Yesterday, I had a conversation with a friend from HSBC about the US dollar issue, and we surprisingly reached a consensus: regardless of whether the Federal Reserve will cut interest rates in the future, or by how much, the US dollar will not return to its state before 2022; the dollar will gradually become a regional currency with some influence among the Americas, the Five Eyes Alliance, and Japan and South Korea, rather than a global currency.

The reason is actually quite simple: the petrodollar system, or the global dollar settlement system that supports the US dollar's global currency hegemony, is being destroyed by the White House itself.

We need to understand that in the past thirty years (after the end of the Cold War), the global flow of US dollars has been as follows:

First, the United States pays us (China) in dollars for the goods we manufacture; then we use those dollars to pay countries like Saudi Arabia, Russia, and Australia for their oil and iron ore, which are used as industrial raw materials for manufacturing goods.

Finally, oil-producing countries like Saudi Arabia and Russia end up with a huge surplus of dollars, an astonishing amount; they cannot spend all this money, so they have to use it to buy US Treasury bonds, stocks, funds, or directly deposit it in US banks to receive substantial returns.

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In this way, the US dollar has tied together the world's largest energy countries (the Middle East, Russia), the largest manufacturing country (China), and the largest financial country (the United States itself) into a trade settlement circulation system, which has made its own great reputation and made it the backbone of the global currency.

Other countries around the world, especially small and medium-sized economies, do not have their own separate trade settlement systems, so they can only be forced or actively integrated into the US dollar-dominated trade settlement system. After earning dollars, they go to buy Chinese-made goods or buy oil from Saudi Arabia and Russia.However, all of this came to an abrupt halt in 2022. First, the White House in the United States personally excluded Russia, the world's largest energy country, from the US dollar settlement system; then, relations with Saudi Arabia became very tense due to some religious and ideological issues, with both sides exchanging insults from afar, deepening the rift day by day.

The most provocative move is that the White House is also seeking to decouple trade with China, the world's largest manufacturing country. The White House does not allow US goods (chips, semiconductor equipment and materials, precision instruments, etc.) to be sold here, nor does it allow Chinese goods (electric vehicles, power batteries, solar panels, and even consumer goods) to be sold there.

Just recently, the White House announced that it will soon impose a 100% tariff on China's electric vehicles, power batteries, and solar panels.

This operation is very confusing, offending the world's largest manufacturing and energy countries at the same time, and trying their best to exclude them from the US dollar settlement system. Isn't this personally destroying the petrodollar circulation system that has forged the hegemony of the US dollar, and self-destructing the Great Wall?

Although the US dollar is the global currency, in the final analysis, it is a currency. Classical economics says: currency, currency, first have goods, then have currency. Without the energy of the Middle East and Russia and the goods of China, the US dollar in the international market is just a pile of waste paper.

Now, Russia, which has been excluded from the US dollar settlement system, does business with Europe in euros and rubles; and with China and India in yuan. The bilateral trade settlement amount with China alone is as high as 1.65 trillion yuan per year.

Without the US dollar, Russia's oil and natural gas are still sought after by the world and sell very well; and without the part of the waste paper US dollar supported by Russia, it can only be forced to flow back to the United States, becoming one of the "culprits" that push up US inflation.

Similarly, Saudi Arabia and the United Arab Emirates, which have a strained relationship with the United States, no longer invest their huge US dollar surplus in the United States, but instead invest in China; there are shadows of Saudi investment companies everywhere in China's chemical, material, and new energy fields. At the same time, there is an excess of US Treasury bonds, begging Saudi Arabia to buy, but Saudi Arabia turns a blind eye.As for China, the world's largest manufacturing country, the largest trading nation, and the largest market, its methods of foreign settlement are even more diversified. When doing business with Europe, transactions can be settled in euros; when trading with Russia and Saudi Arabia, they can be settled in yuan; and when trading with ASEAN, they can even be settled point-to-point using digital currencies.

Across the entire Eurasian continent (China, Russia, Saudi Arabia + Europe), from the Left Bank cafes in Paris to the central malls in Moscow, and to the coconut groves in Hainan, businesses continue to thrive and payments never cease, even without the US dollar.

The commodity trade of the Eurasian continent has always existed. If the US dollar leaves, it can be replaced by a 'beautiful dollar'. But if the commodity trade of the Eurasian continent leaves, what will support the excess US dollars? Democracy and freedom?

Therefore, I still do not understand the intention of the White House to offend China, Russia, and Saudi Arabia at the same time, and to try its best to drive the world's largest manufacturing country and the largest energy group out of the US dollar settlement system.

Do they really think that without China, Russia, and Saudi Arabia, the US dollar can produce oil and a wide variety of goods by itself? Or has the White House lost its mind, facing the rise of China and the uncontrollable world situation, making one blunder after another.

Regardless of which, the future US dollar will gradually be squeezed out of the Eurasian continent dominated by China, Russia, and Saudi Arabia (plus the European Union), retreating to the Americas, Japan and South Korea, and the Five Eyes Alliance area where the US can still control, with monkeys claiming to be the king.

The US dollar will eventually lose its global currency hegemony and become an ordinary regional currency.