Credit Suisse predicts end of dollar hegemony
https://ift.tt/GY5jKkv
Bad cause and effect connection. If it was only supply and distribution shortages, all world currencies would be equally disadvantaged, so there would be no particular reason for the dollar hegemon to be at a particular disadvantage.
The mistake made by the dollar lords was using the dollar as a weapon against a large economy.
When they disconnected Russia from the SWIFT network, they did not make russia’s people and assets disappear. They simply forced them to use an alternative money network. Thats all. Arguably it didnt even hurt them, since the rouble is actually stronger that it was before the ban, and their export profitability is higher.
No matter how bad Putin or his war was, this was simple a huge mistake. Its like cutting off your hand so that someone you dont like cant shake it. If russia moves its foreign trade permanently to gold, bitcoin, or other reserve pairs, that just means the dollar network has permanently shrunk. And that wound isnt going to heal – if anything, in the current climate, its going to get worse.
The other effect that is relevant is over-printing. The Fed simply spat out way too many dollars. Its within their power to reverse that by raising interest rates and unwinding QE, but the cost is so high (essentially the price tag is *great depression 2.0*) that its not clear that the fed has enough political cover to actually correct it. But regardless, it is within their power to deflate the dollar to protect its remaining status as a money network in the parts of the world that still accept it.
Normally, the international community of dollar users could be expected to shoulder some of the loss. Now that there are cracks in the dollar’s armor, that is far less certain, and the Fed may be forced to put more of the pain directly on the American people than it normally would.
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