Goodbye to the Almighty Dollar?

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The BRICS nations are currently working to develop a new international reserve currency, China and Russia have challenged the petrodollar, countries are diversifying their foreign exchange reserve currencies portfolios away from the dollar, and even US central bank chairman Jerome Powell recently stated himself, “there’s room for multiple reserve currencies”. Does all this signal that the reign of the dollar is starting to collapse? 

The July 1944 Bretton Woods agreement that took place in the mountains of New Hampshire at the Mount Washington Hotel officially established that the US dollar would replace the British pound sterling as the world’s national reserve currency. At the time the United States held most of the world’s supply of gold, therefore, it was agreed upon that the value of the dollar would be fixed to gold at $35 an ounce. Every country around the world would now have to peg their currency’s exchange rate to the dollar and use the dollar to trade and save. Still, the gold standard would be short-lived. As the US began facing deficits and not having enough gold reserves, President Nixon dropped the gold standard by 1971. Today, like other fiat currencies, the value of the dollar comes from a combination of economic activity and political forces. One of those main driving forces is none other than oil. As oil must be exchanged in US dollars, better known as petrodollars, the world will always need dollars as long as it will need energy. That is, at least until that position will not be significantly challenged by Russia and China. This February, China signed an agreement stating it will start buying Russian oil in euros. In addition to that, Saudi Arabia has announced that it “is considering accepting Chinese yuan in crude oil sales.” [1] Despite this change, around 80% of oil sales continue to be exchanged in dollars.[2] For this reason, among others, the US dollar has continued to hold its relevance for the past 78 years and counting. However, recent efforts show how nations are attempting to dethrone the almighty US dollar once again.


BRICS nations aspire to create an alternative reserve currency

Putin declared in late June, “The matter of creating the international reserve currency based on the basket of currencies of our countries is under review. We are ready to openly work with all fair partners.”[3] The partners Putin has in mind are those of the BRICS (Brazil, India, China, South Africa) nations. Putin aspires that the BRICS can come together to develop an alternative basket-based currency composed of “real, roubles, rupees, renminbi, and rand” in order to compete against the IMF’s Special Drawing Right (SDR).[4] It should be noted that the “IMF’s SDR is not a currency, but effectively a basket of claims on top reserve currencies such as the dollar, the euro, the pound, the yen and its most recent addition the renminbi.”[5] A new SDR basket currency would not only reduce the influence of the US dollar in the IMF and the world, but it would in effect “allow BRICS to build their own sphere of influence and unit of currency within that sphere.”[6] Among those countries to be included in the BRICS sphere of influence would be nations from Southern Asia and the Middle East. In addition, countries such as Iran, Argentina, Turkey, Egypt, and Saudi Arabia have already voiced their interest in becoming a part of the BRICS group. However, even without these additional members, the BRICS nations hold a considerable amount of influence. Collectively, the countries make up 31.5% of the world’s GDP and they also hold dominance over critical resources.[7] Together they make up 26% of the world’s oil supply, 50% of the world’s iron ore, 40% of the world’s corn, and 46% of the world’s wheat.[8] It should also be noted that trade between these countries has increased by 38% this year.[9] Taking into account the power of these useful commodities, BRICS countries could use their resources to manipulate the supremacy of the dollar.

Still, attempts at de-dollarization have been going on for years. It can be speculated that this recent announcement by the BRICS nations to start developing the new basket of currency is especially driven by Russia’s desire to revive its economy. Russia’s GDP is now on track to drop by 11.2%, making this “the largest drop in GDP since the collapse of the Soviet Union.”[10] This is expected as Western sanctions have cut Russia off from borrowing money from the IMF and accessing SWIFT as well as from using any foreign and international banking. In addition, about half of Russia’s gold and foreign exchange reserves were frozen immediately at the start of the war in February. In effect, Brazil, India, China, and South Africa witnessed how detrimental relying on the US dollar could be and agreed that it is not in their best interest to continue investing in dollars if those dollars could essentially be taken away at any moment. BRICS, as well as other countries around the world that have been subject to similar provisions before from the West, hope to diversify their reserve currencies so that their economies could be able to survive in the event of future Western sanctions or restrictions.

