17 July 2023
For the past decade, Zoltan Poszar has arguably been the world’s foremost expert in the ugly nuances and arcanery in world money-markets (and more recently, on how the financial and physical markets overlap on the geopolitical chessboard). However, his insights paint a bleak picture of the global economy. Poszar claims that we are witnessing a shift away from US dollar dominance towards a multi-polar world, ushering in the era of “Bretton Woods III.” He discusses the concept of de-dollarization, the resurgence of gold as a monetary asset, and the utilization of central bank digital currencies (CBDCs) to construct an alternative financial system.
Poszar highlights the growing focus in the West on reducing reliance on Chinese supply chains and striving for self-sufficiency. Conversely, countries in the East seek to extricate themselves from the Western financial system, reducing their exposure to the US dollar and Western financial institutions. He suggests that the rise of CBDCs could facilitate direct settlement between central banks, bypassing correspondent banks and the dollar-based system.
The former Credit Suisse expert envisions a future where trade is invoiced in multiple currencies such as the renminbi, the petroyuan, or even gold. This shift has the potential to reshape the foreign exchange swap market and diminish the demand for dollars. Poszar believes that the importance of gold as a monetary asset will make a comeback, with non-US aligned countries shunning treasuries and the dollar in favor of gold.
Poszar’s views extend to the stability of the banking system. While he acknowledges potential challenges in credit portfolios and commercial real estate lending, he expresses confidence in the Federal Reserve’s ability to address issues on a case-by-case basis. The evolving landscape of shadow banking, with functions migrating to central bank balance sheets, offers potential balance sheet relief for global systemically important banks (GSIBs).
In conclusion, Poszar emphasizes the increasing significance of gold and the potential for a multi-currency world. He foresees a shift away from the US dollar and traditional financial systems, driven by CBDCs and changing trade dynamics. The future of finance lies in the hands of central banks and alternative currencies, ushering in a paradigm shift with both risks and opportunities for the global economy.