Business
US Faces Economic Uncertainty Over the Decline of the US Dollar
The US is facing an economic catastrophe as the use of the US dollar as a global currency may fall to 40-45% within 2-3 years because of international trading with a new BRICS currency.
The United States experienced an economic catastrophe in March 2023. One of the most famous American banks, Silicon Valley Bank, ranked one of the top 20 banks in the United States with over $215 billion in assets, went bankrupt. The bank incurred a $1.8 billion loss due to the interest rate increase on US Treasury securities.
Days later, New York-based Signature Bank, with over $110 billion in assets, failed because its deposits exceeded the maximum permissible limits of the US Federal Deposit Insurance Corporation, while First Republic Bank, with over $215 billion in assets, saw its share price fall by 67% and Western Alliance Bancorporation fell by 90%.
Also, almost every major private bank in the United States has had its credit ranking downgraded. Before all of this, Silvergate Bank, another cryptocurrency-related institution, failed due to liquidity problems in the first week of March 2023.
Global demand for the US dollar falling
The manner American financial institutions are collapsing one after the other portends the Western superpower’s economic doom. These banks have a singular explanation for their failure, and it is related to the interest rate on US Treasury bonds.
As global demand for the US dollar falls, so do these bonds, and to keep them afloat, banks are forced to give higher interest rates, which eats into their liquidity.
When renowned economist Dr. Nouriel Roubini, also known as ‘Dr. Doom,’ who accurately predicted the 2008 global recession, not only predicts another global economic collapse but also warns that problems will last for a long period, possibly a decade or more.
De-dollarization would be one of the primary causes of the impending recession. Once thought to be the sole currency for global commerce, the US dollar is losing its luster and being replaced by other currencies.
Naturally, it will significantly affect the American economy and may lead to an economic disaster for the world’s leading superpower.
Let us attempt to grasp the concept of de-dollarization.
Historically, the value of any currency has been determined by the assets held by the nation issuing that currency. Until about a century ago, the British Pound was the most valuable worldwide currency, not the US Dollar.
Following World War I, America, which escaped relatively unscathed because the war was not fought on its soil and got the lion’s share of wartime gold reserves, began to replace the pound as a global trade currency.
The Bretton Woods Agreement
In 1944, the United States implemented the Bretton Woods Agreement, which promoted bilateral commerce in US dollars. Surprisingly, by the late 1960s, it was thought that keeping US dollars was more profitable than holding stocks or gold. As a result, its hoarding was widespread not only among people but also among countries.
After the London Gold Pool was disbanded in 1970, the Bretton Woods Agreement was nearly null and void, and Asian economies began to recover. On the other hand, the United States was confronting a negative balance of payment crisis due to massive Cold War and Vietnam War expenditures.
President Nixon canceled the US dollar’s convertibility into gold in 1971, detaching it from the worth of his country’s assets. As a result, the value of the US dollar was now determined by worldwide demand rather than assets held by the US government.
The advent of ‘Petro Dollars increased demand for the greenback, and to meet the demand, the US began printing more and more dollars.
Because the United States was the largest contributor to worldwide institutions such as the IMF and the World Bank, all payments were made in US dollars. Consequently, developing or underdeveloped countries were compelled to trade in US dollars with other countries. By the late 1990s, nearly 90% of worldwide trade was conducted in US dollars.
Bilateral currency swap agreements
Hoarding grew, and more money was printed to meet the demand. Today, instead of nearly $500 billion in US gold reserves, they have released nearly $4 trillion in hard currency and $38 trillion in US treasury bonds, nearly 80 times the total assets of the US Treasury.
The US believed that because its currency was in high demand in the market, it would continue to cruise on its artificial bubble. It has produced war-like situations worldwide in recent years, compelling countries to purchase more weapons, fuel, and other items from the global market, promoting trade in US dollars.
The Information Technology (IT) boom of the 1990s boosted demand even more because most of the top IT firms were American, and nearly 80% of the IT industry was based in the United States. American sanctions were also imposed on bilateral currency swap agreements between nations to discourage trade in other currencies.