BRICS leaders in Johannesburg From left: Indian Prime Minister Narendra Modi, Chinese leader Xi Jinping, South African Presidents Cyril Ramaphosa, Russia’s Vladimir Putin and Brazil’s Michel Temer, source:

What privileges does the US hold as the distributor of the dollar?

Although China and Russia are the two main forces aspiring to de-dollarize, the intention is supported by various other nations as well. In March of this year, the Eurasian Economic Union, consisting of Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, met together to discuss the direness of developing a new international reserve currency. What countries such as the following do not like about the US holding the world’s reserve currency, including countries that share good relations with the US, are the special privileges that it holds which no other nations have access to. The monopoly of the dollar allows the US to print money when it needs and therefore it can spread its inflation to countries all over the world. US inflation reached a new forty-year record high of 9.1% which correspondingly affected inflation in the rest of the world.[11] In addition, the US is in a unique position as it holds the purchasing power to print more dollars so it can buy from the Chinese, the Russians, or Europeans as it wishes. Luca Fantacci an economic historian further explains the leverage the US holds, “Unlike other countries, the United States can meet their international obligations by printing money, meaning that they have no budget constraints in making expenditures, loans or even grants abroad.”[12]

Another advantage is that the US does not have to worry about exchange rate risk in international business and trade deals. In effect, international investors are more likely to invest in American companies since the value of the dollar allows for higher profitability compared to a lower possible exchange value of other currencies. Lastly, holding the reserve currency gives the US immense political power as international institutions still are required to abide by US laws even when operating outside of the country. All of the following advantages are what make the US a global political and economic leader. However, countries around the world have expressed their concerns that the US has repeatedly abused the power that comes with holding the reserve currency. The question then becomes, if the new international currency became the renminbi or the euro, would the situation be any different? China is one nation, in particular, that would love to have this power that the US holds. For over a decade, China has been a major player in the de-dollarization process.

Renminbi is the currency of the People’s Republic of China (abbreviated as RMB or CNY – from Chinese yuan).

China’s efforts to de-dollarize

Back in 2009, China’s governor of the central bank introduced the idea of reforming the IMF by creating a reserve currency that would be backed by a basket of major commodities.

The idea gained traction with the BRICS countries but ultimately failed as Western countries were not on board with the proposal. Then in 2016, the yuan joined the IMF’s basket of currencies that make up the SDR (special drawing rights). ING’s global head of markets Chris Turner shares, “That was meant to be the gun being fired on the yuan becoming a major international reserve, but the pick-up in the yuan’s use as a reserve currency has been quite disappointing.”[13] Today, the yuan only makes up 2.9% of the global reserves.[14] However, more recently, China has moved on to de-dollarize through the use of the digital yuan. Richard Turrin, author of the book Cashless: China’s Digital Currency Revolution, stated that China’s proposed central bank digital currency can have the power “to challenge the dollar’s domination as the currency of choice in international trade settlements.”[15] Turrin continues, “Remember, China is the largest trading country and you’re going to see digital yuan slowly supplant the dollar when buying things from China.”[16] However, the digital yuan is in its beginning stages. For now, China is still focused on the physical yuan and has accordingly “pressed trading partners, including with Russia, to denominate some trade in renminbi (RMB); established RMB trading centers in Hong Kong, Singapore, and Europe; and created cross-border stock exchange connection programs that denominate some trade and investments in RMB.”[17] China has also attempted to move away from the dollar by becoming a top gold producer. In 2020 they have managed to mine 380 metric tons of gold.[18] Even in the case that through these various efforts China does somehow manage to significantly reduce the influence of the dollar, this doesn’t indicate that the yuan will be sufficient to take over the dollar’s place.


Will the dollar be de-throned?

