The Time Chamath Palihapitiya Thought Talk Of 'De-Dollarization' Was A 'Huge Nothingburger'

Billionaire venture capitalist Chamath Palihapitiya reportedly said, in April, that the whole discussion about de-dollarization on social media is a huge “nothingburger” and highlighted the fact that China’s yuan — being talked about as an alternative — is pegged to the dollar, a fact that most people do not take into consideration.

"As long as it’s pegged, whether you trade through the U.S. dollar or you don’t and you directly go to yuan, you are indexed to the U.S. dollar. And then you use a dollar swap to convert it into the currency you need," he told in the latest All-In Podcast episode in April.

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In February, China’s central bank signed a memorandum of understanding on setting up yuan clearing arrangements in Brazil, in a move to help strengthen the currency’s global clout. The yuan also reportedly took over the position held by the U.S. dollar as the most traded currency in Russia, a year after the Ukraine war led to a slew of Western sanctions against Moscow.

Real Price: Palihapitiya said that unless the yuan is unpegged into a free-floating currency, people will never know what the real market clearing price is. He also pointed to the fact that China has been effective in manipulating the currency since they were brought into the WTO.

"They were able to artificially suppress the value of their currency so that exports from China could gain traction in countries all around the world. You have to take into account this currency peg and you have to ask the question: where would the currency be if it wasn’t free-floating and then what would the incentives be for folks to replace the dollar?" he noted.

The billionaire venture capitalist believes there are a lot of interesting questions that are worth asking in this regard. "I think you have to be a little bit more intellectually honest to have the discussion," he said at the time.
This story was originally published on Apr 10, 2022

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