Ordinary Americans are beginning to realize that the dollar is no longer the same. As the grim reality unfolds, years-long faith in the omnipotence of the US dollar gives way to thoughts of its loss of status as the world's preeminent currency in global trade. They are starting to acknowledge that the greenback’s dominance is facing serious challenges.

For a long time, the US government managed to maintain beliefs about the dollar's supremacy. However, there is increasing evidence that this is not the case. Thus, US investor Jim Rogers shared his opinion with the RIA news agency. "The American dollar’s time is coming to an end," he said. Rogers attributes this to the country’s huge national debt level. The United States is currently the world's largest debtor nation. "Many people are starting to say: ‘Wait a minute, I don’t know if we want to use that money, because it will have a problem someday," the investor noted.

"The world’s international currency is supposed to be completely neutral. Anybody can use it for anything you want. But now Washington is changing the rules. And if they get angry at you, they cut you off," Rogers said.

At the same time, he added that the world had not yet found "something to replace or even compete with the dollar." According to the investor, the Chinese yuan could take up that role, but it is not completely converted.

The US has firmly settled at the top rank on the list of heavily indebted countries. The federal debt of the top global economy surpassed others by a wide margin. Less advanced and smaller economies have to deal with humongous public debts. Italy’s government debt hit another historic record of €2.79 trillion.

The Bank of Italy reported that the country’s sovereign debt soared in a mere month by €17.8 billion to a jaw-dropping €2.79 trillion. “New historic record! A worrying and alarming exponential rise given the rate hikes due to the ECB’s new restrictive monetary policy,” AgenPress cited Massimiliano Dona, president of the National Consumer Union. 

According to his estimates, if government debt were shared among the Italian population, each citizen would owe €47,405. In turn, it means that the public debt now amounts to €106,446 per household. There is also good news. In the economic forecast, the European Commission anticipates Italy’s sovereign debt to shrink relative to GDP this year. Italy’s government debt equaled 144.4% of GDP in 2022. The debt-to-GDP ratio is likely to decline to 140.4% in 2023. Experts at the European Commission believe that Italy’s public debt is likely to decrease at a slower pace.    

Fears about a default in the US have finally abated. After a prolonged standoff, the Senate passed bipartisan legislation that lifts the government's $31.4 trillion debt ceiling. However, the parties reached an agreement just a few days ahead of the X-date.

It was extremely hard for congressmen to make concessions. Hence, the bitter battle over the debt ceiling seemed endless and the final decision was made at the last moment. Uncertainty and risk aversion persisted in markets. US Treasury Secretary Janet Yellen was one of the first to warn about the problem. She noted that the US was unlikely to reach mid-June and still be able to pay its bills, underscoring the urgency to reach a deal. Thus, June 15 was a "hard deadline" for the federal government to raise the debt ceiling. After June 15, the country would have made additional tax payments. Yellen doubted that the United States would have had enough money until that date.

"We take the debt ceiling seriously as a constraint on our ability to pay bills that are coming due. And my assumption is that if the debt ceiling isn’t raised, there will be hard choices to make about what bills go unpaid," Yellen stressed.

White House Press Secretary Karen Jean-Pierre also added fuel to the fire. She accused Speaker of the House of Representatives Kevin McCarthy and his team of creating a threat of default. "The Speaker’s team put on the table an offer that was a big step back and contained a set of extreme partisan demands that could never pass both Houses of Congress,”  Karine Jean-Pierre pinpointed.

However, the parties eventually managed to strike a deal, averting a first-ever default.

The already suffering Turkish economy experienced even more pressure amid the presidential election that took place in late May. Persistent political uncertainty sent the local currency and stock indices tumbling once again. Unfortunately, the Turkish lira has already seen many such falls. Following Erdogan’s election victory, the lira extended its slide together with Turkey’s benchmark BIST-100 index which tracks the performance of 100 major national companies. The Turkish currency has slumped below 20 against the US dollar, down from 19.3 just a month ago. Investors have been rapidly losing confidence in the local currency due to the high level of uncertainty that gripped markets after the first round of the election in Turkey. Two major candidates in Turkey's presidential race were Recep Tayyip Erdogan, who was eventually reelected in a runoff, and his main opponent, Kemal Kilicdaroglu. Markets were cautious with trading decisions while anticipating a possible shift in the economic policy of the country if the opposition leader had won. In this scenario, the new government could have probably stopped lowering the key rate to support a weakening lira. Meanwhile, Erdogan known for his unconventional view on the economy and interest rates is likely to pursue his previous policy of cutting rates. Such an approach has already resulted in the lira depreciating drastically in the past year and a half.

