World Economic News and Discussion

Nearly Half of Canadians Struggling to Meet Daily Expenses Due to Rising Prices - StatCan, 08.15.2024.

WASHINGTON (Sputnik) - Close to half of Canadians (45%) have reported that rising prices have affected their ability to meet daily expenses, Statistics Canada (StatCan) said on Thursday.

The data come from the latest cycle of the Canadian Social Survey, collected from April 19 to June 3, Statistics Canada said in the latest edition of its "The Daily" bulletin.

"In spring 2024, nearly half (45%) of Canadians reported that rising prices were greatly affecting their ability to meet day-to-day expenses, 12 percentage points higher than what it was two years earlier (33%)," Statistics Canada said.

Close to four in ten Canadians (38%) said they are "very concerned" about their ability to either afford a home or rent due to rising prices - an 8% increase from two years ago, Statistics Canada said.

In addition, nearly a fourth of Canadians reported their households as being very or somewhat likely, respectively 8% and 15% to obtain meals from community organizations in the past six months - a 3% surge over a two-year period.

In mid-June, Food Banks Canada reported that more than one in four Canadians might currently be living under the Material Deprivation Index poverty-level standard.

https://sputnikglobe.com/20240815/nearly-half-of-canadians-struggling-to-meet-daily-expenses-due-to-rising-prices---statcan-1119782371.html

Gold reserves are climbing globally: the dollar is being hit with everything, from all sides.

Great news for countries buying gold like Russia and China whose gold reserves just get more and more valuable as the value of gold increases.

All part of the scam... things are great... well OK, some things are not so great... but at least Putin or Xi isn't in charge.

The irony is that things in China and Russia are not perfect either, but money is being spent to make things better, and it seems to be helping.

The "Titanic" of the German economy has already hit the iceberg, by Irina Alksnis for RiaNovosti. 09.04.2024.

A new chapter has opened in the chronicle of Germany's deindustrialization: the management of the Volkswagen automobile concern announced that for the first time in its 87-year history, the company may close factories in Germany. This concerns the possible liquidation of two enterprises - one for the production of cars and one for components.

No less of a public and media shock was the announcement that "the concern, in order to save money, was also considering breaking the agreement with the trade unions, which was signed until 2029." Volkswagen is considered (although, perhaps, it would be more correct to say - was considered) the "gold standard" employer in Germany: the most reliable work, the most generous social guarantees, the highest salaries. So the company's plans, of course, caused a storm of indignation, especially from the trade union structures, which announced massive resistance to the announced plans.

The authorities, for their part, are also putting pressure on Volkswagen, insisting on finding alternatives that would allow them to avoid the announced intentions. And perhaps they will even succeed in achieving their goal - for a while, since there is no point in talking about a radical solution to the problems that have arisen.

The fact is that the unpopular plans of Volkswagen management are based on an increasingly unfavorable reality. And gloomy trends for the Germans, which show no hope of being reversed even in the medium term. According to the company's CEO Oliver Blume, "Germany as a place to do business is increasingly lagging behind in terms of competitiveness," and in general "the European automobile industry is in a very difficult and serious situation."

There are many reasons for the current situation. There is the terribly expensive labour force in Germany, accustomed to the highest level of social security, and the rapid displacement of Germans from the market by the Chinese auto industry, primarily by electric car manufacturers, and the loss of Russian pipeline gas by the German industry (the cheapness of which largely compensated for the high cost of labour), and shooting at their own feet in the form of leaving the Russian market, and much, much more.

In general, one can understand the management of Volkswagen, for whom the forecast puzzle began to come together in the word "bankruptcy", and in order to avoid such an unpleasant scenario in the future, they are faced with the need to take tough measures today. And it is clear: the longer the decision is delayed, the more painful the return will be. And Germany as such is increasingly reminiscent of the "Titanic", so no one will be very surprised if Volkswagen finally decides to finally leave the sinking ship.

Perhaps the strangest thing about what is happening is the insulting, cynical openness with which the destruction of German industry is being carried out. After all, until now the West has always sugar-coated the bitter pill of reality that it wanted to feed to someone. And Germany itself has considerable experience in this: as the leader of the European Union, it successfully destroyed entire industries of Eastern European EU members under the guise of beautiful words about European unity and prosperity.

