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De-Dollarization: Countries Seeking Alternatives to the U.S. Dollar

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De-Dollarization: More Countries Seek Alternatives to the U.S. Dollar

De-Dollarization: Countries Seeking Alternatives to U.S. Dollar

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The U.S. dollar has dominated global trade and capital flows over many decades.

However, many nations are looking for alternatives to the greenback to reduce their dependence on the United States.

This graphic catalogs the rise of the U.S. dollar as the dominant international reserve currency, and the recent efforts by various nations to de-dollarize and reduce their dependence on the U.S. financial system.

The Dollar Dominance

The United States became, almost overnight, the leading financial power after World War I. The country entered the war only in 1917 and emerged far stronger than its European counterparts.

As a result, the dollar began to displace the pound sterling as the international reserve currency and the U.S. also became a significant recipient of wartime gold inflows.

The dollar then gained a greater role in 1944, when 44 countries signed the Bretton Woods Agreement, creating a collective international currency exchange regime pegged to the U.S. dollar which was, in turn, pegged to the price of gold.

By the late 1960s, European and Japanese exports became more competitive with U.S. exports. There was a large supply of dollars around the world, making it difficult to back dollars with gold. President Nixon ceased the direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.

Although it has remained the international reserve currency, the U.S. dollar has increasingly lost its purchasing power since then.

Russia and China’s Steps Towards De-Dollarization

Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony.

As the United States and other Western nations imposed economic sanctions against Russia in response to its invasion of Ukraine, Moscow and the Chinese government have been teaming up to reduce reliance on the dollar and to establish cooperation between their financial systems.

Since the invasion in 2022, the ruble-yuan trade has increased eighty-fold. Russia and Iran are also working together to launch a cryptocurrency backed by gold, according to Russian news agency Vedmosti.

In addition, central banks (especially Russia’s and China’s) have bought gold at the fastest pace since 1967 as countries move to diversify their reserves away from the dollar.

How Other Countries are Reducing Dollar Dependence

De-dollarization it’s a theme in other parts of the world:

  • In recent months, Brazil and Argentina have discussed the creation of a common currency for the two largest economies in South America.
  • In a conference in Singapore in January, multiple former Southeast Asian officials spoke about de-dollarization efforts underway.
  • The UAE and India are in talks to use rupees to trade non-oil commodities in a shift away from the dollar, according to Reuters.
  • For the first time in 48 years, Saudi Arabia said that the oil-rich nation is open to trading in currencies besides the U.S. dollar.

Despite these movements, few expect to see the end of the dollar’s global sovereign status anytime soon. Currently, central banks still hold about 60% of their foreign exchange reserves in dollars.

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Personal Finance

Mapped: Federal Tax Paid Per Capita Across Canada

We show which provinces and territories pay the most and least tax after adjusting for the number of tax filers in each jurisdiction.

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A Canadian map of federal tax paid per capita with the values for BC, Alberta, NWT, Ontario and Quebec as question marks

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The following content is sponsored by Fidelity Investments

Mapped: Federal Tax Paid Per Capita Across Canada

Which parts of Canada pay the most personal tax? In 2021, according to the latest available data, people in Ontario paid by far the greatest share: 42% of the total. Of course, Ontario is also the most populated province.

But if we look at which parts of the country paid the most and least taxes on a per capita basis, the picture looks different. In this graphic from Fidelity Investments, we show the amount paid per tax filer for each province and territory.

A Breakdown of Tax Per Person

We took the total personal federal tax paid in each province according to 2021 tax filing data from the Canada Revenue Agency. We then divided the total tax paid by the number of people filing taxes in the province. Below, we rank the provinces and territories from least to most taxes on this basis.

Province or TerritoryFederal Tax Paid Per Person
New Brunswick$4,186
Prince Edward Island$4,491
Nova Scotia$4,708
Manitoba$5,001
Newfoundland and Labrador$5,033
Quebec$5,352
Saskatchewan$5,596
Nunavut$6,314
British Columbia$6,828
Yukon$6,897
Ontario$6,969
Alberta$7,608
Northwest Territories$7,876
All of Canada$6,368

All of Canada is calculated as the total federal taxes paid in Canada divided by the total number of tax filers in Canada.

New Brunswick paid the least taxes on a per capita basis. Within the province, 13% of people worked in retail jobs, the highest proportion nationally. Retail positions in New Brunswick earned $34,000 annually on average. As a whole, 71% of people in New Brunswick earned less than $49,000 per year.

The Highest Taxes Per Capita

The Northwest Territories (NWT) paid the most taxes relative to the number of tax filers. Public administration workers made up nearly a quarter of tax filers, four times the national share of 6%. These workers, which include local, provincial, federal, and aboriginal government employees, had an average annual income of $120,000 in the NWT.

Additionally, the territory also had a relatively high proportion of people working in mining, who earned $221,000 a year on average.

However, it’s important to note that the NWT faces a high cost of living. On average, households in the capital city of Yellowknife paid 28% more for food and 47% more for shelter than the average Canadian household in 2021.

On a per person basis, Ontario paid the third highest taxes in Canada. The province had the highest proportion of finance and insurance workers, who earned $106,000 annually.

Reducing Your Taxes

Generally, a higher income leads to higher taxes. However, you can explore allowable deductions such as RRSP contributions to save more of your money.

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Use Fidelity’s income tax calculator to quickly estimate your taxes.

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