Some Countries may want to get off the dollar for several reasons, including:
- Economic independence: By using their own currencies or other alternatives to the dollar, countries can reduce their dependence on the US and gain more economic independence. This can be especially important for countries that have historically been subject to US economic influence or that have experienced economic crises in the past.
- Hedging against currency risk: If a country’s economy is heavily reliant on exports, it may be beneficial to use a currency other than the dollar to reduce currency risk. For example, if a country’s exports are priced in dollars and the value of the dollar falls, the country’s exports will become more expensive and may become less competitive. Remember all of those years when China deflated their currency, it was to increase the purchases of their goods.
- Political reasons: In some cases, countries may choose to move away from the dollar as a political statement or in response to US policies that they disagree with. For example, countries that are subject to US economic sanctions may seek to bypass US sanctions by using alternative currencies. For instance, due to the war in Ukraine, the US banned some Russian banks from the Swift system thereby impeding the flow of dollars for that country.
- Diversification: Holding a variety of currencies and assets can help countries diversify their financial holdings and reduce their exposure to risk. In this sense, moving away from the dollar can be seen as a way to diversify a country’s financial holdings and reduce its vulnerability to economic shocks or crises. This is an all of your eggs in one basket thing.
- Some countries may also want to get off the US dollar in order to reduce their exposure to potential US inflation. If the US Federal Reserve were to significantly increase the money supply, it could lead to higher inflation and a decrease in the value of the dollar, which could hurt countries holding large amounts of US dollars or US dollar-denominated assets.
- The US dollar’s dominance in the global financial system has given the US significant economic and geopolitical power. Some countries may want to reduce this power imbalance by promoting alternative currencies or payment systems, such as digital currencies or blockchain-based systems.
- The use of alternative currencies or payment systems could also help facilitate international trade and investment between countries that may have difficulty accessing the US dollar-based financial system. This could be especially important for developing countries or countries that are not aligned with US interests.
- In recent years, there have been efforts to promote alternative currencies or payment systems, such as the Chinese yuan or the European Union’s euro, as potential alternatives to the US dollar. However, these currencies still face significant challenges in terms of adoption and acceptance in the global financial system.
It’s worth noting that moving away from the dollar can be a complex and challenging process, as the dollar is the world’s most widely used currency and plays a key role in the global financial system. However, some countries have taken steps to reduce their dependence on the dollar in recent years, such as by increasing their holdings of gold or by establishing currency swap agreements with other countries. In addition, Russia & China have had many rumors about breaking away from the dollar.