An Economic Catastrophe Awaits the World as a Result of De-dollarization

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As of March 2023, the US economy has been plunged into an economic bloodbath. One of the most prominent American banks, Silicon Valley Bank, counted among the top 20 banks in the US with over $215 billion in assets, suddenly collapsed.

Banks like Silicon Valley Bank reflect the decline of the U.S. dollar

Silicon Valley Bank’s fall is a symptom of a significant issue: de-dollarization. The US dollar, previously seen as the cornerstone of the global economy, is losing its stability due to rising interest rates on US Treasury securities and other factors.

The collapse of New York-based Signature Bank has further compounded the US dollar’s diminishing stability. With over $110 billion in assets, the bank could not meet the maximum permissible deposit insurance limits laid down by the US Federal Deposit Insurance Corporation. This caused a run on deposits and cash withdrawals, leading to its eventual collapse.

The failure of these two significant banks has caused massive losses, with Silicon Valley Bank suffering an estimated loss of $1.8 billion due to the interest rate hike on US Treasury securities.

Major Amit Bansal, a retired Army officer said, “The way American financial institutions are falling one after another predicts a kind of economic doomsday for the Western superpower.”

De-dollarization of U.S. economy linked to rising interest rates

The rapid de-dollarization of the US economy has been linked to increasing interest rates on US Treasury securities. With the demand for these bonds decreasing worldwide and banks now having to offer higher interest rates to attract investors, this has had an adverse effect on the US economy.

Banks heavily relying on US Treasury securities have been forced to take losses due to increased interest rates, leading to Silicon Valley Bank and Signature Bank’s eventual collapse. 

De-dollarization has been a growing problem as countries move away from using the US dollar as their main or reserve currency. It presents an economic challenge for the United States, with economists warning that further instabilities could lead to an economic catastrophe if not addressed soon.

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