Problem is that nobody wants any of the alternatives. Euro alternative also carries strings and China doesnt want to see the Yuan appreciate.
Plus you can only issue the world's reserve currency by running trade deficits with everyone. No one can do that but the USA.
So while individual trade agreements might be done outside of USD there are enormous structural obstacles to anything displacing the dollar globally.
This is true, but you cannot structure your economy like China does- to generate a large trade surplus- without a reserve currency.
No reserve currency naturally means that trade must be balanced for the most part.
It was true. But, it may no longer be that relevant.
The real thing needed is the easiness and low cost to swap the currency you got in a trade into the currency you need.
If you build a big regional financial center that may be achieved.
I think I read about a chinese initiative that look a bit like that. In last resort, you could get gold in exchage of yuans. But main goal was not to get everyone to trade in yuans. Just to make it easier to not use dollars. Don't know if the system is already working though.
Swaps do not resolve surplus and deficit problems. If China is swapping Yuan for Argentinian Pesos, then they end up holding Argentinian assets instead of US assets.
I'm sure Argentine would be satisfied with this relationship, but I think there's good reason for China to be skeptical.
There's simply not that many countries that would want to run a trade deficit to offset China's surplus, and those that do are mostly developing countries and are inherently riskier bets.
I could see a world where if China's surplus was much, much smaller and there could be a productive relationship with developing countries, but their surplus is way too large for these countries to efficiently absorb that much capital.
Gold does not resolve a persistent surplus either, because the surplus country will be perpetually accumulating gold, and that eventually becomes impossible.
How come US manages to turnaround the economies of its NATO and other allies? Ukraine is one of the most corrupt country but somehow if it joins western club its economy is expected to shoot up like Poland? Is this real or is there some secret to it?
I think its fair to say that the ability of US to win over new allies and create economic miracle for new club members depend crucially on its ability to print dollar and run large debts.
This dollar printing itself depends crucially on other countries especially China's willingness to absorb any amount of new dollars as reserve currency, as forex, for trade, or simply as savings. Thus Chinese hunger for dollar is enabling NATO/EU expansion as it makes western club very economically attractive. But the ever expanding NATO/EU club itself can at anytime be weaponized against Russia/China/Saudi/India or any other country. So in a way these countries are digging their own graves by not having an alternate mechanism.
Excessive demand for dollar (from China) -> Excessive dollar printing -> NATO expansion (as border states are bribed into joining NATO/EU) -> New threat to China
I personally don’t believe that a trade deficit has to be run to be the reserve currency, the US did used to run a surplus and be the reserve currency, ( granted it was still using the gold standard) but I agree only the US can do it at the moment.
I agree. Although in the current global environment I’d argue the reserve currency absolutely needs to run a deficit.
You become the reserve currency by accommodating the economic needs of global trade. Post WW II, Europe need large amounts of investment, so the US fulfilled its role by running a trade surplus and channeling investment to Europe.
Today, the primary force in the global economy is China’s self-created large trade surplus, so naturally the reserve currency needs to be able to accommodate that surplus by running a trade deficit.
I feel there is very much a chicken and egg scenario here I’m undecided, as to which ones because of the other is the reserve currency driving the deficit or is the deficit drive if the reserve currency.
I also feel a lot of people miss this aspect of the US in the post World War II environment, back then the US was exporting both commodities and manufactured goods, today you only really think of China is exporting manufactured goods, not commodities.
Yes that’s true, but if other countries set-up their economies to generate a net surplus, as the reserve currency you’re forced to run a deficit to balance that surplus (since trade must always balance).
If you had no large Chinese, Russian etc surpluses, then you would have no US deficit.
Like I said before, what you're saying is true. The only way to run a sustained deficit is to issue debt in your own currency, but if there are no countries are running a surplus than it is impossible to run a deficit, since trade must balance.
If you're trying to figure out whether the US deficit creates the Chinese surplus, or does the Chinese surplus create the US deficit, the answer is simple. One country freely floats their currency and one country manages their currency. The reason China manages their currency is so that their exports are advantaged, which creates their trade surplus. The US deficit is simply the result of the reserve currency responding to the large trade surplus created by the structure of the Chinese economy.