But now that Germany itself is on the chopping block, the Germans are not being treated to even the slightest bit of inspirational rhetoric. They must endure a decline in their standard of living and quality of life because Putin will attack. They must abandon nuclear power for the sake of the planet's future. They must switch to cricket meat for the sake of climate change. They must embrace the entire LGBT* madness for the sake of tolerance. They must tighten their radiator valves and their belts simply because they have to.

The results of the elections in Saxony and Thuringia on Sunday showed that at least in the eastern states of the country, most of the people have had enough of this approach. However, so far the German – as well as the Western – establishment has not shown even the slightest hint of a change in policy and is prepared to stubbornly continue to stick to its line.

It will be interesting to see what the authorities' fundamental disregard for the opinions of their own people will lead to.

* An extremist movement banned in Russia.

https://ria.ru/20240904/ekonomika-1970362304.html

Mexico's automotive sector could benefit from the China-US trade war, by Daniel García, SputnikSpanish correspondent in Mexico. 09.20.2024.

The automotive industry is one of the most important that Mexico has, as it is one of the largest foreign exchange generators and represents an important percentage of the Gross Domestic Product (GDP); however, it is currently in the middle of the trade war between the United States and China and that could affect it.

Recently, several messages and decisions generated in the United States have set off alarm bells in the Mexican automotive industry, whose main trading partner is its neighbor to the north.

According to the most recent data from the Mexican Association of the Automotive Industry (AMIA), which can be consulted on its website, this sector represents 3.5% of GDP, generates over 930,000 jobs annually on average and attracted a foreign direct investment of 5,4 billion dollars.

”It's a very dynamic sector for the Mexican economy, it's strategic," César Roy Ocotla Gutiérrez, a journalist and analyst in the national automotive sector for more than 40 years, told Sputnik in an interview.

Even, according to data from the National Institute of Statistics and Geography (INEGI), the automotive industry was the one that generated the largest number of foreign exchange for Mexico during 2023 with a total of 188,903 million dollars, although it is not comparable with the other foreign exchange generators, because this sector depends on imports of automotive parts, machinery, metal products and other inputs.

"As you can see, we are a key piece, in addition to the fact that throughout the American continent, we are the second most important manufacturer, only after Canada and, at the same time, we are the main supplier for vehicles and auto parts and components for the United States," Alberto Bustamante, director of the National Agency of Suppliers of the Automotive Sector in Mexico (ANASPA), said in an interview for Sputnik.

The importance of the US market for the national automotive sector is reflected in the exports of light vehicles from Mexico, which, according to INEGI figures, exceeded 3.3 million units, of which about 2.55 million were exported to the United States.

Could Mexico benefit?

Being the main automotive supplier of the United States, the Mexican automotive industry is in the midst of the trade war between the United States and China in the internal combustion vehicle market and, more recently, in the electric vehicles market specifically. Conflict from which it could benefit by filling the gap that the Asian country could leave, but from which it has also been affected by the ambiguous statements about the imposition of tariffs by the Republican presidential candidate, Donald Trump.

On September 13, the US announced that it will impose tariffs of 100% on Chinese electric vehicles, 50% on solar cells and semiconductors, and 25% on steel, aluminum, electric vehicle batteries and key minerals, the Office of the US Trade Representative (USTR) reported.

This announcement is in addition to the one made by the Government of Canada at the end of August, about imposing a series of measures to combat what Ottawa calls "unfair competition" from Chinese producers, among which a 100% tariff on all electric vehicles manufactured in the Asian country stands out, starting from October 1, 2024.

Thus, Mexico's two largest regional partners decided to impose tariffs on Chinese electric cars, while their presence and the interest of automakers from the Asian country to settle in their territory is growing in the Latin American country.

Contrary to what one might think, the decision of Mexico's two partners in the Treaty between Mexico, the United States and Canada (T-MEC) to restrict the entry of Chinese vehicles into their markets could benefit the Latin American country, as it would have the opportunity to meet that demand.

"Recently we saw that the United States imposed a tariff, not only on vehicles, but on several final products and that benefits Mexico, because the more tariffs they put on China, the Mexicans will be covering that demand that, in fact, our country has already begun to make," the ANASPA director added.

A report entitled the Mapping of Electromobility in Mexico 2024 indicates that, between 2020 and 2023, more than 254,000 fully electric vehicles have been produced in Mexico. The document predicts that this figure could almost double in 2024, as 214,000 electric units could be produced, 96% more than in 2023.

