Analysts at Credit Suisse believe that the US dollar’s hegemony is likely to end soon. The greenback is projected to be replaced by international settlements in commodity currencies.
"We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West," Zoltan Pozsar, the Credit Suisse Global Head of Short-Term Interest Rate Strategy based in New York, said.
For regional currencies, the situation is also quite curious. Credit Suisse draws attention to the long-term economic crisis triggered by an artificial scarcity of goods. Therefore, regional currencies backed by commodity goods are beginning to dethrone such leaders as the US dollar and the euro.
Analyzing the economic situation in Russia and in other countries, experts are drawing parallels with mortgage bonds. "Russian commodities today are like subprime CDOs were in 2008. Conversely, non-Russian commodities are like US Treasury securities back in 2008. One collapsing in price, and the other one surging, with margin calls on both regardless of which side you are on. "Commodities basis" is climbing". After the crisis ends, the US dollar is highly likely to weaken, while the yuan will take the upper hand being backed by commodities.
Credit Suisse considers the current crisis to be a bridge from the first to the third version of the Bretton Woods system. "From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities)" Zoltan pointed out.