Since 2014, when the US imposed economic sanctions on Russia and created roadblocks in its trade in US dollars, countries have considered alternatives to using the US currency.
The introduction of the Euro also assisted nations in breaking the US dollar’s monopoly. Over the last eight years, many nations have signed bilateral agreements to avoid a situation similar to Russia’s. Russia and China created payment gateways, and India and Russia signed a similar arrangement that linked the Reserve Bank of India and Russia’s Sistema Peredachi Finansovykh Soobscheniy. (SPFS).
The US dollar’s share has fallen.
Meanwhile, nations such as Brazil, China, Australia, Argentina, Egypt, the European Union (EU), Iran, Japan, Saudi Arabia, the United Arab Emirates (UAE), and Turkey signed bilateral treaties to break the monopoly of the US dollar.
As a result, the total circulation of the US dollar worldwide decreased considerably, as has greenback stockpiling. According to one estimate, the US dollar’s worldwide trade has dropped by more than 20% in the last four years.
This is evident in the International Monetary Fund’s foreign currency assets, where the US dollar’s share has fallen from 71% in 1999 to 57% in 2021 and is expected to fall further.
The net cascading impact on the worldwide circulation of the US dollar will be significant. The worldwide use of the US dollar as a currency is anticipated to fall to 40-45% within the next 2-3 years.
The Euro, previously traded below the US dollar, now has the upper edge. Russia trades in Ruble against its cheap oil, while other nations trade in Chinese Yuan, Japanese Yen, Saudi Riyal, and UAE Dirham. India also trades in the Indian Rupee with over 44 nations.
LONDON — The European Union started new investigations into Facebook and Instagram on Thursday, alleging that they are failing to protect youngsters online, in contravention of the bloc’s rigorous digital standards for social media companies.
It’s the latest wave of investigation for parent business Meta Platforms under the 27-nation EU’s Digital Services Act, a broad set of regulations enacted last year to clean up online platforms and protect internet users.
AP – VOR News Image
Facebook And Instagram Face Fresh EU Digital Scrutiny Over Child Safety Measures
The European Commission, the bloc’s executive arm, expressed worry that the algorithmic algorithms used by Facebook and Instagram to propose content such as movies and postings could “exploit the weaknesses and inexperience” of minors and encourage “addictive behavior.” It’s concerned that these methods would exacerbate the so-called “rabbit hole” effect, which drives consumers to more distressing content.
The commission is also investigating Meta’s use of age-verification technologies to prevent youngsters from accessing Facebook or Instagram or viewing inappropriate information. Users must be at least 13 years old to create an account on these networks. It also investigates whether the corporation complies with DSA regulations demanding high privacy, safety, and security for children.
“We want young people to have safe, age-appropriate experiences online and have spent a decade developing more than 50 tools and policies designed to protect them,” Meta stated earlier. “This is a challenge the whole industry is facing, and we look forward to sharing details of our work with the European Commission.”
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Facebook And Instagram Face Fresh EU Digital Scrutiny Over Child Safety Measures
The most recent DSA lawsuits center on child safety under the DSA, which mandates platforms to implement strict procedures to protect children. Earlier this year, the commission started two separate investigations into TikTok due to concerns about potential hazards to children.
“We are not convinced that Meta has done enough to comply with the DSA obligations — to mitigate the risks of negative effects on the physical and mental health of young Europeans on its platforms Facebook and Instagram,” European Commissioner Thierry Breton stated on social media.
The cases announced on Thursday are not the first for Facebook and Instagram. The DSA is already investigating them over worries that they are not doing enough to combat foreign disinformation ahead of the EU elections next month.
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Facebook And Instagram Face Fresh EU Digital Scrutiny Over Child Safety Measures
X, a social media platform, and AliExpress, an ecommerce site, are under investigation for violating EU regulations.
