De-Dollarisation Accelerates as Global Economies Shift Away from US Financial Infrastructure

Washington's financial leverage is being applied more aggressively against Iran, as part of its broader efforts to exert influence over global economic systems. The US has been attempting to sever Iran's financial connections worldwide through Operation Economic Outcast, a move that could deny access to the US dollar system for entities facilitating Iranian activity.

This strategy is not new; Washington has spent decades learning how to turn dependence on the US financial infrastructure into leverage. However, this approach has also given other governments reason to reduce their exposure to it, particularly China and Saudi Arabia, which have been accumulating gold reserves and experimenting with local-currency trade systems.

The freezing of Russia's foreign-exchange reserves in 2022 set a precedent that extended beyond Moscow, demonstrating the reach of American financial power. This event was followed by increased interest in de-dollarisation among governments seeking to reduce their dependence on the US financial system.

Meanwhile, Japan has been re-evaluating its reliance on American financial infrastructure, with Japanese government bond yields climbing towards levels unseen for decades. The 10-year JGB has approached 3%, while the 30-year has moved above 4%. This shift in sentiment could have significant implications for global economic dynamics.

The US Treasury's actions are also being constrained by rising long-term Treasury yields, which have climbed towards levels last experienced before the financial crisis. The federal debt has surpassed $40 trillion, with interest expense reaching around $1.2 trillion annually.