De-dollarization: Elon Musk, Ray Dalio, Chamath Palihapitiya weigh in

• An increasing number of nations are making plans to break away from the dollar’s dominance of global trade and investment flows.
• China has pursued the yuan in cross-border trade deals, while France’s president has called for reduced dependence on the greenback. 
• Here’s what 10 expert voices have said about the rise of a de-dollarization trend. 

The de-dollarization movement is gathering global momentum, with an increasing number of nations from Asia to Europe and Latin America lining up plans to end the greenback’s dominance of global trade and investment flows.

China and Brazil have made a deal to settle trade in each other’s currencies, while French president Emmanuel Macron has urged Europe to wean itself off its dependence on the greenback. 

The acceleration of the anti-dollar drive has seen the yuan overtake its US counterpart as the most used currency for Chinese cross-border transactions. It is also Russia’s most traded currency since Moscow was largely pushed out from global finance following its war with Ukraine. 

And while Goldman Sachs thinks attempts to undercut the dollar’s supremacy will remain contained and constrained for years to come, other influential figures have adopted a more bearish view on the greenback. 

Here’s what 10 top voices have said about the anti-dollar drive. 

Elon Musk, billionaire business magnate 

The Tesla and SpaceX CEO has warned against weaponizing currencies like the US has done with its economic sanctions, and suggested the de-dollarization trend may be linked to that. 

In a tweet on Tuesday, he responded to a video post by economist Peter St Onge, in which the latter highlighted that “de-dollarization is real and is happening fast.” 

“Dollar share went from 73% (2001) to 55% in (2020). Went from 55% to 47% since sanction launched on Russia, now de-dollarizing at 10x faster than the previous two decades,” Onge said. 

Musk responded: “If you weaponize currency enough times, other countries will stop using it.” 

Ray Dalio, Bridgewater founder 

“Dollars are debt. In other words, when one holds a dollar — a central bank — they hold a debt asset,” the Bridgewater Associates founder recently said. “So the holders of that would say, ‘I’m already over-exposed to US dollar-denominated debt.’ And so there’s less of an eagerness to buy.”

Western sanctions against Russia have frozen $300 billion worth of its central bank’s assets, preventing Moscow from transacting in dollar- or euro-based assets. Those sanctions “increased the perceived risk that those debt assets can be frozen in the way that they’ve been frozen for Russia,” Dalio said.

“So for those reasons, there’s less desire to hold US dollar-denominated debt, which means yes, less US dollars,” he added. “So the supply-demand picture is worsening particularly as we continue to have to sell them internationally to fund the deficit.”

Emmanuel Macron, French president 

France’s Macron urged that Europe must reduce its dependence on the  “extraterritoriality of the US dollar” in a Politico interview this month. 

The bombshell remarks came as the president stressed Europe should avoid getting tangled in tensions between China and the US. “If the tensions between the two superpowers heat up … we won’t have the time nor the resources to finance our strategic autonomy and we will become vassals,” he said.

Chamath Palihapitiya, venture capitalist

While the China’s yuan in trade deals is increasing, Palihapitiya said it’s unlikely to erode the dollar’s dominance.

“This whole thing is a huge nothingburger,” he said in a recent episode of the All-In Podcast.

“Until [the yuan] is unpacked in a free-floating currency, we will never know what the real market clearing price is,” Palihapitiya said. “China has been very effectively able to manipulate this currency since they were brought into the WTO, in order to engender that trading partner status,” he continued, adding that the dollar will remain the “canonical” flight to safety. 

Stanley Druckenmiller, Duquesne Capital founder

Billionaire investor Druckenmiller recently shared he is shorting the US dollar after missing out on last year’s rally. In an interview with the Financial Times, he said he felt confident taking a bearish position against the greenback due to the prospect of US interest-rate cuts, a rise in non-dollar trade agreements, and the dollar’s weaponization. 

“One area I’m comfortable is I’m short the US dollar,” he told the outlet. “Currency trends tend to run for two or three years. We have had a long [run] higher.”

Jeremy Allaire, Circle CEO 

“If we want to make the dollar safer and more competitive, we need to do two things,” Allaire said in a tweet.

“Unleash it’s power as a native data type on the internet, that can be openly used and integrated” and “remove the underlying bank lending IOU risk on electronic money, and separate payment tokens from lending tokens,” he added. 

Goldman Sachs

De-dollarization is “lots of talk (again), not a lot of action,” the bank’s strategists wrote in a note.

“[P]art of the Dollar’s declining share can likely be attributed to regular market forces as Treasuries fell and Asian central banks sold their Dollar holdings to counter the stronger Dollar last year,” strategists said.

“While that is a clear risk if the US abuses its ‘exorbitant privileges’, we see no evidence of that in the data so far (for example, even Brazil’s rising share of CNY reserves replaced CAD, not the Dollar), and our strong view is that there is currently no real contender,” they added.

Joseph Sullivan, former White House economist

According to Sullivan, the dollar’s dominance could be seriously threatened by a currency issued by Brazil, Russia, India, China and South Africa.

“The BRICS would also be poised to achieve a level of self-sufficiency in international trade that has eluded the world’s other currency unions,” he said. “Because a BRICS currency union—unlike any before it—would not be among countries united by shared territorial borders, its members would likely be able to produce a wider range of goods than any existing monetary union.”

“Either way, the dollar’s reign isn’t likely to end overnight—but a [BRICS currency] would begin the slow erosion of its dominance,” he said.

Stephen Jen, Eurizon SLJ CEO and former Morgan Stanley currency guru

“The prevailing view of ‘nothing-to-see-here’ on the US dollar as a reserve currency seems too innocuous and complacent,” Jen, who coined the “Dollar Smile” theory, wrote in a note, per Bloomberg.

“What needs to be appreciated by investors is that, while the Global South is unable to totally avoid using the dollar, much of it has already become unwilling to do so.”

Anwar Ibrahim, Malaysian prime minister

“There is no reason for Malaysia to continue depending on the dollar,” the country’s prime minister Anwar Ibrahim said earlier this month. He added that Malaysia and China are already in talks to utilize the ringgit and renminbi for trade deals.

Readmore: The anti-dollar drive spearheaded by Asia has spread to Europe, with France growing sour on the greenback’s dominance. Here are 6 rising threats to the buck’s supremacy of global trade.