In fact, the expert points out that these tariffs announced by the United States and Canada would not even affect the plans of Chinese shipowners to build factories in Mexico.

"So it doesn't really affect the decision-making of companies to settle in our country, because first they are going to conquer the Mexican and Latin American markets and then, in many years, they will be thinking about entering the United States," he added.

Trump's threats

Another issue that has triggered the alerts in the Mexican automotive sector are the statements of former President Donald Trump about imposing tariffs on vehicles manufactured in Mexico, although they have often turned out to be ambiguous, because he has not made it totally clear whether he refers to any vehicle manufactured in the Latin American country or only to Chinese cars developed in that nation.

"We're going to put 200% tariffs on those cars so they can't come into our country, because they will kill the United Auto workers and any auto worker, whether it's in Detroit or South Carolina or anywhere else. It will be like taking away candy from a child," Trump said at a campaign event in Michigan.

The former president said that those tariffs would make Chinese cars manufactured in Mexico not be sold in the United States, which would force Chinese automakers to move their operations from this country.

"They are Chinese-owned and built in Mexico, and there are already several of them right now," Trump said of the alleged Chinese factories in the Latin American country.

"It is a fallacy that the United States intends to impose tariffs on vehicles that have not even arrived yet; even Chinese plants have not yet been installed in Mexico. We still do not have the first stone of any Chinese automobile plant in Mexico, neither electric nor combustion," adds the expert in the automotive sector.

César Roy Ocotla adds the electoral factor is relevant: Trump's tariffs are a political flag that seeks to attract voters.

"Trump doesn't know the USMCA. We don't care what he says because he has no knowledge of the trade rules between the three countries that signed the treaty," he adds.

The analyst explains that, according to the USMCA, if a Chinese company or one from any other country settles in Mexico by investing capital in that country and complies with the 75% regional content in its products, it could export them freely without paying tariffs or taxes throughout North America.

"So what the Chinese are going to do when they arrive in Mexico is comply with the requirements to be considered regional companies. They are going to settle in Mexico, they are going to generate employment for Mexicans, they are going to have Mexican suppliers, with which they are going to meet the 75% quota,” he concludes.

Yandex Translate from Spanish.

https://noticiaslatam.lat/20240920/el-sector-automotriz-de-mexico-podria-salir-beneficiado-de-la-guerra-comercial-mexico-eeuu-1157617599.html

So if Trump gets elected you can bet if China builds car factories in Mexico and complies with the rules of the agreements they have with Canada and the US then he will have to rip up those agreements... which might actually benefit Mexico in turning towards BRICS and away from the US as that is a rather abusive relationship anyway.

There will be lots of countries in central and south America that would like cheap Chinese electric vehicles made in Mexico... the US has such an ego to think they will try to sell their cars in the US when the rest of the continent is a market for their products too.

The mexican companies that are currently making cars for the US market can continue to do so, and chinese companies can make them in Mexico for any customer that wants them.

Why does the US think everything is about them?

Let the American consumer spend more on inferior American and European vehicles... that is not Chinas problem.

Mario Draghi is a f*cking clown and contortionist economist much like his connational spaghetti carbonara with Pommarola, working to please Ursula von der Leyen in Brussels:

Has the EU suddenly realized how much it has screwed itself over?, by Rachel Marsden a columnist, political strategist and host of independently produced talk-shows in French and English, for RT. 09.21.2024.

The EU is having a full-blown existential crisis. Someone has really screwed up its economy, and the culprit is conspicuously absent from a new report outlining the carnage. Are there no mirrors in Brussels?

Former European Central Bank president and Italian prime minister, Mario Draghi, has published a new “economic competitiveness” report after a year of work at the request of unelected ‘Queen’ Ursula von der Leyen’s ‘Royal’ European Commission. And it’s a real page-turner, one of the great mysteries of our times.  

One is left to breathlessly leaf through the 400-page document looking for a culprit responsible for the massive amount of economic carnage detailed by Draghi. “For the first time since the Cold War we must genuinely fear for our self-preservation,” he told reporters in Brussels. How about starting off by not actively self-sabotaging?