There is no timeframe for the investigations to conclude. Violations may result in fines of up to 6% of a company’s annual global revenue.
SOURCE – (AP)
According to Chinese official media, Microsoft has asked at least 100 employees in China to consider migrating to other nations.
The reports come as tensions between Beijing and Washington deteriorate over technology such as artificial intelligence (AI) and renewable energy.
Microsoft personnel, particularly involved in cloud computing, were recently offered opportunities to work in the United States, Australia, or Ireland, among other nations, according to a report published Wednesday by state-run media The Paper, citing an unnamed source.
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Microsoft Asks Some Employees In China To Move To Other Countries
According to the Wall Street Journal, Microsoft has urged up to 800 employees, most Chinese engineers working on cloud computing and artificial intelligence, to consider relocating. Last year, the Journal reported, citing anonymous sources, that the Biden administration was planning to restrict Chinese corporations’ access to US cloud services.
CNN has contacted Microsoft for comment.
According to a statement from Microsoft (MSFT) that Reuters cited, the company was still committed to China and that giving some employees internal opportunities was part of its regular business.
The business first entered China in 1992, and for decades, it relied on its influential Beijing-based research lab, Microsoft Research Lab Asia, to gain influence.
“Everyone is confused,” an employee told the paper, noting that the impacted employees have less than a month to decide.
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Microsoft Asks Some Employees In China To Move To Other Countries
Yicai, a Chinese state-owned financial media site, reported that over 100 staff were affected. It also said that residents had the option not to move.
The reports come the same week President Joe Biden proposed duties on $18 billion in Chinese electric vehicle imports and other products. Biden stated that he was working to prevent unfair competition from China and the US industry from being decimated.
The two economic superpowers have been at odds in the technological realm for years. In October, the Biden administration restricted the semiconductors that American companies may export to China.
In recent months, the United States has joined with its European and Asian partners to block China’s supplies of advanced chipmaking equipment.
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Microsoft Asks Some Employees In China To Move To Other Countries
Beijing has responded by setting its restrictions on shipments of germanium and gallium, two materials required for semiconductor manufacturing.
SOURCE – (CNN)
Businesses ranging from McDonald’s to Home Depot are battling to attract financially challenged customers. However, Walmart is expanding as customers seek low-cost groceries, necessities, and other items.
Walmart reported Thursday that sales at locations open for at least a year grew 3.8% over the previous year. The company upped its sales and profit guidance for the year, indicating that it expects growth to continue.
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Walmart’s Business Surges As Shoppers Hunt For Low Prices
According to retail analysts, the largest retailer in the United States has leveraged its size and purchasing power to keep prices lower than competitors despite rising inflation since the outbreak.
Groceries account for more than half of Walmart’s sales, and analysts at Evercore IRI say the company has profited from its pricing advantage, with prices that are approximately 25% lower than traditional supermarkets.
While low—and middle-income customers have traditionally made up the majority of Walmart’s customer base, the company has expanded to include people earning more than $100,000 per year. It stated that its growth last quarter was “primarily driven by upper-income households.”
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Walmart’s Business Surges As Shoppers Hunt For Low Prices
“Most Americans remain uncomfortable with food prices and are still actively looking for ways to keep their spending in check,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Thursday. This has benefited “Walmart’s favor and has allowed the chain to continue to acquire new customers.”
Meanwhile, department stores, home improvement retailers, and other retail groups have suffered as buyers tighten their belts. Fast-food restaurants have also struggled.
Retail sales have declined overall in recent months.
The business stated this week that Home Depot’s sales at locations operating for at least a year declined 2.8% last quarter. McDonald’s reports that some lower-income Americans are eschewing the restaurant in favor of cooking at home.
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Walmart’s Business Surges As Shoppers Hunt For Low Prices
“It’s a challenging consumer environment,” said Ian Borden, McDonald’s CFO, stressing that many people are struggling with inflation, rising interest rates, and shrinking savings.
SOURCE – (CNN)
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