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56 countries including Japan, Israel, etc. de-dollarize, US media: Japan is dumping US debt with lightning speed
2023-05-26 06:06
Meanwhile, U.S. GDP shrank sharply in the first quarter. The U.S. economy shrank at an annualized rate of 1.4% in the first quarter of this year, the first decline since the 2020 pandemic, data showed. To make matters worse, the U.S. economy was in debt at this time.
Total U.S. federal debt ballooned to an all-time high of $30.45 trillion as of May 15, or about 129 percent of GDP. When inflation, economic contraction, and debt pile up, the Fed is likely to pass those risks on to markets that have historically relied heavily on dollar-denominated debt. The Fed has raised interest rates twice since March, totaling 0.75 percentage points. Fed Chairman Jerome Powell last week hinted at another rate hike of at least 0.5 percentage point each in June and July. Surveys show that the Fed may raise rates at least seven times this year.
From the coming June, the Fed will officially enter the cycle of increasing balance sheet reduction, and plans to start from September, the Fed will reduce its holdings by $95 billion per month, which will be divided into $60 billion in U.S. Treasuries and $35 billion in MBS. The balance sheet shrinkage is expected to exceed $1.1 trillion each year. This shows that the dollar feast that began with the Fed in March 2020 is coming to an end.
In this way, profit-seeking interest groups on Wall Street may turn their attention to harvesting wealth to those fragile markets with high dollar foreign debt and low foreign reserves. In turn, the Federal Reserve indirectly or indirectly transfers the risks of huge U.S. debt deficits and high inflation to these fragile markets. It is worth noting that at least 13 countries including Nepal, Sri Lanka, Ukraine, Brazil, Pakistan, Egypt, Indonesia, Thailand, Malaysia, Lebanon, India, Argentina, and Turkey have fallen into a new dollar because of their high debt and lack of strong foreign exchange reserves. Dilemma in a round of monetary tightening cycles. In other words, the Fed may transfer the risk of debt inflation in the United States to at least 13 countries.
Taking India as an example, economists have combined various data statistics, including states and the Indian Federation, the total public debt of India is about 1.78 trillion US dollars, and according to the latest data released by the Reserve Bank of India on April 29. , India’s foreign exchange reserves have fallen to 600.423 billion US dollars, and continued to decline for the seventh consecutive week. The total debt is equivalent to 296% of India’s foreign exchange reserves. This shows that the high growth of India’s economy in the past few years is caused by the accumulation of US dollar debts, which provides convenience for US dollar capital to harvest wealth spreads in India.
As investment manager Patricia Perez-Coutts said, the Fed’s monetary actions have always been on vulnerable economies, like a wild wildebeest crossing a river, lions will pick the young and weak… The other whole herds of wildebeest will move on. And this phenomenon is also becoming an important driver of global de-dollarization. It is not difficult to understand that economies such as India have begun the process of de-dollarization.
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So far, the de-dollarization process of India, Indonesia, Malaysia, and Thailand has surprised the market. For example, India has not only continuously purchased commodities from Russia since this year, but also used non-dollar currencies such as the ruble. In the past three years, it has also used Venezuelan petro and other non-dollar currencies to purchase energy commodities such as oil from Venezuela and Iran.
In Southeast Asia, as early as four years ago, the central banks of Indonesia, Malaysia and Thailand have launched the direct settlement plan for local currency transactions to reduce the dependence of the financial systems of the three countries on the US dollar. Agus, the former governor of Indonesia’s central bank, said, “Currently, 94% of Indonesia’s export business and 78% of its import business are settled in US dollars. The above plan will help the three countries to diversify their international financial business settlement currencies.”
We know that the originator of the Asian financial crisis in 1997 is also considered to be closely related to the operation of the US dollar in shearing the world’s economic wool. This has also become the main reason for the de-dollarization of Southeast Asian countries such as Indonesia, Malaysia, and Thailand. Even Malaysia proposed a pan-Asian gold-backed currency among Southeast Asian countries weeks ago. As the US financial website Zerohedge quoted the former chief economist of the World Bank three days ago, the dominance of the US dollar was the root cause of the global financial crisis. And this time, something even more unexpected happened.
Israel announced last month that it would sell off some of its U.S. dollar reserves in its foreign exchange reserves and increase its renminbi reserves for the first time. After dropping the dollar’s share from 66.5% to 61%, selling off 5.5% of dollar reserves and setting the yuan’s share at 2%. Insidearabia website analysis believes that Israel will continue to sell dollar reserves in the future, considering that Israel is a major ally of the U.S. economy, and Israel has been inextricably linked with Wall Street and the Federal Reserve in the past few decades, but now Israel deliberately damages the dollar, The diversification of Israel’s foreign exchange reserves took the market by surprise.
Similar to Israel’s de-dollarization, according to a report released earlier by the Bank for International Settlements, the Bank of Japan has officially launched, and has joined forces with the Bank of England (Bank of England), the Bank of Canada, the European Central Bank, the Swiss National Bank and other developed countries. The economies’ central banks have come together to form a joint cryptocurrency group to try to circumvent dollar restrictions. This means that Japan, the United Kingdom, Canada, Germany and France and other 19 euro zone countries, neutral countries such as Switzerland, and at least 24 developed countries such as Israel mentioned above have jointly started to use digital currency to de-diversify.
Not only that , the latest data shows that Japan, as the largest holder of overseas U.S. Treasury bonds, has reduced its holdings by about $60 billion in the three months to late April, and it has been a net sell-off for at least 13 weeks. Although this seems to be a drop in the bucket compared to Japan’s $1.3 trillion U.S. Treasury inventory, an analysis by the U.S. financial website Zerohedge believes that Japan is selling U.S. Treasuries at an epic speed and is becoming the largest short seller of U.S. Treasuries.
U.S. media said that after Japan is selling U.S. bonds at a rapid pace, under the circumstances of the sell-off of U.S. bonds and the increased risk of default, Japan may liquidate U.S. bonds, and up to $1.3 trillion in U.S. Treasury bonds may face sold by Japan. Analysts at Nomura said earlier that some practices in the U.S. economy are making the dollar less like a major reserve currency.
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The above-mentioned multiple de-dollarization phenomena show that global de-dollarization has spread from Russia, Iran, Venezuela and other oil countries to many countries around the world, including many developed countries, as well as economies in Southeast Asia and South Asia. Following up the global de-dollarization process, we found that up to now, China, Germany and other 19 euro zone countries, the United Kingdom, Japan, Israel, the United Arab Emirates, India, Vietnam, Hungary, Brazil, South Africa, Romania, Sweden, Singapore, Canada, Switzerland, Saudi Arabia , Russia, Cuba, Nigeria, Myanmar, Indonesia, Malaysia, Thailand, Iran, Angola, Venezuela, Iraq, Kuwait, Pakistan, Kazakhstan, Belarus, Armenia, Kyrgyzstan, Turkey, Qatar, Mongolia, the Philippines at least 56 countries have started The process of de-dollarization began in different ways.
For example, using non-dollar currencies for economic and trade transactions; using non-dollar currencies to trade oil; increasing non-dollar foreign exchange reserves; extensive local currency swap agreements and other methods. From the latest reserve data released by the IMF above, it can be seen that the share of U.S. dollar reserves has fallen from a high of 85% in the 1970s to a historical low of 58%.
Analysts believe that this ratio will decrease. Because when Japan and Israel begin to de-dollarize, the flames of global de-dollarization may become more and more prosperous. (Finish)
Source: iMedia
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