America has held the title of the world’s largest economy for the past 130 years (since 1890) yet now various resources claim that China is projected to take that leading spot as soon as 2030. These predictions might be alerted now because of the recent scam in China’s real estate market, “Chinese banks have about 62 trillion yuan (US$9.2 trillion) of exposure to the property sector (and) more than half is in the form of mortgage loans.”[19] In the meantime, the Chinese economy is still competitively growing so it is no surprise that the yuan is gaining in popularity. However, the yuan lacks critical characteristics that allow it to be classified as a world reserve currency. If the yuan is to rise above the dollar, it must possess fair value, wide circulation, stability, and wide acceptance.[20] First and foremost, when it comes to the yuan, there is an overall lack of transparency. Washington has pointed out for years how “China artificially lowers the value of its currency in foreign exchange markets to make its exports more competitive.”[21] Therefore, the yuan cannot be classified as a currency that possess a fair value.

In addition to the lack of transparency economically, there is also a great lack of transparency with China politically. The investigations of the origin of the COVID virus (China sanctioned Australia for wanting to investigate the origins of the virus), the forced labor and atrocities in the Xinjiang internment camps, and the overall treatment of its citizens are often hidden from public knowledge. Despite China’s efforts to hide its brutalities, the world is becoming more aware of China’s crimes and knows of the various restrictions its citizens must deal with on a daily basis. For example, Chinese citizens are unable to transfer over $50,000 in funds outside of the country in one year.[22] This not only shows that China forbids its citizens from having a chance to create a new life abroad or build a business in another country, but it also signifies that “even China is so uncomfortable about the truth of its currency that it writes laws in US dollars.”[23] Until China’s transparency changes both economically and politically, it is very unlikely that the yuan will hold wide acceptance.

If the euro has not been able to take over the dollar, then it is even less likely that the yuan will. The euro is a good competitor because of the euro zone’s comparable size to the US and the fact that the euro has been able to hold its value a bit better than the dollar has. The growth of the euro’s share in the international market is also increasing each year and falls right behind the dollar in reserve currencies. In 2021 the euro held 21% of the world’s reserve currencies. However, the main problem is that the “eurozone is neither a fiscal nor a political union, and this makes it difficult to persuade others that they can really rely on the euro in hard times.”[24] There have even been discussions of bitcoin and cryptocurrencies taking place as the new international reserve currency but in the end “they are speculative assets, without the political backing or foundations they would need to become reserve currencies, especially in periods of financial instability.”[25]

Still, even if these currencies do not have enough power to necessarily replace the dollar as the main reserve currency, they have already at least challenged the dollar. According to IMF research, the dollar’s influence is decreasing as more countries are beginning to hold alternative currencies in their exchange reserve portfolios. Based on a chart from the IMF blog, one can see that the dollar made up 59% of the global foreign exchange reserve in 2021 while other nontraditional currencies are slowly starting to gain relevance.

Source: Serkan Arslanalp, Barry Eichengreen and Chima Simpson-Bell, “Dollar Dominance and the Rise of Nontraditional Reserve Currencies”, IMF Blog (IMF, June 6, 2022), 

Even with these challenges present, the numbers show that the dollar remains the dominant reserve currency. With the current instability present in the world, more people are parking their investments with the dollar than ever before. The dollar has always held the reputation as being the “safe haven” because people recognize the dollar as “… a reliable currency. We’re [the US] not going to expropriate people’s bank accounts”, as stated by William Reinsch, holder of the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS).[26] The value of the dollar is also currently rising due to the Federal Reserve raising interest rates at an accelerating pace. This in effect attracts more foreign investors because there is more profit in the dollar than in any other currency, “the Fed’s aggressive tightening is making it more attractive to hold dollar deposits in interest-bearing accounts in the U.S.”[27] As a result, “the dollar is up 15% against the Japanese yen, 10% against the British pound, and 5% compared to China’s renminbi.”[28] In addition, for the first time since 2002, the dollar has reached parity with the euro, an exchange rate of 1-1. People also recognize that the US has built a reputation as being “a lender of last resort” which provides “billions of dollars in emergency loans to foreign economies in crisis.”[29] Lastly, the dollar continues to hold its value because “the global economy runs on dollars…Nearly half of cross-border bank loans are dollar-denominated… Nearly 90 percent of foreign currency trading involves the dollar on one side of the transaction.”[30] Based on the following qualities, the dollar continues to hold its reputation as a durable and safe currency. The reality is that no other currency at this time has the potential to fill the role that the dollar has held for decades.[31]