Draghi said that the bloc desperately needs to keep up with China and the US, but has been failing. Perhaps it has something to do with the fact that the EU readily jumped in to ride shotgun alongside Uncle Sam along regime change highway, but now finds itself kicking dirt on the roadside and wanting to make its own way.

“Now conditions have changed,” Draghi said. “World trade is slowing. China is actually slowing very much, but it’s become much less open to us, and actually it’s competing with us in global markets on all accounts. We’ve lost our main supplier of cheap energy, Russia. And now we have to start for our defense again for the first time since the Second World War.” Apparently, the jokers ruling Europe from the big top tent in Brussels are shocked to discover that they’ve been victimized. Who could possibly have done such a thing?

Gotta love the use of the passive there. “Lost” their cheap energy from Russia. Like it just fell out of their pocket like a set of house keys on the way back from the store.

Listening to Draghi, you’d also think that the EU hasn’t actually adopted “de-coupling” from China as a strategy, egged on by Washington, which wanted Europe all to itself, before EU officials rebranded it a “de-risking” when they realized how stupid a move it would be to fully alienate China as the bloc’s top trading partner and customer.

And now, oh gee, the EU has to start thinking about its own defense again, Draghi said, rather than just using it to shake free some natural resources from all the places with fortuitously-located terrorist problems.

The Ukraine conflict has been an equally convenient excuse to make more weapons at taxpayer expense for the EU’s own defense after emptying out the old junk from its closets. Good thing, too, because making more weapons is about the only real easy answer for improving the economy right now, judging by the dire state of things outlined in this new report. Still, the EU can’t even do the military-industrial racket right.

Draghi has pointed out that EU members are basically idiots for buying most of their weapons abroad, with nearly two-thirds coming from the US. Big mystery as to why Washington wants to keep the party going in Ukraine when it’s making bank by drumming up the need to ramp up weapons purchases for EU members under the guise that their former top economic lifeline and energy supplier (Russia) was suddenly a big threat to them. The bonus: making Europe more dependent on the US for pricier gas, too.

The whole report is just loaded with gems, like this one: “If Europe cannot become more productive, we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage. We will not be able to finance our social model. We will have to scale back some, if not all, of our ambitions. This is an existential challenge...”

Draghi’s going on about all these grand ambitions like leading new tech and being a climate and social icon, while European elites have been yelling at the plebs to turn down the heating and air conditioning to stick it to Putin and cheering mild winters like we’re living in the dark ages. Draghi also said that the EU needs another €800 billion ($890 billion), which is about 4.5% of the entire bloc’s GDP, just to be able to stay globally competitive. And that competitiveness can only be achieved by thoroughly unscrewing everything they screwed up over the past two and a half years through self-inflicted idiocy in the interests of impressing their girlfriend Vladimir Zelensky (aka president of Ukraine).

Draghi also said that the amount of cash needed to make the EU competitive now is so massive that private investment just won’t cut it. And well, you know what that means. In related news, EU taxpayers, there’s a sale right now on Amazon France for €4 tubes of lube.

But what if EU taxpayers don’t want to comply, because they’ve had enough of paying for all these screwups, as recent elections across the EU suggest, with anti-establishment parties surging. Well, here’s Draghi with a plea. Cue the violins: “Why do we care so much about growing. Yes, we have to finance these needs, and these needs are important, but why are they so important? Well, they are important because they have to do with our founding values, prosperity, equity, peace and democracy in a sustainable world. And the EU exists to ensure Europeans that they actually will benefit from these fundamental rights. And if Europe can no longer provide them to its people, it will have lost its reason for being.”

Okay, put the lube on ice, folks – he’s giving seduction a try. Queen Ursula will no doubt be along shortly to play the “bad cop.”

So basically, the EU’s ‘braintrust’ blew a bunch of cash and deregulated the economy “for Ukraine”, but now they need Europeans to be okay with handing over even more cash, because it’s totally for their own good. This time it’ll work out. Promise. Just like it did with that ex who you let crawl back into your life one too many times.

Meanwhile, von der Leyen is talking about the need for economic supply security and Draghi is saying that the EU needs more friends. Ones that happen to have a ton of resources that they can cozy up to, preferably. And he’s also saying that some countries are already trying to do that on their own, but it would be better if the EU took charge of it. Draghi added that the bloc was “punching under our power.”

