Global Finance (5): World is Seeing How the Dollar Works

Question 1

How is Russia affected by the war in Ukraine relating to the US and Europe? (2 ways)

Answer 1

1. US/EU imposed sanctions on central bank
2. Foreign reserves in euros/dollars - gives US/EU power

Question 2

How did Russia response?

Answer 2

Restricted itself from the world, imports dropped 50%.

Question 3

How are countries like Russia, India, and China responding to the power of the dollar? Which currency may possibly be used instead?

Answer 3

Speculation they want another system to stop relying on dollar. Considering Chinese currency.

Question 4

The US increased interest rates to control inflation in 2021. What affect does this have on the world?

Answer 4

US dollar value increased 15% - harder for countries to pay back debts. Forces them to raise rates to avoid inflation.

Question 5

Which countries struggle with debt and inflation?

Answer 5

Sri Lanka, Argentina, and low-income countries.

Question 6

How have countries “learned their lesson” with the dollar?

Answer 6

• Borrow in their own currency
• Avoid dollar loans for housing/gov’t to reduce risk

Question 7

On the flip side, how does the dollar support global finance?

Answer 7

• Commercial interests (banks, investors, alliances)
• Help other central banks in crises

Question 8

What if the US dollar keeps strengthening? What if it weakens? What’s considered ideal?

Answer 8

Stronger = higher interest rates (strain)
Weaker = ease pressures
Ideal = soft landing (mild recession)