Will the US dollar collapse in 2024? | Economy

Prepare Dollar The symbol of American power and one of the reasons for its emergence is the result of American aggression. At the same time, the factors that strengthen American power also come from multiple factors. They are as follows:

1- Economic factors

  • The amount of wealth, natural and monetary reserves, and assets the United States possesses.
  • The United States' production capacity, export capacity, and trade balance.
  • The attractiveness, size, depth, openness, transparency, and availability of information in U.S. financial markets.
  • US hegemony over the financial system and global trade.
  • The world's most traded commodities are pegged to the dollar, such as oil.
  • The sustainability and strength of demand for the U.S. dollar.
  • How easily the U.S. dollar can be bought and sold against other currencies.
  • Pegged to the US dollar, more than 60 countries in the world peg their currencies to the US dollar.

2- Political and geopolitical factors

  • The efficiency and internal social cohesion of the American government.
  • America’s political dominance is reflected in its ability to impose its foreign policy agenda on the world.
  • Military power and geopolitical advantage.
  • The cohesion of the world order that emerged after the collapse of the Eastern Bloc in the 1990s.

3- Strength of the model

  • The superiority of the American economic, political, civilizational and cultural model.
  • Harmony of model and practice.

These factors are dialectically related. Although economic factors are considered to be the basis of political and geopolitical factors, the strength of the latter has a positive impact on the former, and they jointly determine the strength of the US dollar.

The relationship is also not one-way, as a stronger dollar can have a negative impact on economic, political and geopolitical factors, and vice versa.

But this dialectical, mutually supportive cycle began to falter two decades ago, as all the factors that contributed to the strength of the dollar waned, as shown below:

First: Internal factors

The United States is suffering from multiple and worsening internal crises that demonstrate the lack of social justice and the erosion of the democratic model.

The persistent inflation crisis, combined with the nation's high poverty rate, continues to limit the competitiveness of American products, leading to a decline in exports and an increase in foreign imports, resulting in a continued accumulation of imbalances in the trade balance.

This situation, which leads to a reduction in income and difficulties in meeting external and internal financial and credit obligations, also leads to a continued rise in housing costs, which has an impact on the number of homeless people in the United States, which currently reaches 1 billion. It is expected that in 2023 there will be about 650,000 homeless people, of which 28% will be families with children, which will be a record high.

  • Economic inequality

A Human Rights Watch report shows that despite some economic reforms implemented by the government Joe Biden Giving states the power to enact legislation and local laws limits the impact of reforms, suggesting that the crisis in America’s political structure is casting a shadow over the economy.

For every dollar of wealth held by white households, black households have 24 cents and Hispanic households have 23 cents, creating racial disparities in access to adequate health, nutrition, education, employment, housing, and at nearly every point of contact with the justice system, putting millions of women of color at risk, especially as laws restricting reproductive health care grow.

Income inequality is high compared to other wealthy countries, with the richest tenth of the population receiving nearly half of total income, while the poorest half of the population has an income inequality of 13%, with their private ownership of the country's wealth not exceeding 1.5%.

  • Detention rates increased

The United States has the highest detention rate in the world, with about 2 million people in prison and millions more on parole and supervision, and the proportion of black prisoners is far higher than their proportion of the total population.

  • child labor

Exemptions granted under U.S. labor law allow children as young as 12 to work in the agricultural sector (the sector responsible for the most child labor deaths). Child labor violations increased dramatically in 2023, with the majority of them child labor violations. Death rates from drug overdoses continue to rise, with more than 111,000 deaths last year, and working in dangerous and exploitative conditions, not to mention racial disparities in overdose deaths.

  • High polarization

As lawmakers continue to ban books, enact laws that restrict free discussion in classrooms, delete inspiring stories of ordinary citizens who have successfully organized to promote human rights, and provide military support to countries that violate human rights, the threat indicators to democracy continue to rise.

Indicators of peaceful and smooth circulation by the authorities are declining, as happened on January 6, 2021, when groups of rioters stormed the US Capitol (Capitol) in support of Trump's plan to overturn the election results, and the intensity of polarization increases as the date of the presidential election approaches, especially Trump's statement that the state will descend into bloodshed if he is not elected.

Second: External factors

  • Economically

Over the years, the United States has been losing its position as the world's leading economic power, benefiting China and some other countries, as the share of U.S. production in total global output has declined and its value has also declined relative to other countries. The United States has also lost ground in terms of global innovation and invention levels compared to China's total output.

The share of the US dollar in international reserves has been declining for two decades, ever since the United States began the so-called war on terror and imposed economic and financial sanctions against “terrorism”. After realizing their high dependence on the dollar, countries and entities began to look for alternatives to the dollar, making the dollar and its policies hostage to US interests.