More like it’s been punching itself right in the face, over and over again, if the EU’s recent policies and performance are any indication.

https://www.rt.com/news/603975-eu-mario-draghi-report/

The real irony is that the drive to mass produce weapons to then be put into storage or paraded around the place does not fix infrastructure and does not feed the people and does not generate income for the country.

It is a horrible waste of resources if you are not actually at war... careful what you wish for...

China will strangle Europe with money, by Sergey Savchuk for RiaNovosti. 09.24.2024.

The current world order continues to crack and fan out, and the global economy, primarily the economy of the real sector, is undergoing a transformation along with it. The Financial Times writes that the largest representatives of European metallurgy have addressed an official letter to the Brussels regional committee. They demand that a mechanism for protective duties on the entire line of similar products from China be developed and implemented without delay.
The metallurgists, among whom were representatives of companies such as ArcelorMittal , Thyssenkrupp Steel, Salzgitter, Tata Steel , as well as the European Steelmakers Association (Eurofer), are alarmed not even by the trends, but by the reality that has come to pass.

In it, the global and internal EU markets are experiencing excess supply, which automatically lowers price indicators, reducing turnover and profits of European companies. But this is only half the trouble: the overflow of markets is caused by the "steel flood" from China, which this year plans to export a record one hundred million tons of steel and related products. European companies, experiencing significant financial pressure due to the jump in energy prices, are physically unable to compete with Chinese steel and rolled products, which, according to a Eurofer representative, are trading below the production cost. Roughly speaking, in order to beat the Chinese offer, European metallurgists need to start trading at a loss, strictly and without options.

This topic is interesting because it allows us to go a little beyond the Russia-centric matrix in which we live and through which we perceive global processes by default. At least because it turns out that the collective West began a trade and economic war long before the start of the SVO, and not only Russia fell into its millstones . There is a historically significant struggle between two economic blocs - the old and the new formation.

China has already undertaken steel expansion into the Old World, it happened when Russia moored Crimea to its side. In the period 2014-2016, Chinese metallurgists sent abroad from 90 to 115 million tons of steel. The Europeans then, albeit with losses, but survived thanks to cheap energy resources from Russia - mainly natural gas. Such are the paradoxical grimaces of the global market.

In 2024, Europe has no hydrocarbon ace up its sleeve, and nowhere to get one. Gas supplies from Norway are at their maximum, and LNG from the US has been flowing to the Asia-Pacific region for two months, as demand and price offers are higher there.

It should be noted that Brussels has already tried to close itself off from Chinese exports by lowering the tariff barrier. In 2018, blocking duties were imposed on products from China. But, as the Eurometallurgists themselves admit, this had no effect, since imports from third countries immediately increased, and it is quite difficult to track the pedigree of each rolled coil.

If you felt a sense of déjà vu at this point, you are not imagining things. We are seeing all of this today with Russian oil supplies, for example, from India . Nothing personal, just business. The parallel import-export scheme that is so worrying Washington and London was not invented today, nor was the use of a shadow fleet of oil tankers. Everything new that is successful is a well-thought-out old thing.

By the way, Western politicians and mass media endlessly repeat the mantra about the isolated Russian economy with pleasure, forgetting to mention that they themselves are often not averse to isolation. Not long ago, for example, Washington introduced 25% duties on steel from Mexico , any product was affected if the smelting and casting was carried out outside of North America . As you might guess, enterprising Mexicans, in order to increase profits, began to drive north volumes that were many times greater than their own production. The influx of cheap steel reduced the profitability of local metallurgists, which, of course, they did not like.

Today, even India, the world's second-largest blast furnace manufacturer, is considering measures to limit imports. And here we come to the main thing - the reasons for the current processes.

Western financial analysts are waiting for the US elections, but in general they are quite unanimous in their opinion that a new trade war with China is coming. The question is when and who will side with the US. The European Union is seen as the only ally of the anti-Chinese coalition.

It all comes down to the key claim that Western free market advocates make against Beijing, namely, broad and systemic support for the real sector through budgetary allocations. According to open sources, the volume of investment in the state's main assets in the national steel industry has almost doubled, from $60 billion to almost $120 billion. Among other things, this money was spent on building new coal-fired power plants and coal-based metallurgical plants. This allowed production to increase from 700 million to 1.2 billion tons per year in just ten years.

