar and take its place.
For other currencies to replace the dollar, they need to be supported by strong economic strength. Some countries with slightly inferior economic strength also want to make their currencies one of the international currencies in the tide of de-dollarization, but it is very difficult.
India, for example, as a country with rapid economic growth, has been actively de-dollarizing. However, India's economy is far smaller and less powerful than that of the United States, making it difficult for India to successfully implement its strategy of de-dollarization.
Other similar countries are similar, lacking the economic strength to support them, and face difficulties in breaking free from the shackles of the dollar.
At the same time, the EU, as a union with a large economy, would have had the opportunity to reduce its dependence on the dollar.
However, the United States skillfully used the opportunity of the Ukrainian-Russian conflict to successfully weaken the EU's economic power and threat to the dollar by provoking issues such as the energy crisis, the inflation crisis and the exchange rate crisis. This series of events has led to the fact that the euro is becoming less and less likely to replace the dollar.
Even though it is increasingly unlikely that the euro will replace the dollar, the world's monetary landscape has diversified.
In the east of the world, the sleeping dragon has awakened, and the strong economic power is enough to support the currency to go global.
It's worth waiting and seeing.