The likelihood that the world will see a new international reserve anytime soon is very low. However, what is more possible is a situation explained by economic historian Luca Fantacci who stated, “What we will see is possibly something that never happened in history, and that is a fragmentation of the international monetary system, with several currency areas that compete and several strong currencies that maintain local regional hegemony.”[32] This means that the hegemony of the dollar will be challenged based on the region, but not globally taken over. Therefore, it is important to consider what a stronger yuan or euro would ultimately mean for Poland. The strengthening of the yuan would strengthen the Chinese economy and other economies in Asia. In effect, it would devaluate the importance/strength of the German economy and Poland, which is dependent on the German economy. On the other hand, the strengthening of the euro would benefit all euro-zone countries and make the German economy more competitive in the world market. It would force Poland to adopt the Euro currency and decrease Poland’s political and economic autonomy in the European Union. For now, these potential situations do not seem likely as the numbers show that the dollar still holds its value. There has been a lot of talk about de-dollarization for years, but the alternatives do not seem to be any better. Therefore, “A day may come when the dollar loses its central role as the dominant global reserve currency, but it is not this day.”[33]




Arslanalp, Serkan, Barry Eichengreen , and Chima Simpson-Bell. “Dollar Dominance and the Rise of Nontraditional Reserve Currencies.” IMF Blog. IMF, June 6, 2022.

Associated Press. “U.S. Inflation Reached a New 40-Year High in June of 9.1 Percent.” POLITICO, July 13, 2022.

Bankowa, Gazeta. “Podgryzanie Petrodolara. Zacznie Się Od Podkopywania Pozycji Petrodolara, Poprzez Próbę Stworzenia Petrojuana.”, May 10, 2022.

Besta, Shankar. “Profiling the Top Five Largest Gold Producing Countries in 2020.” NS Energy, May 13, 2021.,reserves%20of%20about%202%2C000%20tonnes.

Buddhavarapu, Ravi. “Isolated Putin Says Trade with China and India Is Increasing.” CNBC. CNBC, June 23, 2022.

Chia, Henry. “Global Investors on Edge as China Faces $9.2 Trillion ‘Flashpoint’.” Asia Markets, July 16, 2022.,is%20becoming%20a%20potential%20flashpoint.%E2%80%9D.

Chúláin, Aisling Ní. “Can the US Dollar Be Toppled as the World’s Premier Reserve Currency?” euronews, August 3, 2022.

Copelovitch, Mark. “Analysis | Jack Dorsey Is Wrong. the Dollar Is Still a Global Reserve Currency.” The Washington Post. WP Company, June 2, 2022.

Could China’s Currency Be The New World Reserve? | Economics Explained. YouTube. YouTube, 2022.

Daniel, Will. “Why Is the Dollar Dominating? Because the U.S. Is ‘the Cleanest Dirty Shirt’.” Fortune. Fortune, July 23, 2022.

European Council. “Impact of Sanctions on the Russian Economy.” Consilium, August 19, 2022.

Garver, Rob. “Strengthening Dollar Presents Challenges for Global Markets.” VOA. Strengthening Dollar Presents Challenges for Global Markets, July 20, 2022.

Glover, George. “China Is Doubling down on Its Bid to Challenge the Dollar’s Global Dominance. Analysts Lay out Why It’s Unlikely to Succeed.” Yahoo! Sports. Yahoo!, July 2, 2022.

Huang, Eustance. “China’s Digital Yuan Could Challenge the Dollar in International Trade This Decade, Fintech Expert Predicts.” CNBC. CNBC, March 15, 2022.

Nelson, Rebecca M, and Karen M Sutter. “De-Dollarization Efforts in China and Russia .” Congressional Research Service, July 23, 2021.

Pilkington, Philip. “The New BRICS Alliance Is a Mortal Threat to the West.” UnHerd, June 29, 2022.

Redman, Jamie. “Targeting the US Dollar’s Hegemony: Russia, China, and BRICS Nations Plan to Craft a New International Reserve Currency – Economics Bitcoin News.” Bitcoin News, July 25, 2022.

Turner, Chris. “BRICS: The New Name in Reserve Currencies.” ING Think, June 22, 2022.