It is noteworthy that this trend is weakly related to direct profit generation. Over the specified ten-year period, Chinese steel exports showed maximum profits in 2018 and 2021, when they managed to earn about $65 billion by the end of the year. By the end of 2023, the industry as a whole was stuck at zero profitability, but with a huge caveat. Thanks to powerful government investment, partially covering the cost of energy resources, and various tax incentives, Chinese steelmakers occupied 56 percent of the world steel and sheet metal market by the end of last year.

Beijing's strategy is straightforward and uncomplicated, but it produces results. The state allocates money to its producers through a complex support system. They, like a storm troop, burst into the market with deafeningly low prices, take up a perimeter defense and wait until the corpses of their main competitors float past them along the market river. As part of this strategy, Beijing consciously incurs costs and sometimes even planned losses, but all this is repaid a hundredfold by the subsequent monopolization of the market with the ability to control its processes.

This model is not applicable to Russia - our economic structure and model are too different, and the depth of the labor market is incomparable, not to mention the climatic conditions. But it certainly wouldn't hurt to conduct a deep analysis. After all, smart people learn not only from other people's mistakes, but also from other people's successes.

https://ria.ru/20240924/kitay-1974304784.html

Europe is divided over the ban on internal combustion engines by 2035, 10.02.2024.

The Swedish car manufacturer Volvo, which belongs to the Chinese consortium Geely, and 50 other companies asked Brussels to comply with the ban on cars with internal combustion engines by 2035, writes the Czech portal 'Hrot24'. However, the largest European manufacturers were silent, and "they have their reasons," he adds.

"Electrification is the main measure that our industry can take to reduce its carbon footprint (...) We urge EU policy makers to focus on the steps we need to take to achieve it," said Volvo CEO Jim Rowan.

In his opinion, the shift to electric vehicles is precisely what will ensure that the European industry is globally competitive in the production of cars with an electric motor.

Other companies - including Uber Technologies, furniture maker IKEA and Spanish energy company Iberdrola - have joined Volvo, arguing that European industry needs certainty and predictable conditions for investment and business development. As the CEO of Electreon, Oren Ezer, commented, this is especially important "considering that the US and China continue to actively promote their respective electric car industries."

However, the ambitious goals of the European Union to reduce greenhouse gas emissions "have been increasingly criticized" in recent months by some senior managers of European companies.

For example, the largest European car manufacturer, Volkswagen, has been forced to admit that the transition to electric cars (EV) is progressing with difficulty and will have to close some plants and lay off staff. Mercedes-Benz also stated that the deadline to stop selling cars with an internal combustion engine (ICE) should be reconsidered.

"Paradoxically, Volvo also recently announced that it will offer a hybrid model from 2030, although it had previously promised that it would exclusively produce and sell EVs," the portal highlights.

Proponents of the ICE ban argue that Europe should catch up with American and Chinese competitors in the production of EVs by refusing to invest in the development of such engines. On the other hand, it is observed that sales of this type of vehicles are falling in the European market, "which makes most manufacturers question the need to switch completely to EVs," the outlet elaborates.

Moreover, the postponement of the ban on ICE is now also being pursued at national level by Italy, the third largest economy in the European Union. Thus, Stellantis, the largest car manufacturer on the Apennine peninsula, has already stopped the production of Fiat 500 electric cars at its Turin plant due to the lack of buyers, which worries the authorities in Rome.

According to Bloomberg, the country's Prime minister, Giorgia Meloni, argued that Brussels' ecological policy "is self-destructive," and Italian Industry Minister Adolfo Urso insisted that the EU's emissions reduction plan be thoroughly reviewed.

Otherwise, predicts Hrot24, "hundreds of thousands of jobs will disappear" in the European car industry. But if internal combustion engines are maintained, "the introduction of synthetic fuels and biofuels would be possible" and the industry would stay afloat, summarizes the Czech outlet.

Yandex Translate from Spanish.

https://noticiaslatam.lat/20241002/lucha-por-el-motor-europa-se-divide-ante-la-prohibicion-de-los-motores-clasicos-para-2035-1157930460.html

America's main weapon deemed extremely dangerous, 10.14.2024.

Analyst Antonov: A non-obvious factor is influencing the decline in the dollar's share in settlements.