The decline of the dollar’s ​​global currency status can be explained as follows:

  • The trend in Europe, both at the national and EU level, is towards greater independence from the foreign policy of the United States of America and less dependence on the US dollar.
  • The global trend of concluding non-dollar international transactions has grown, such as the first RMB-settled transaction between China and the UAE, the deal between Malaysia and India, the signing of a non-dollar oil deal between Russia and India, Brazil and China agreeing to abandon the US dollar, and Russia and China agreeing to exchange oil for local currencies.
  • Malaysia's prime minister has proposed the creation of an Asian Monetary Fund to reduce reliance on the U.S. dollar.
  • Strengthening the group Brix the degree of cooperation among its members, and plans to issue new currencies and expand membership.
  • Saudi Arabia is open to moving away from the petrodollar model and starting to sell oil in yuan.
  • A report released by JPMorgan Chase in late August last year confirmed the decline in the use of the US dollar in global currency markets.
  • Data from the International Monetary Fund shows that the dollar's share of global reserves has continued to decline for two decades.
  • The growth of digital currency and its global trend, 90% of the world's central banks are researching or discussing the issuance of digital currency.

  • At the geopolitical level

US hegemony is facing geopolitical challenges on multiple fronts simultaneously: on the front with Russia in Ukraine, on the front with China over Taiwan and in the Indo-Pacific, on the front with Palestinian resistance, support and ongoing military operations in the Arab world and the region. Iran’s threat to US influence in the region is escalating.

On the African continent, as Africa’s resource sovereignty and the trend of getting rid of the legacy of colonialism strengthen, the hegemony of the United States and its strategic interests are showing a downward trend, which directly affects the strength of the US dollar and its status as a global currency.

  • At the global system level

After World War II, an international system emerged, governed by international institutions, systems and laws, which contributed greatly to strengthening the hegemony of US imperialism and its allies. After the collapse of the Eastern Bloc, the United States gained well-known global hegemony. However, this system, which provided a global incubation environment for US expansion and domination, has begun to disintegrate with the rise of new international and regional powers, in favor of the formation of a new multipolar system, which means a decline in the United States' global dominance in economics, finance and geopolitics, and threatens the United States' influence in international institutions. The disintegration of the global system will directly weaken the strength of the US dollar.

  • At the global level of expectations

As financial capital, stock market economy and securities grow and dominate at the expense of the productive economy, the future expectations of investors and major players have become the fundamental determinant of direct economic indicators. Taking the above factors into account, the major players tend to assume that the strength of the US dollar will decline or collapse in the future, which prompts them to make real-time investments that do not bet on the strength of the US dollar, thus anticipating the trend of the US dollar. The decline in future strength will lead to a weakening of current strength.

LONDON, ENGLAND - DECEMBER 7: A visual representation of the digital cryptocurrency Bitcoin against the U.S. dollar on December 7, 2017 in London, England. While cryptocurrencies such as Bitcoin, Ethereum and Litecoin remain extremely volatile, they have seen unprecedented growth in 2017. Despite financial institutions’ divided opinion on digital currencies, which currently have a market value of approximately $175 billion, the cryptocurrency industry continues to grow
Cryptocurrencies are one of the factors weakening the dollar (Getty Images)

The most likely scenario for a dollar collapse

The gradual accumulation of the dollar's weakening indicators continues. Two main factors will have a decisive effect on the dollar's collapse, one is internal and the other is external. It should be noted that these two factors influence each other:

1- External: A clear defeat on one of the main geopolitical fronts.

2. The crisis of the United States failing to meet its financial and credit obligations and raising the debt ceiling.

A study by the Baypartisan Policy Center shows that treatment U.S. Congress The issue of raising the U.S. debt ceiling will have a significant impact on the strength of the dollar globally, and if the debt ceiling is not raised sufficiently, the U.S. will default on its fiscal obligations, leading to a catastrophic reduction in debt. Credit Rating It prompted investors to sell U.S. assets and move to other safer currencies, accompanied by widespread unemployment shocks and high borrowing costs, as confirmed by the U.S. Treasury Secretary. Janet Yellen.

About a month after President Joe Biden signed a law in December that raised the debt ceiling by $2.5 trillion, the Treasury Department exhausted the new limit and invoked special borrowing powers under emergency provisions if the debt ceiling is not reached. Once again, the Treasury is reaching a point of … default.

The study predicts that the date of the first default will be between the summer and autumn of 2024, a date that will be decisive for the decline of the United States' power in the face of geopolitical challenges if we go to raise the debt ceiling, which will lead to the exhaustion of the US economy and the accumulation of an already high level of public debt, a decline in income rates and purchasing power, and an increase in poverty and unemployment.

The dollar crisis comes at a time when the United States of America is having difficulty meeting its foreign imperial obligations to its allies and on the front lines with its enemies.

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