Is this possible and what are the risks?
Russia began to sell gas for rubles, and the president said that Western and European currencies had compromised themselves. Can Does Russia generally prefer the dollar? How does all this work and what could be the consequences?
Russia has already gradually reduced the use of the dollar in recent years: its share in the exclusive gold and foreign exchange reserves and international contracts has decreased, but it has not been possible to reduce it to such a reduction. Let’s try to figure it out Is DNA it is now.
Why do we pay in dollars at all?
150 years ago, the dollar was not the main currency in world trade. The British pound sterling belonged to the first world war – more than 80% of all tastes were in the German currency. But after 1918, the role of the dollar began to grow in 1944. at Bretton Woods the conference finally took shape, and the dollar became the main world currency.
There were several reasons:
- The United States at that time was very interested in considering the sides of different countries, and on both sides of the conflict. They were all countries of Europe, Asia, as well as developing countries. The US allocated steel, which controlled the finances and debts of virtually all European powers and economies. This is a very powerful lever, and the United States took possession of it during the war, because during the time of their economy and infrastructure there were no serious losses. On the contrary, there was a positive effect of increased consumption and a sharp increase in credit to other countries for post-war recovery.
- The rest of the countries recognized that trading in dollars was convenient and reliable, since the US economy was actually the most resilient among the major economies and the most diversified and developed technology industry.
- The US has the largest gold reserves in the world, and this causes the stability of the currency. Due to this, the dollar had low volatility, that is, there were no sharp jumps in its exchange rate.
That is, at the moment when a conflict arose in the United States and a stable powerful dynamic was required, and the price was determined by the method of settlement. Naturally, he did not object to making a defeat in dollars as a stable currency.
So the dollar became the world’s key trading currency, and then the reserve. This means that the central banks of different countries keep reserves in dollars – reserves of money, which can be used to support the national currency or carry out settlement calculations.
What does it give the USA
There are both pros and cons to paying in US dollars. But pluses yet more:
- The US can “export” inflation. Roughly speaking, some economic rules for not using the dollar. In particular, the United States is pursuing a softer monetary investigation, while inflation will be lower, because a significant part of the dollars is raised for the criminal responsibility of the country.
- The US government debt is in dollars and in theory can be limited: if necessary, the US can print as many dollars as it likes, and inflation will not grow at the same time. No other country can do this. This is the basic rule monetary policy, expressed in the Fisher formula: MV = PQ, where M is the money supply, V is the velocity of money turnover, P is the price of goods, Q is the quantity of goods. That is, if we increase the volume of the money supply, but do not increase the number of goods, then we justify prices and, accordingly, inflation.
- Thanks to the strength of its currency already by the 1990s The US has gone from being a major lender to a major investor. would be discoveredthis is a negative factor, but developing from the debtor hardly no stronger than the debtors have grown. Everything from the USA is developed: if something The state of the US national debt and the dollar – for example, an uncontrolled depreciation – then everyone suffers. The collapse of the US national debt and the dollar means an economic collapse for the whole world. Nobody is interested in this happening.
The disadvantage of the state reserve currency is that it cannot be devalued. Any other country through monetary checking and managing the rate can smoothly devalue the rate of this own currency and by increasing the trade balance of payments.
This is one of the best trade points in terms of import substitution: imports become too expensive and the country starts own production. The United States does not have such opportunities, because the dollar for them is the currency of both exports and imports.
What alternatives to the dollar are there
There are not many alternatives to the dollar for holding reserves, and they are significantly less popular. Now most of the country’s European foreign exchange reserves still stored in dollars. In second place in terms of volume is the euro. Chinese Yen, English
Amount of foreign exchange reserves, billion dollars
Third quarter 2020 | |
---|---|
In dollars | 7081 |
In Euro | 2452 |
In Japanese yen | 697 |
In pounds of nutrition | 572 |
In Chinese yuan | 318 |
In Canadian dollars | 262 |
In Australian dollars | 217 |
In Swiss francs | twenty |
In other currencies | 348 |
Third quarter 2020
In dollars
7081
In Japanese yen
697
In pounds of nutrition
572
In Chinese yuan
318
In Canadian dollars
262
In Australian dollars
217
In Swiss francs
twenty
In other currencies
348
It should be understood that not every currency can be a reserve, because many of them are too volatile.
The problem with most currencies is that their exchange rate is highly dependent on a narrow group of goods. In Russia, these are energy carriers, metals, raw materials. The conjuncture of prices for these goods shows the country’s balance of payments and, accordingly, the exchange rate of the ruble. Exactly due to this volatility and dependence, the ruble does not become a reserve currency. No country wants its reserves to fall in price due to expect oil prices.
Same The problem is also with the Brazilian real, because there are a limited number of goods that Brazil exports. Even the resulting dollar is too volatile for a reserve currency, even though it is an advanced economy.
But this does not mean that all currencies cannot be traded. There are indeed many alternatives as a currency for international trade, and at the end of the 20th century the dollar began to lose ground in world trade. Countries began to use the euro more actively for settlements.
At the same time, the rejection of the dollar in world trade still seems like a fantasy. There is a so-called QWERTY effect: it is revealed that the existing display layout is not the most ergonomic and not the most comfortable. too expensive – no one will do it. Same the same thing here: everyone is used to transactions in dollars, it is expensive to change, there can be shock consequences.
But if the share of the dollar in world trade drops to a third or a quarter, then the loss of world currency status will no longer seem like a fantasy. And these can be large, if large exporters and importers – India, China, Brazil, Russia, Indonesia – will mainly trade not in dollars, but, for example, in national currencies.
It is possible to agree on such calculations, for example, upon acceptance commodity groups. the dollar will cease to be statistical in regard to the security of the international device.
What are the consequences of abandoning the dollar in world trade
It must be understood that there will be no economic benefits from this. There are 18 freely convertible currencies in the world:
- Dollar.
- Euro.
- British pound.
- Japanese yen.
- Swiss frank.
- Canadian dollar.
- Australian dollar.
- Swedish krona.
- Danish krone.
- Norwegian krone.
- Singapore dollar.
- Hong Kong dollar.
- South Korean won.
- New Zealand dollar.
- South African rand.
- Mexican peso.
- Israeli new shekel.
- Hungarian forint.
You can buy the British pound for the euro immediately if you buy the yuan for rubles, most likely an intermediate transfer to dollars or euros. Countries incurring large transaction costs by converting currencies multiple times to calculate their own.
Countries, including Russia, are being driven away from the dollar by a complex set of considerations, including participation. It is impossible to justify this economically, but the trend is clear. So the structure of world trade will change in the direction of currency diversification.
What is the forecast for Russia
The structure of Russian foreign trade is generally similar to the world one. Russia has reduced the share of dollar settlements in recent years, and in 2021 the share of the dollar fell below 40% for the first time. At the same time, the share of settlements in euros and even in rubles grew, mainly with the countries of the Eurasian Economic Union.
In the coming years, the share of the dollar in Russian foreign trade settlements will still decrease, but finally we will hardly we refuse: still the return of goods that Russia buys in the United States, and there the settlements will be made in dollars. The share of the yuan and non-European currencies will grow.
Russia can agree on settlements in rubles in those groups of goods where we have a significant share. So, for example, Russia is trying to do with gas.