MOSCOW, 14 Oct — RIA Novosti, Elena Savelyeva. The share of the dollar in world government reserves has fallen to a 30-year low. The American currency is also losing weight in international trade. This is explained not only by the actions of the United States and the desire of countries for financial independence. There is another, less obvious factor.

Protect reserves

According to calculations by the International Monetary Fund (IMF), the dollar lost 0.7 percentage points in the second quarter and 1.2 percentage points over the year. It now accounts for 58.22% of international reserves, which has not happened since 1995.

Central banks are cooling off for several reasons at once. First, the issuer, the US, is increasingly using currency as a tool to put pressure on those who are undesirable.

"The dollar is dangerous. After unprecedented financial sanctions against Russia, more and more countries are looking for an alternative," stated former Brazilian representative to the IMF Paulo Nogueira Batista.

As a result, global central banks are increasing the share of less “toxic” monetary units and transferring assets into gold, reducing risks.

“Non-traditional reserve currencies are attractive because they provide diversification and relatively good returns, and because they are becoming easier to buy, sell and store thanks to the development of digital financial technologies,” explains Evgeny Shatov, a partner at Capital Lab.

"Technical de-dollarisation"

Analysts also point to another factor that is often overlooked.

Official IMF statistics do not reflect the full picture due to the growing role of stablecoins, in particular USDT, notes Vladislav Antonov, financial analyst at BitRiver.

"The formal reduction of the dollar's share in official reserves can be compensated by stablecoins tied to it. This creates a kind of "technical de-dollarisation" through the cryptocurrency market," he explains.

Is there money?

The endless growth of the US national debt does not add to confidence: it is already more than 35 trillion. About two percent of GDP is spent on servicing it alone. And the budget deficit is five percent. Investors doubt the financial stability of the US.

"The hegemony of the dollar is a legacy of the Bretton Woods agreement. Back then, the American currency was actually backed by gold. Now, its main advantage is its universality. Global trade is tied to this; without the dollar, most payments in the world would be paralyzed. The lack of real security is evidenced by the inflation of the national debt; the government is forced to regularly raise its bar to avoid a technical default," says Alexander Shneiderman, head of the customer support and sales department at Alfa-Forex.

Settlements in national currencies

The dollar still maintains its dominant position in world trade. However, many countries are switching to alternative payments.

"First of all, it is China, which is striving to expand the yuan zone. Russia is also trying to switch primarily to the ruble," says Evgeny Shatov, a partner at Capital Lab.

Moscow has cut the dollar's share in international transactions by almost half, to 17%. The ruble accounts for 67% of payments for exports to Europe, an absolute maximum. In trade with Asia and Africa, national currencies - Russian and partners - account for 80% and 84%, respectively.

This is not only a necessary measure, but also a strategic decision that provides certain advantages.

"Firstly, currency risks and dependence on the American financial system are weakened. Secondly, direct interbank relations with partners are formed. Thirdly, the development of our own financial infrastructure is stimulated," lists Vladislav Antonov, an analyst at BitRiver.

In countries with unstable national currencies, payments in rubles look more reliable, since it is a partially convertible currency, which is important for partners, adds Ruslan Pichugin. In addition, conversion costs are reduced.

The bet on national currencies is not only made in the Asia-Pacific region.
In Europe, the idea of ​​de-dollarisation has long been promoted by, for example, Switzerland. States of the Global South and individual monarchies of the Persian Gulf (for example, Saudi Arabia) are also increasingly diversifying settlements, clarifies Yevgeny Shatov.

What's next?

Washington is concerned about this. In October 2022, Colin Weiss, an economist at the Federal Reserve System (FRS) International Finance Department, considered various geopolitical scenarios. One of them envisages the dollar losing its dominant position if China, Hong Kong, and a number of countries in Africa, Asia, Latin America, and the Middle East switch export payments to yuan with those controlled by the US.

Weiss considered such a development unlikely - in the coming years. However, in the long term, much depends on the success of alternative financial systems developed within the BRICS and other international associations, Vladislav Antonov points out in turn.

BRICS plans to create BRICS Pay, based on blockchain. The decentralized cryptocurrency system will allow to do without the dollar and trade with Russia without fear of secondary sanctions.

A corresponding report will be presented at the summit in October. In any case, de-dollarisation will accelerate - the process is already irreversible. This is a natural evolution of the global financial system towards multi-polarity.

https://ria.ru/20241014/dollar-1977675255.html