Wiseman, Paul. “With the U.S. Dollar Nearly Equal to the Euro for the First Time in 20 Years, the Impact Is Already Being Felt by Americans.” Fortune. The Associated Press, July 7, 2022.



[1] Gazeta Bankowa, “Podgryzanie Petrodolara. Zacznie Się Od Podkopywania Pozycji Petrodolara, Poprzez Próbę Stworzenia Petrojuana,”, May 10, 2022,

[2] Ibid.

[3] Jamie Redman, “Targeting the US Dollar’s Hegemony: Russia, China, and BRICS Nations Plan to Craft a New International Reserve Currency – Economics Bitcoin News,” Bitcoin News, July 25, 2022,

[4] Chris Turner, “BRICS: The New Name in Reserve Currencies,” ING Think, June 22, 2022,

[5] Ibid.

[6] Ibid.

[7] Philip Pilkington, “The New BRICS Alliance Is a Mortal Threat to the West,” UnHerd, June 29, 2022,

[8] Ibid.

[9] Ravi Buddhavarapu, “Isolated Putin Says Trade with China and India Is Increasing,” CNBC (CNBC, June 23, 2022),

[10] European Council, “Impact of Sanctions on the Russian Economy,” Consilium, August 19, 2022,

[11] Associated Press, “U.S. Inflation Reached a New 40-Year High in June of 9.1 Percent,” POLITICO, July 13, 2022,

[12] Aisling Ní Chúláin, “Can the US Dollar Be Toppled as the World’s Premier Reserve Currency?,” euronews, August 3, 2022,

[13] George Glover, “China Is Doubling down on Its Bid to Challenge the Dollar’s Global Dominance. Analysts Lay out Why It’s Unlikely to Succeed.,” Yahoo! Sports (Yahoo!, July 2, 2022),

[14] Ibid.

[15] Eustance Huang, “China’s Digital Yuan Could Challenge the Dollar in International Trade This Decade, Fintech Expert Predicts,” CNBC (CNBC, March 15, 2022),

[16] Ibid.

[17] Rebecca M Nelson and Karen M Sutter, “De-Dollarization Efforts in China and Russia,” Congressional Research Service, July 23, 2021,

[18] Shankar Besta, “Profiling the Top Five Largest Gold Producing Countries in 2020,” NS Energy, May 13, 2021,,reserves%20of%20about%202%2C000%20tonnes.

[19] Henry Chia, “Global Investors on Edge as China Faces $9.2 Trillion ‘Flashpoint’,” Asia Markets, July 16, 2022,,is%20becoming%20a%20potential%20flashpo

[20] Could China’s Currency Be The New World Reserve? | Economics Explained, (YouTube, 2022),

[21] Ibid.

[22] Ibid.

[23] Ibid.

[24] Mark Copelovitch, “Analysis | Jack Dorsey Is Wrong. the Dollar Is Still a Global Reserve Currency.,” The Washington Post (WP Company, June 2, 2022),

[25] Ibid.

[26] Paul Wiseman, “With the U.S. Dollar Nearly Equal to the Euro for the First Time in 20 Years, the Impact Is Already Being Felt by Americans,” Fortune (The Associated Press, July 7, 2022),

[27] Rob Garver, “Strengthening Dollar Presents Challenges for Global Markets,” VOA (Strengthening Dollar Presents Challenges for Global Markets, July 20, 2022),

[28] Will Daniel, “Why Is the Dollar Dominating? Because the U.S. Is ‘the Cleanest Dirty Shirt’,” Fortune (Fortune, July 23, 2022),

[29] Mark Copelovitch, “Analysis | Jack Dorsey Is Wrong. the Dollar Is Still a Global Reserve Currency.”

[30] Ibid.

[31] Ibid.

[32] Aisling Ní Chúláin, “Can the US Dollar Be Toppled as the World’s Premier Reserve Currency?,” euronews, August 3, 2022,

[33] Mark Copelovitch, “Analysis | Jack Dorsey Is Wrong. the Dollar Is Still a Global Reserve Currency.,” The Washington Post (WP Company, June 2, 2022),

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