China and Brazil ditch US dollars, but USD will always be king
Invezz.com – According to Sergei Perfiliev, the trade agreement between China and Brazil to transact with each other in their own currencies would have no impact on the global dominance of the US dollar.
The ‘world runs on dollars’
China and Brazil will now trade with each other using yuan and reais instead of the almighty US dollar. China already has similar deals, notably with Russia, and it can be seen as a move to unseat the US dollar as the world’s most important currency.
Perfiliev, a financial training instructor and former Goldman Sachs (NYSE:) quantitative strategist, noted in a tweet that “the world runs on dollars” and “it’s not going away anytime soon.”
According to Perfiliev, the US dollar is not only backed by the world’s largest economy, it is backed by the American system that is characterized by being free and open. US private property and assets are subject to strict laws and the risk of seizure or confiscation is minimal.
Compare this to China, as Invezz recently reported, where billionaire Mark Mobius said that China is “restricting the flow of money out of the country.”
The US dollar is irreplaceable
The US dollar is held by countries around the world as part of their foreign exchange reserves, while many world currencies are pegged to the US dollar. The dollar remains the dominant “common denominator” for global transactions, despite China’s latest attempts to say otherwise.
Meanwhile, global commodities like oil are traded in dollars and the US is home to commodity and futures exchanges that are trusted by users around the world.
#6 – Dollar benefits from worldwide network effectsDollar is a common denominator for global trade – it’s very liquid and widely acceptable.Lots of foreign debt is denominated in US dollars too and dollars will be needed in the future to service that debt.
— Sergei Perfiliev
