The Bank of America has said that the biggest danger to the U.S. Dollar’s spot as the top currency is from problems within our own country, and not from any foreign currency like the BRICS currency. They went on to explain that every time debt ceiling talks come up in the United States, there is a chance of the government shutting down or even worse – defaulting!
“A Risk Too High to Ignore
Bank of America said Thursday that the U.S. dollar is still very important and won’t be replaced anytime soon. But, they also mentioned that our dollar could be in danger if the U.S. doesn’t pay back their debts on time.
The analysts at Bank of America said that the US Dollar’s dominant role comes from its position in the US Treasury market. However, any surprise defaults due to a debt ceiling dispute would damage the Dollar’s reputation as a store of value. This means that the major threat for the US Dollar mainly comes from inside America, and not from competing currencies.
Analysts said that if we don’t pay attention to the debts, it will be bad for the U.S dollar in the long run. This is because out of all the countries in the G10 group, America has the highest debt percentage compared to their total wealth. The International Monetary Fund claims this debt-percentage will get even higher from 2022 till 2028. Bank of America agrees with these predictions.
When the US talks about its debts and bills, there is a risk that the government could be shut down or even not pay back what it owes.
U.S. Treasury Secretary Janet Yellen just said that if Congress does not raise or put the debt limit on hold before June 1, the government will not be able to pay all of its bills. She warned that this could lead to very bad conditions for American families, our country’s reputation around the world might suffer, and it could even influence our ability to defend ourselves from people who want to hurt us.
Could the U
Bank of America explained that the U.S. dollar is still the main currency used in trading, bills, and SWIFT transfers despite the risk of defaulting on debt payments and a growing change towards other currencies. However, they noted that some central bank reserves are using different currencies instead of the U.S. dollar.
The U.S. dollar is not going to lose its special position compared to other currencies, and at this moment no other currency has appeared that can take its place. According to Bank of America’s report, it may be possible for the Chinese yuan to become international but the Chinese government will have to let people move their money in and out of China freely. If this happens then China could face unexpected problems with its money or how it manages the money within the country.
Bank of America analysts don’t think the U.S. Dollar will be replaced by a special currency that is used across Brazil, Russia, India, China and South Africa (collectively known as BRICS countries). This is because the countries have little trade with one another other than China and their relations are often difficult. Despite this, more and more countries are interested in joining the economic bloc that these five countries make up.
Economists think that a new currency shared by countries like China, Brazil, India, and South Africa (known as BRICS) will replace the U.S dollar as the leading currency. A professor from Sweden even said that if Saudi Arabia joins this group, it will mean the Chinese Yuan is used more often as an official trading currency. Do you think Bank of America is right about the U.S. dollar still being in charge? Let us know what you think in the comments section below!