Germany has been deemed the driving force of the European economy for many years.  However, analysts see signs of slowing down. It makes them extremely worried about the economic prospects of the fourth-largest economy.

Germany has always helped all eurozone countries cope with difficulties. However, now its economy is on the verge of crisis. The problems have been mounting for the first two quarters of 2023.

According to Bloomberg analysts, the German economy is losing steam which may adversely affect the euro area.

"Decades of flawed energy policy, the demise of combustion-engine cars, and a sluggish transition to new technologies are posing a threat to the economy. We’ve been naive as a society because everything seems fine. These problems we have in Germany are accumulating. We have a period of change ahead of us; I don’t know if everyone realizes this," Martin Brudermüller, the CEO of BASF, said.

For several years, Germany has successfully tackled different problems. However, the country needs to develop a strategy to overcome the crisis. Bloomberg analysts predict that Germany could lag behind other European countries "for many years." International Monetary Fund (IMF) made a similar prediction.  The Fund expects Germany's GDP growth to be the slowest among the G7 countries in 2023.

On May 25, the German Federal Statistical Office reported that in the first quarter of this year, the country's GDP decreased by 0.3% compared to the same period in 2022. A contraction for two consecutive quarters indicates a looming recession.

Despite the current difficulties, German Chancellor Olaf Scholz is optimistic about the prospects of the national economy. He assumes that its economic potential is still high and it will eventually get back on track.

According to JPMorgan, bitcoin could rise to $45,000 this year. Its rally is likely to be driven by the current price of gold, which has come close to $2,000 per ounce. Such a conclusion has been made after observing the dynamics of the two assets. 

BTC and the precious metal tend to move in tandem and are viewed by investors as alternatives. With the price of gold above $2,000 per ounce, the value of the metal held outside central banks is currently valued at $3 trillion. Against this backdrop, bitcoin could rally to $45,000, analysts estimate. This scenario is possible if the biggest cryptocurrency equals gold in the portfolios of private investors.

However, currency strategists at JPMorgan see the $45,000 mark as an upper limit, suggesting that bitcoin’s upside potential is limited. Markedly, the upcoming halving of the digital currency scheduled for 2024 will double its production cost to around $40,000. This level has historically been the lower price limit of the token, JPMorgan stressed.

Not so long ago, Microsoft Corp. announced plans to acquire Activision Blizzard Inc., a leader in game development and interactive entertainment content publisher. To do so, Microsoft had to convince regulators that the merger would not hurt competition. The company was able to overcome this obstacle. The European Commission approved Microsoft’s $68.7 billion acquisition of Activision Blizzard. "The approval is conditional on full compliance with the commitments offered by Microsoft," the European Commission stated.

Microsoft announced its intent to acquire Activision Blizzard in January 2022. It was preparing to take over the company in the summer of the same year. However, such large acquisitions are not made without the approval of US and EU regulators. Activision Blizzard is truly a legendary company in the gaming industry. It has released such videogames as Call of Duty, World of Warcraft, Candy Crush, Tony Hawk, Diablo, Overwatch, Spyro, Hearthstone, Guitar Hero, Crash Bandicoot, and StarCraft. This is why regulators probed the merger. The European Commission greenlighted the deal after accepting Microsoft's offer to modify its licensing agreements and release Call of Duty on various cloud gaming platforms.

If Microsoft were to make Activision’s games exclusive to its own cloud game streaming service, it would not significantly impede competition in the distribution of games via cloud streaming, the regulator stressed.

