This dangerous US dollar dominance
The world definitely has to do something with the problem of one dominant global currency, which is the US dollar.
For the last 12 months, the financial world has seen alarming bouts of volatility in the markets. That was caused by the fear of what might happen to the world with its highest-ever peacetime debt under the circumstances of relatively high interest rates.
Notwithstanding a constant narrative regarding American households as well as banks paying down debts ever since the world credit crash 8 years ago, any deleveraging appeared to be more than just offset by higher authorities, personal and corporate debt throughout the world and in China, Europe and across emerging markets.
Currently, aggregate world debt is much higher than it was before that credit crash 8 year ago. Then, the role of the greenback as the world’s major reserve currency denominating huge chunks of this debt pile should be considered to be a crucial factor contributing to global instability.
For instance, the first December’s US interest rate surge, just a quarter of a percentage point triggered a convulsion in global markets, leading to the worst start since the World War Two.
Meanwhile, On Tuesday, in Zurich, Bill Dudley New York Fed chief told that Americans should be ready for the fact that other currencies such as Chinese Yuan or the euro will gain a greater global reserve share.