From the moment Trump officially took office as President of the United States, the political and economic landscape of the U.S. was destined to undergo a series of profound changes. Trump's ascendance not only stirred waves in foreign policy but also triggered a series of chain reactions in the financial sector, the most notable being the depreciation of the dollar and the exploration of monetary independence by various states. Meanwhile, on the other side of the ocean, the renminbi has quietly begun a new round of counterattack.
Do states want to compete for power?
Trump has finally returned, but the economic challenges he faces are exceedingly daunting.
Today, the total amount of U.S. national debt has surpassed the astronomical figure of $36 trillion, far exceeding the limit set by Congress, and is sure to continue rising.
Such a large debt, even if Trump repeatedly claims to cut the budget, Musk’s 'Department of Government Efficiency' should not just be for show, but this number is still very difficult to resolve.
Moreover, as the Biden administration prepares to leave office, neither Biden himself nor Yellen has provided strong support for Trump's new government.
Against this backdrop, it is not surprising that the dollar index continues to weaken.
Moreover, the Trump couple introduced a personal cryptocurrency before taking office, which also attracted much skepticism, and naturally did not benefit the strengthening of the dollar.
What’s more shocking is that multiple states in the U.S. are pursuing monetary independence, although there have already been quite a few actions taken previously.
Pennsylvania and Ohio were the first to propose using digital currencies to build a new monetary reserve system, and subsequently, more than ten states expressed their willingness to join this effort.
These states are not only exploring the use of digital currencies to alleviate the pressure on the dollar but are also considering restoring the gold standard as a supporting foundation for the new digital currency.
The Republican stronghold of Texas even submitted a bill to Congress, hoping to establish gold and silver as the legal backing for U.S. digital currency.
Although the direct purpose of this series of actions is certainly not to challenge the dollar, it does objectively send unfavorable signals about the dollar to the world.
The core goal of these states is to seek autonomy in currency issuance, although today it is the Republican Trump in the White House, and a small government is traditional.
However, it's not easy to compete with the federal government on this.
It could not only worsen the relationship between the federal and state governments but also trigger deeper economic and political crises.
After all, even in the United States, a unified monetary system is a core interest, and the attempts at monetary independence by various states undoubtedly challenge this principle.
Renminbi counterattack
Just as the dollar is mired in crisis and various states seek monetary independence, the renminbi has quietly risen, becoming an important force in the global financial market.
After Trump took office, the exchange rate of the renminbi began to rise significantly, influenced both by the weakening of the dollar and by increased confidence among international investors in the Chinese market.
As the credibility of the dollar declines, many international investors have begun to reduce their investments in the U.S. market, instead seeking more stable and promising markets.
The stable growth of the Chinese economy, its large market size, and the continuously opening market environment all provide a solid foundation for the attractiveness of renminbi assets.
Therefore, when the dollar depreciates and leads to capital outflows, renminbi assets have become a safe haven for capital, attracting a large influx of international capital.
In recent years, the scale of cross-border settlements in renminbi has been continuously climbing, especially in Shanghai, an international financial center, where the total amount of cross-border settlements in renminbi has exceeded 30 trillion yuan in a year.
This number not only highlights the rise of the renminbi in global trade and financial transactions, but also indicates that the renminbi may become an important pillar in the global monetary system in the future.
The depreciation of the dollar and the rise of the renminbi not only changed the financial competition landscape between China and the U.S. but also had profound impacts on the global economy.
On one hand, the weakening of the dollar may lead to turmoil in the global monetary system, especially for countries with large dollar reserves, as the depreciation of the dollar will directly affect the value of their foreign exchange reserves.
On the other hand, the strengthening of the renminbi provides us with more international voice and economic influence.
In the face of the dollar crisis, the U.S. government's response will be crucial.
Issuing government bonds backed by gold, adjusting monetary and fiscal policies, among other measures, may become one of its options.
However, whether these measures can effectively alleviate the dollar crisis remains to be tested over time.
What’s more concerning is whether the U.S. will use financial warfare to shift risks, transferring its debt deficit, inflation pressure, and risks of economic recession onto other countries.
This move may lead to instability in the global economy and threaten the harmonious state of international relations.
The future development path of the global monetary system is still unclear and full of variables.
Although the dollar hegemony is facing challenges, it is still difficult to be fully replaced by other currencies in the foreseeable future.
Although the renminbi is rising strongly, it still faces numerous obstacles and challenges to achieve a leading position in the global monetary system.
Other currencies, such as the euro and yen, may also play important roles in the changes of the global monetary landscape.
In short, the dollar crisis in the Trump era, the resistance of state governments, the rise of the renminbi, and the future of the global monetary system are all important topics that cannot be ignored in the current global economic landscape.
These changes not only affect the financial competition between China and the U.S., but will also have far-reaching impacts on the global economy. In the future, as the global economy continues to develop and change, these issues will continue to attract widespread attention and discussion.