Now, Microsoft needs to convince US regulators. At the end of last year, the Federal Trade Commission (FTC) filed an antitrust case against Microsoft to challenge the software maker’s attempt to acquire Activision Blizzard. "With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition - including competition on product quality, price, and innovation,” the FTC said in its complaint. The FTC case is set to go to trial in August.

According to Reuters, Chinese President Xi Jinping has unveiled an ambitious plan for Central Asia’s development. It includes a number of important missions, from building infrastructure to expanding trade ties. Thereby, China is trying to take on the role of a leader in the region, which is traditionally Russia's sphere of influence.

China intends to implement development strategies with several countries, primarily Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The Chinese leader is ready to provide assistance in modernization, infrastructure construction, and mutually beneficial trade.

The five Central Asian states in turn offer China a network of alternative routes to transport essential goods such as fuel, food, and other commodities. However, they can be used only in unforeseen situations and in case of disrupted logistics.

Under the agreement, the parties will respect and support each other in defending core interests such as sovereignty, independence, national self-determination, long-term development, law enforcement, and defense capabilities.

For efficient cooperation, China will reportedly upgrade bilateral investment agreements and boost cross-border traffic volume. This will help create more jobs, launch the construction of production facilities, and bolster tourism. The world's second-largest economy is set to provide Central Asian countries with financial support amounting to 26 billion yuan ($3.8 billion). This is enough to realize large-scale projects, preliminary estimates show.

Notably, two-way trade between China and Central Asian states reached $70 billion in 2022. China's foreign trade turnover with Kazakhstan accounted for $31 billion.

At present, China supports the construction of an international transport corridor across the Caspian Sea and the development of China-Europe freight train hubs.

Analysts at Bloomberg warn that market participants are unaware of serious repercussions, even if US legislators pass a deal on the federal debt ceiling. Other Wall Street experts are on the same page, saying that the last-minute deal will prevent the US government from defaulting on its debt but will entail devastating consequences for the US economy.

According to Ari Bergmann, an analyst at Penso Advisors who specializes in hard-to-manage risks, investors should stay alert and hedge risks that could arise from the debt limit agreement.  

Experts believe that the US Treasury Department has to engage all available tools to replenish dwindling liquidity. Meanwhile, the government is rapidly running out of cash and soon will not be able to pay its debt obligations. 

For the time being, the amount of bank liquidity is very modest, but servicing the federal debt worth $1 trillion is sure to drain liquidity from the banking sector soon, the analyst warns. This will take its toll on the US economy which is already slipping into a recession, Ari Bergmann added. 

At the same time, the expert at Penso Advisors is cautious about what will happen after the Treasury replenishes cash liquidity on the back of shrinking bank reserves. 

The analyst predicts that as soon as the debt limit deal is nailed down, the dynamics of the Treasury cash balance, the Federal Reserve’s quantitative tightening program, and the fallout from high borrowing costs will put a great strain on risky assets and the US economy.

After Washington resolves the gridlock, the Treasury’s cash reserve is likely to swell to a record $550 billion by late June from the current $95 billion. According to the Treasury’s estimates, this figure could balloon to $600 billion. Notably, this outlook is not rock-solid because experts do not rule out other developments. 

One of the largest investment banks, JPMorgan Chase, is expanding its algorithmic trading offers to US Treasury investors, betting on the high potential of this trading strategy. Analysts at JPMorgan believe that computing power can help its clients succeed in the world’s biggest bond market. Algorithmic technology analyzes bond prices in various venues to determine the best way to trade them. Yet, this strategy is not so widely used. For example, algo trading is very rare on Forex. At the same time, the situation is changing as more platforms for trading Treasuries have appeared in recent years. Automated trading should boost the number of trades, making their execution easier and reducing the spread between bid and ask prices. On the other hand, algorithmic trading could contribute to high volatility especially when markets are stressed. The algo execution framework was designed to trade any asset class. Initially, there wasn’t strong demand for this trading tool but now it has increased significantly in different trading venues and continues to gain traction. 

Many economists have vented their frustrations about the steps taken by the White House during the recent banking crisis. Depositors got their money back, the management of failed banks got away with it, and the US government stopped tremors in the financial sector by paying for everything. However, such a problem-solving approach has sparked outrage from professionals.

