The external value of the US dollar is rising dramatically, which is causing more and more countries and companies to struggle. This exacerbates inflation and creates problems in servicing dollar debt. Is it time to abolish the US dollar as the world’s leading currency?
Within a year it increased US-Dollar from EUR 0.85 to EUR 1.03, and the British pound even jumped from EUR 0.73 to EUR 0.95. This is an additional burden for the European economies, which, for example, have to import raw materials such as oil, coal and various metals on a dollar basis. This means that the current strength of the dollar is also becoming an additional driver of inflation, while the Americans can import much cheaper goods in return, which at least somewhat eases their inflationary pressure.
But while Europeans are also feeling the inflationary pressure, the strength of the dollar is hitting developing and emerging countries even harder. Not only do they also have to pay higher import prices (in local currency): the debts of governments, companies and some private households are also getting tighter there. Because these can often only take out loans in US dollars and are now faced with additional costs in local currency. For example, a year ago one US dollar was 8.90 Turkish lira, today it is 18.45. A doubling – and thus twice as high costs for the Turkish borrowers in their own currency.
Many other currencies have also weakened significantly against the US dollar over the past few months, making the situation for these countries increasingly difficult. Argentines, for example, currently have to pay around 145.50 pesos for one US dollar – a year ago it was 98.60 pesos. In Colombia you already have to lay out around 4,440 pesos instead of 3,835 for a “greenback”. And that runs across the bank across the globe.
However, this is also putting more and more economies under pressure, which sooner or later, together with the energy crisis and the sharp rise in food prices, will lead to an economic downward spiral – worldwide. This also makes it clear that the system with a world reserve currency, in which the most important goods are traded and many foreign loans are granted, is antiquated. Because that puts you in the hands of the Federal Reserve, which only cares about the external effects of its monetary policy on the side. No wonder, then, that the BRICS countries (Brazil, Russia, India, China and South Africa), for example, are already participating in one common basket currency work, on the basis of which trade agreements can then be concluded with one another and with other countries.