The dollar was never going to die, it had to be killed, and almost everything Donald Trump has done since becoming President has been a stab in the greenback's back. The fact that this currency assassination hasn't seen too much turbulence in the stock market may be proof that the world is ready to move away from the dollar rather than proof of any remaining dollar stability.
The basic equation has switched from US debt creation riding on the back of a virile and dominant US dollar to the dollar now riding on the back of the US's increasingly turbo-charged debt addiction, with greenback looking increasingly ragged as a result. This in turn is driving away investors in US debt, creating an increasingly downward toxic spiral.
The more unstable the dollar appears, the less investors want it, raising the costs of US government debt and adding to the instability that is driving investors away. Trump's "trump card" of DOGE turned out to be a busted flush. Instead of "trillions in savings" and "renewed confidence in the dollar," it will, at best, save a few paltry billions or even add to government debt. Likewise the tariffs.
The next ingredient in the perfect storm of Donaldian de-dollarisation does not depend on him but on rivals to the dollar, mainly the Chinese Renminbi and the Euro. The Euro has soared, gaining around 10% in the last few months, making it very attractive for investors.
Meanwhile, the Renminbi has budged up around 1% against the dollar. This is entirely because the Chinese government has zero intention of allowing the dollar to devalue against their currency and push down their exports. Under normal conditions the Renminbi would be shooting up like the Euro or even the Yen back in the 1980s.
Meanwhile, the Renminbi has budged up around 1% against the dollar. This is entirely because the Chinese government has zero intention of allowing the dollar to devalue against their currency and push down their exports. Under normal conditions the Renminbi would be shooting up like the Euro or even the Yen back in the 1980s.
This desire of the Chinese to keep their exports cheap may stand in the way of the Renminbi replacing the dollar as the next reserve currency. After all, who wants to park their wealth in a currency that may suddenly be manipulated downwards. Both the dollar and the Renminbi are suffering from this effect right now.
But this is apparently why the Chinese central bank created the Digital Renminbi, a blockchain-driven digital currency, which is designed to work as an efficient tool for de-dollarisation and a weapon aimed at the downfall of dollar hegemony.
In theory, it is supposed to remain convertible with the Renminbi on a 1:1 basis, but that may change at some point in the future. But the Chinese already are presenting it as a "safe" and stable" alternative for global investors wary of the turbulence of the dollar caused by America's "unmanageable" debt and Trump's erratic policies.
In theory, it is supposed to remain convertible with the Renminbi on a 1:1 basis, but that may change at some point in the future. But the Chinese already are presenting it as a "safe" and stable" alternative for global investors wary of the turbulence of the dollar caused by America's "unmanageable" debt and Trump's erratic policies.
One of the most prominent Chinese economists Zhang Ming, deputy-head of the Financial Research Institute at the Chinese Academy of Social Sciences, writing in the People's Daily on the 29th April, said:
"The credit of US debt has been severely damaged, and in the end it's the foundations of US dollar hegemony that have been shaken. In other words, global investors will have an increasingly intense desire to invest in other secure assets. [They will] increasingly shift towards other secure assets that possess ample liquidity, comparatively high returns and possess sufficiently large scale." source
According to another prominent Chinese economist Li Jian, the Digital Renminbi is mainly designed to displace the dollar as a means of "cross border settlements," basically as the medium of international trade, including of course oil.
"As Sino-US trade frictions worsen, against the background of the reshaping of global supply chains, the innovations of the Digital Renminbi cross-border settlement system have already emerged as a strategic weapon for China to break through US dollar hegemony and shape a new trade system," Li wrote on social media.
While Western democracies may be reluctant to switch to the Digital Renminbi even with Trump behaving as he is, other parts of the world are not so adverse.
Following Trump's "Liberation Day" tariffs on 2nd April, the Chinese started to roll out adoption of the Digital Renminbi for cross-border payments in South-east Asia and the Middle East. Both of these are areas where Beijing has built up respect for its steadiness in finance, quietly reinforced by the implicit threat of it massive economic muscle.
Following Trump's "Liberation Day" tariffs on 2nd April, the Chinese started to roll out adoption of the Digital Renminbi for cross-border payments in South-east Asia and the Middle East. Both of these are areas where Beijing has built up respect for its steadiness in finance, quietly reinforced by the implicit threat of it massive economic muscle.
If the Digital Renminbi could catch on in just these two areas, that in itself might be enough to finish off the petrodollar and US fiscal dominance, while pumping yet more economic chaos into America's house of cards.
In fact, Trump's advisers may know this and this may explain his sudden decision to dump Bibi Netanyahu and cosy up to Qatar, Saudi Arabia, Syria, and even Hamas in recent days.
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Colin Liddell is the Chief Editor of Neokrat and the author of Interviews & Obituaries, a collection of encounters with the dead and the famous. Support his work by buying his book here (USA), here (UK), and here (Australia), or by taking out a paid subscription on his Substack.
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