Berkshire Hathaway Chairman Warren Buffett was one of the opponents of government assistance. First Republic Bank offered non-government-backed mortgages at fixed rates, sometimes for terms of ten years, which Buffett called “a crazy proposition”. In his view, mistakes could have been easily spotted. “It was doing it in plain sight and the world ignored it ‘til it blew up,” the billionaire said.  However, regulation overseeing the banking sector was riddled with skewed incentives and poor communication with the American public about the safety of customer deposits. The latter factor resulted in panic, which in turn caused further hardship. Buffett also noted that executives in charge of failed lenders and the subsequent crisis should at least be fined.

Notably, First Republic Bank was rescued by its rival. It was taken over by top financial conglomerate JPMorgan Chase. Prior to that, the California Department of Financial Protection and Innovation (DFPI) shut down the bank, but then the Federal Deposit Insurance Corporation (FDIC) agreed on a deal. Interestingly, according to the Fed's report assessing the resilience of the US financial system, the national banking sector is currently stable.

Rivals of the collective West team up to build their parallel universe. Dodgy regimes create their ideology and economic concepts and interpret geopolitical events through the prism of their official rhetoric. Oddly, negative economic growth is a newly-coined term meant to define moderate economic development. Sanctions and bans actually boost economic progress. The rogue countries declare that the Chinese yuan has already replaced the US dollar as the world’s number one reserve currency. On top of that, alternative experts insist that Western advanced economies lag behind emerging markets and third-world economies. 

The renminbi has again come under the spotlight. The Economist, the British weekly periodical, published another article on the end of the US dollar’s global reign. The bottom line is that the yuan has dazzling prospects to become a new main reserve currency. All in all, the US which still remains the top global economy is doomed to failure. 

“Every so often an appetite surges for an alternative reserve currency to the dollar—and a market booms in predictions of the greenback’s imminent demise,” the article reads. Notably, some countries are able to evade the well-established system if they wish.

No doubt, the authors took notice of helpful economic sanctions. They pointed out that Russia’s economy did not suffer from the sanctions because 16% of its exports are now settled in yuans. Besides, the journalists underscored the rapid progress of the Chinese alternative to the SWIFT payment system and Beijing’s moves towards mutual trade transactions in the renminbi.

The new technology of digital payments and digital currencies introduced by central banks could simplify money flow around the world without the involvement of the US, the authors conclude.            

It seems that these days, all and sundry are talking about the US dollar and foretelling its imminent decline. Some experts see the future of the greenback as rather gloomy and blame it for all the troubles. Thus, Uday Kotak has recently called the US currency “the biggest financial terrorist in the world.” Uday Kotak is the richest banker in Asia and the CEO of Kotak Mahindra Bank, one of the largest banks in India. In his speech at the ET Awards in Delhi, the banker harshly criticized the dollar, saying that its status as a reserve currency gives it an unfair advantage in controlling global transactions. “All our money is in nostro accounts (bank accounts held with a foreign bank in local currency). If somebody in the US decides to block it, you are stuck. That is the power of the reserve currency,” Kotak explained. At the same time, he couldn’t see any alternatives to the US dollar although he acknowledged global efforts to find a new reserve currency. He doubted that Europe, the UK, or Japan could offer their currencies for this role. China’s yuan is also unlikely to become the next reserve currency mainly due to the issue of trust.

The prophets of doom and gloom keep predicting grim scenarios for the US economy. For instance, they are constantly making predictions about the imminent recession. However, this is one thing when such forecasts are made by various analysts but the other one when Fed Chairman Jerome Powell admitted such a possibility.

He reckons that the US could face a recession. Powell voiced his concerns in an interview with Forbes. He stressed that a mild recession is likely this year. "Avoiding a recession is, in my view, more likely than having a recession. But I don’t rule that out either. It’s possible that we have a mild recession."

The Fed has raised its benchmark rate to the range of 5-5.25%, the highest level since 2006. Given that the US is the world's largest economy, a recession in this country will be disastrous for the commodity, stock, and financial markets. It will inevitably have a negative impact on other industries.