Do you see that having any consequences of the future role of dollar as an international currency, and what do you think is going to happen on the U.S. Treasury bond market in the future? Thank you.
Just a general word about the role of the U.S. dollar. It has been a source of a lot of U.S. power and prerogative, the fact that about 60% of world trade is denominated in dollars and settled in dollars.
And the U.S. banking system is the predominant mechanism for clearing transactions. And the swift system, which is how the U.S. banking system settles transactions, is the instrument by which the U.S. excludes Russia, for example, under the sanctions.
I believe that in 10 years from now, the role of the dollar will be much, much less than it is today. And in 20 years, we'll have a very different international monetary system.
And the U.S. will have lost what was called by de Gaulle inexorbitant privilege, but it will have lost the privilege of having the key currency in the world.
I think there are three reasons for this decline that will come that's already underway. One is that to be the world currency depends on being the predominant economy in the world.
And as the U.S. share of the world economy diminishes, it's natural that the role of the U.S. dollar would diminish as well.
And we are, as I said, on a gradual decline of the share of world output due to the U.S., not mainly because of the U.S. collapse, but mainly because the rest of the world develops economically, like China.
So that's one reason. The second reason is much more pertinent to this evening, and that is the U.S. began to weaponize the dollar roughly a decade ago.
So it basically began to use the dollar as a geopolitical instrument. And my advice is if you are a government that isn't getting along too well with the U.S., hold your reserves in some other currency.
Because the U.S. has developed a bad habit of seizing foreign exchange reserves of governments that it doesn't like. And it has done that with Venezuela, with Iran, with Afghanistan, with North Korea, and now with Russia.
It views that as an easy thing to do, stroke of a pen by the president, and your antagonist, your foe can't use their dollars anymore.
We even did that with Afghanistan on the way out, seized all, froze all the foreign exchange reserves so that the economy completely collapsed in that impoverished place afterwards.
It's nasty, by the way. But more than being nasty, it also is not something you can do over and over again, because other countries start to say, maybe we'll hold our reserves in renminbi, thank you, or maybe we'll hold them in some other currency, thank you.
And that's what's happening now. So that's a second reason for why the dollar will decline, because it's not just a money, it's an instrument of geopolitics, which it should not be.
You can have one or the other, but you can't have the geopolitical instrument for very long. You won't have the key currency anymore.
And the third is technological. I think that transactions will not be settled through commercial banks in the future in anything like the way they are now, because we will have digital central bank currencies, and we don't need the commercial banks in the long term to settle our transactions.
Probably the digital renminbi will be a first digital currency, probably for use within China, but then it will start to be expanded internationally.