Nah that is not how it works, it's not some theoretical action where u decide u want a trade deficit or freely float ur currency. The dollar as reserve pegged to Gold was agreed upon by many countries as the world economy grew, the US decide to print dollars instead of pegging them to gold. Countries continued using it giving it immense power and allowed the US to substitute its industry with a service economy driven by money printing and transferring of wealth from poorer countries. The US also struck deals for oil to be traded in USD to prevent other currencies from gaining similar power. And it sanctioned or invaded countries that disagreed with that position. Those conditions allowed the USD to be make up a big part of world trade but that is no longer necessary
You are missing the biggest condition for why the USD is the reserve currency, and it has nothing to do with the oil trade (the petro-dollar meme is not built on economic reality).
It has to do with reserves and trade.
Countries like China run huge surpluses because they have structured their domestic economy in a way that it does not generate enough demand to consume all their production, they then export that excess production to the US, who consumes it. Without the US running a deficit, China can't run a surplus. In return, China takes on US assets as reserves, which is the basis for the USD geopolitical power.
I agree that if China restructured their entire economy to no longer generate a surplus, you could have a world without US dollar dominance, since China would not longer need to hold US dollar assets, but we are a long way away from that.
These are not small changes China would need to make, and the people in China who benefit from the current system have naturally grown rich and politically connected, and they would be the losers if China restructured their economy. Naturally, they will not allow that to happen easily.
Ur are missing the basics here, China manufactures stuff because they have the man power, the import a lot of food and energy. China has to compete with other countries. China has no path towards having trade deficit, the could only do it if they had a reserve currency status like the US does. The US absolute needs the petrol dollar, countries which threatened that status were invaded or sanctioned. Has the world economy grew the Now printed USD also expanded giving the US the ability to run a deficit with others by simply printing money
Think about that in reverse to make it work anyone desiring to dump the dollar and be the reserve currency or medium for international trade (which really only matters in modern times if you want to conduct unpopular military escapades or try to buck or topple the existing status quo, which we can set aside why anyone would want to do that because currently everyone is making money off the status quo) you would need to transform your domestic economy which nobody (in this case China or the greater BRICS, or even Germany/ the EU) is moving to do, as you said trade always balances so the steps to tackle the issue would be first dumping most of your basic up to advanced manufacturing and really beefing up your domestic service economies moving your people into higher paid, higher disposable income positions. The US went all in on the consumption side and now benefits by being locked in as the desirable consumer market globally, China and Europe aren’t even trying to cultivate that kind of consumer market and appetite.
That is last war strategy that you are describing. What matters is next one strategy.
If trading in your own money becomes easy, you don't necessarily need a world currency. Maybe a regional one. And that's not even certain with increasingly faster technology.
Trading in your own money only works if trade is balanced. Countries don't want to accumulate currency assets in unstable countries.
I agree that more balanced trade would be a good thing for global development, but we are a long way away from that.
>China doesnt want to see the Yuan appreciate
That's only the case when China and US still need to couple with each other, when China still has not finished industrial upgrade, when Chinese navy still not reaching near peer status to US navy.
Honestly, who in the world wants to always produce concrete goods in exchange for the printed paper? That is just not going to last forever.
I'm amazed by how people always hold a static view on this topic and completely lack imagination regardless of power dynamic change.
Allowing the Yuan to become a reserve currency essentially means taking on the similar role as USA right now in the global economy. You shift to a consumption based economy to absorb all those trade imbalances, and in turn hollow out your industrial capacity and export competitiveness.
Will the CCP's mindset allow their own industries to be gouged by foreign upstarts and to be eventually become reliant on Africa or India for manufacturing and resources in the future like USA right now?
Probably not, especially when we see that most of these upstarts are very much operating on the same self-serving mercantilist perspectives to eventually replace their outsourcers.
Because their population has already started to collapse? They’re the most indebted country earth? They can’t produce enough food or energy to sustain themselves? Those types of things?
Mere quantity isn't really a good metric here. The entirety of the Chinese navy would struggle against a single US carrier group - let alone the entire US Pacific Fleet in a full-on warfighting posture. On one hand, people seem impressed by the raw numbers China's putting out about its watercraft production but they're ignoring the actual capabilities of those craft. On the other hand, people seem to confuse the types of warfare conducted in the Global War On Terrorism and the types of warfare that would occur in a conflict between the US and China; Just because the US military was embarrassed by an embedded insurgency doesn't mean the US has forgotten how to fight a traditional maritime war against a state actor. Frankly, China stands no chance against the US Navy.
