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Plan to undermine the US dollar
By Boniface Chizea
With the inevitable sanctions on Russia which has my full endorsement to stop other countries like China waiting in the wings to copy Russia. It should be common knowledge that China cannot wait to extend the same treatment to Taiwan. The bouquet of sanctions now tumbling down is scary. Would Vladimir Putin be able to survive?
The sanction particularly the decision to exclude Russia; Russian related businesses from the SWIFT should be most impactful. It excludes Russia from business interactions with the rest of the world. There is perforce the expectation of inevitable realignment. Russia and Russian companies will not just fold their hands to perish as they wine and embrace a victim mentality. There must be recourse to alternative and the readily available alternative is the Rinminbi (Yuan) which in point of fact qualifies as the next reserve currency of the world after the mighty dollar.
We must bear in mind that popular scenario projects that the Russian economy would trump the American economy by 2030; about eight short years from now! An incontrovertible fact is that the Chinese economy is also the most vibrant today from the perspectives of its industrious manufacturing activities across the globe.
But would these shifts occasion the dethronement of the dollar as a reserve currency? I don’t think so. Much of the assets of countries in the world are currently stored in dollars and this is not likely to change in the near term. The present realignment in my considered opinion is not likely to precipitate that eventuality. The only threat to the dollar as a reserve currency today is the on-going elevated inflation spiral which the Americans are advised to reign in as soon as possible. It goes without saying that if your asset value is continuously eroded because of ravaging inflation that common sense will advise diversification mandating reserves in other currencies.
It would take some time for the Chinese economy to be as market driven, open and predictable as the US economy. But of course as should be expected there is jealousy about the fact that the US dollar enjoys this monopoly as the world’s reserve currency and attempts to supplant the dollar is on-going. And any chance of achieving this goal would inevitably be anchored on the Yuan! But this would most certainly not be a flash in the pan. It is not round the corner. There are other reserve currencies in the world such as Euro and of course commodities are veritable stores of value particularly gold.
Dr. Boniface Chizea is CEO, BIC consultancy, Lagos.
