Telsa and Twitter owner Elon Musk this week sounded the alarm about the primacy of the U.S. dollar as the world’s reserve currency following a deal between the Chinese regime and Brazil to trade in their own currencies.
“The US dollar is losing its reserve currency status,” Genevieve Roch-Decter, a former small-cap money manager, wrote on Twitter this week, adding that the dollar has been “the backbone of the global economy for decades. Several countries even use the US Dollar as an official currency, like El Salvador, Panama, and Ecuador.”
Musk indicated that he shares her concerns, writing: “Serious issue. US policy has been too heavy-handed, making countries want to ditch the dollar.”
“Combined with excess government spending, which forces other countries to absorb a significant part of our inflation,” he also wrote.
Serious issue. US policy has been too heavy-handed, making countries want to ditch the dollar.
— Elon Musk (@elonmusk) March 29, 2023
In a statement this week from Brazil’s new left-wing government, China and Brazil came to a deal to trade in their own currencies and will not use the U.S. dollar as an intermediary. The two countries will now exchange the Chinese yuan with Brazilian reais rather than converting to the dollar beforehand.
Brazil’s Investment Promotion Agency, or ApexBrasil, told news outlets that the new arrangement is expected to “reduce costs” and “promote even greater bilateral trade and facilitate investment.”
Some analysts have said the move portends a bad omen for the United States. China has similar agreements with other countries, including with Russia and Pakistan, and some have said that the Chinese regime’s latest moves are attempts to depose the U.S. dollar as the world’s reserve currency.
A number of countries have their currency pegged to the dollar and many central banks hold the dollar as part of their foreign exchange reserves. Global commodities, including oil, also trade in dollars.
The Brazil deal comes right after the Chinese regime settled its first purchase of liquefied natural gas via the yuan, according to Reuters. That transaction contained approximately 65,000 tons of LNG and was sourced from the United Arab Emirates after the China National Offshore Oil Corp. negotiated a shipment with France’s TotalEnergies through the Shanghai Petroleum and Natural Gas Exchange.