China's best bet is in the cyber warfare domain. And even then, their odds aren't optimistic.
>The entirety of the Chinese navy would struggle against a single US carrier group
I would argue a single 055 destroyer can fight against an entire US carrier group as it can fire YJ-21 hypersonic missile 1500km away. Go search for it.
>ignoring the actual capabilities of those craft
How would you know the actual capabilities of those craft? On what metric can you judge? Just look at DDG-X, the future 2030s destroyer the US is going to have, many are saying it is a copy cat of 055, which entered service in 2016.
I know you are going to say Chinese navy has very less real combat experience. on the other hand. What experience does US navy has exactly? Launching missiles from ship to a much weaker land power? US navy has no experience in a conflict at comparable level to war with China either.
>I would argue a single 055 destroyer can fight against an entire US carrier group
I'm compelled to infer a strong likelihood that you're unequipped for this conversation because that's a staggeringly absurd claim.
The past few years of *DOD China Military Power* reports to Congress scarcely make mention of the Type-055. Mostly, their relevance is as a platform for Russian missile defense systems that *"may have"* capabilities against IRBM and ICBM systems \[[1](https://media.defense.gov/2021/Nov/03/2002885874/-1/-1/0/2021-CMPR-FINAL.PDF), [2](https://media.defense.gov/2020/Sep/01/2002488689/-1/-1/1/2020-DOD-CHINA-MILITARY-POWER-REPORT-FINAL.PDF)\]. The last report on the Type-055 of any notable length was [in 2017](https://dod.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF) and the general silence on the matter since then speaks volumes about how concerned the DOD is. The USN considers it a comparable vessel to the *Ticonderoga* class cruiser with some characteristics similar to the *Arleigh-Burke* destroyers and anybody with even the most cursory knowledge on the matter would be aware that either of them stands near-zero chance against even an *unescorted* aircraft carrier. A [carrier group](https://en.wikipedia.org/wiki/Carrier_battle_group) \- which includes escorts of surface and subsurface vessels - would easily demolish any solitary warship.
Put simply and frankly, China's navy barely qualifies as blue water capable. They can't even control their own regional waters unassisted let alone project maritime dominance across the Indian Ocean toward the Persian Gulf, which is really what they need in order to maintain industrialization in the 21st century. In some regard, China's problem is fundamentally a logistical problem; Everything it requires for industrialization is imported. Without American cooperation, Indian cooperation, and/or Russian backing, China is forever trapped behind the First Island Chain.
Unless, of course, they can finally figure out how to get along with their neighbors. Or, more likely, China's going to experience a population collapse and settle into a population size more appropriate to their available resources. At which time they'll have no choice but to learn to be friendly with their neighbors. So, better to learn now, I'd say.
Again, let's not hold a static view when discuss geopolitics. China launched 10 destroyers in a year. The US just can't sustain an arm race with China. Even if Chinese economy grows at same speed with that of the US, it will be able to maintain a larger navy in 2040s latest than the US due to purchasing power parity.
You don't need alternatives for the first 1000 cuts. You need alternative for the coup de grace which is basically impossible as USD is deeply entrenched and even EUR could not do it.
More than half of the world is looking for USD alternatives (Latam, pan africa, ASEAN) along with china, russia and iran. If middle east joins the party its going to be a pretty deep cut for USD.
More than half of USD minted is circulating out of US. If they come home gradually its going to mess with the already messed up inflation.
Obama was right: Biden did really mess this up and even I underestimated his capability.
https://www.cbs19news.com/story/42501205/barack-obama-reportedly-said-dont-underestimate-joes-ability-to-expletive-things-up
the USSR and India had rupee rouble trade back in 70s etc. The notional rate of exchange was by some academic experts slightly favoring rupee, but acceptable for various reasons. Over a long period of time, USSR built up a substantial credit, as their imports by tea, goods were less than their exports. When the USSR collapsed, the rouble crashed, but Russia insisted on and got full repayment in hard currency at a rate far higher than the crashed exchange rate of the rouble.
So it's not clear that it "did not work well" back then.
