The US dollar is suffering a “stunning collapse” as the world’s reserve currency, according to Eurizon SLJ Capital’s Stephen Jen. The CEO says the USD’s share as a global reserve currency fell faster in 2022 than it has over the past 20 years, losing 11% of its market share since 2016. “If the U.S. makes more policy errors and abandons the culture of self-examination, there will likely come a time when much of the rest of the world will actively avoid using the dollar,” Jen wrote. This comes at a time when many experts (including former Treasury Secretary Larry Summers, Morgan Stanley’s Mike Wilson, and economist Nouriel Roubini) are warning of a credit crunch that is likely to end in a recession. In other news, Treasury Secretary Yellen is set to confirm what investors have feared: that President Biden is prepared to let the economy suffer in the name of national security when it comes to a relationship with China. “We won’t compromise on these concerns, even when they force trade-offs with our economic interests,” says Yellen.

Kitco News/Anna Golubova
USD is suffering ‘stunning collapse’ as world’s reserve currency, warns Eurizon SLJ Capital’s Jen

Markets need to pay closer attention to the de-dollarization trend since the greenback is losing its power as a reserve currency faster than many analysts are noticing, according to Stephen Jen, CEO and co-CIO of Eurizon SLJ Capital.

The dollar’s loss of its reserve currency status accelerated last year when the greenback was used against Moscow as part of the sanction package after Russia invaded Ukraine. In 2022, the USD’s share as a global reserve currency fell at ten times the average pace of the past 20 years, Jen said in a report.

“The dollar suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions,” Jen wrote. “Exceptional actions taken by the U.S. and its allies against Russia have startled large reserve-holding countries, most of which are from the Global South.”

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Barron’s/Reshma Kapadia
Yellen Says National Security Is Focus in China Ties, Even at a Cost

Treasury Secretary Janet Yellen is set to confirm what investors have increasingly feared: The U.S. is viewing its relationship with China through a national security lens—and that may come with some economic costs.

Excerpts from a speech that Yellen is scheduled to deliver Thursday morning take a hawkish tone, even as she says the U.S. seeks “a constructive and fair economic relationship with China.” That matches the recent mood in Washington, D.C.

Yellen is due to speak at Johns Hopkins University’s School of Advanced International Studies in Washington, D.C.

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Business Insider/Zinya Salfiti
The credit crunch is here and it could cripple the economy. Here’s what Larry Summers, Nouriel Roubini and 7 other experts have said on the emerging threat.

The worst banking turmoil since the 2008 financial crisis appears to have calmed somewhat but it’s spawned a new worry for investors: a credit slump that’s threatening to cripple the economy.

Banks are turning increasingly risk-averse and less willing to lend as they face massive deposit outflows and the prospect of increased regulatory scrutiny amid the sectoral jitters – and that’s crimping the flow of credit into the economy. Recent data showed the steepest lending drop on record over the last two weeks, which suggests a credit crunch has already started, according to Morgan Stanley.

Many big Wall Street names and other experts are now concerned about the impact of the credit squeeze on the US economy. Former Treasury Secretary Larry Summers, Morgan Stanley’s Mike Wilson, “Dr. Doom” economist Nouriel Roubini and billionaire investor Bill Gross are among those who have warned about the emerging threat.

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