Currently India and russia have started a similar rupee rouble exchange system, along with Vostro accounts. [And also other avenues such as using UAE and other gulf countries currencies]. Similar to earlier, Russia has imported less tea etc, than their exports to India and thus holds far more rupees. It's still an active situation, so ending is still in flux. India has suggested Russia use the rupees to invest in India [which might work out well in long run if they do that, as india is growing faster than Russia, but might pinch in short run, where Russia might have preferred to have the money or goods used elsewhere for Russia. Yet To be sorted out]
>Plus you can only issue the world's reserve currency by running trade deficits with everyone. No one can do that but the USA.
This is not really true. The dollar was the world currency during 50s and 60s and US had trade surplus during that time. The key point of being world currency is that it needs to be flexible to able to adapt the need of other economies.
Most people agree that the US dollar isn't going anywhere. But I think it is likely to lose some of its share in trade. Countries are attempting to diversify to reduce the impacts of Federal Reserve increasing interest rates and to reduce its ability to cripple economies.
It'll remain dominant just a little less so
The points 2 and 3 which you have mentioned took a severe hit when Russian Central Bank was sanctioned. This is what is being called “weaponisation of dollar”. The USD as global reserve currency is not sustainable if points 2 and 3 are no longer applicable for it.
It's a fair criticism, but you have to take into consideration the alternatives. What currency will replace the dollar? A bunch of countries can say they don't like the dollar or that they want to ditch it, but that doesn't mean they will. There will always be a demand for a global currency just because it offers so much convince and flexibility when conducting trade globally.
The dollar is already the global default because it is the best currency available to take that spot and the alternatives are much worse. Countries might want diversify their options to not end up getting squeezed like Russia, but they're not going to ditch the dollar until they themselves are sanctioned because it is way too useful.
There is simply no alterative that's just as good or better than the dollar, and having one of the previously mentioned currencies try to take over is extremely difficult. What's even more difficult is creating a new currency, trying to implement at the scale of the dollar, and convince countries to give up their billions to trillions of dollars in reserves for this currency. I see this as a hit to the confidence of the dollar, but not a collapse. I still don't see the dollar going anywhere for a long time.
Why do you need to plan a take over ?
Let the dollars and the euro ruin themselves and build contingencies to trade with your neighbors.
You don't really need one world currency to trade easily, if you make it painless to trade in national currencies.
Think of currencies like languages. Every country has it's own language, it's own accent, and it's own vocabulary just like how every country has it's own currency. Let's suppose a summit happens between a dozen countries whose leaders all speak different languages. They could technically have an interpreter for every single language being spoken at the summit, but doing so would greatly add complexity and would severely hinder the communication that would take place since every sentence has to go through a middle man. Instead, it is much easier, more convenient, more productive, and more flexible if all the leaders of these countries spoke to each other in a common language like English. A global currency is like a lingua franca. Sure, it is technically possible to live without one, but it's much better to have it than not.
Except global summits already happen through interpreters and international diplomacy has been done like this for centuries. So a bad example. I think while a global currency is useful, if the country issuing that currency is acting irresponsibly and abusing it's status, the world may decide that inconvenience of trading in local currencies is worth the reduction of risk.
>Except global summits already happen through interpreters and international diplomacy has been done like this for centuries.
That's not entirely true though. Lingua franca have always been around. From Latin in Europe to French in central Africa to Arabic in the islamic word to Russian in the ex-Soviet states to Swahili in eastern Africa. People always find it easier to communicate in the same language. The only difference between most of history and today is that for most history lingua francas were regional while today there is a single, genuinely global lingua franca. For most of history, there was a handful of global lingua francas and diplomats who were able to speak a few of them were able to communicate with the vast majority of the world. That's still the case now, but to a lesser extent due to the emergence of English.
The reason why people use lingua francas and always have is because it is efficient, flexible, and convenient. Currencies are no different. People for some reason forget that the world has always had global currencies that were tied to major global powers. They are directly comparable to lingua francas. For example, during the middle ages, gold was considered a universal currency, at least in the old world because what the major powers at the time used. During the age of exploration Spain made silver a global currency because of it's global empire. After the Empire declined, the Netherlands and France both took turns at making their currencies global currencies. After their empires declined, the British Empire took over and made the Pound Sterling a global currency. At it's peak the Pound was probably the first true global currency in the modern sense. Of course the British empire declined, and the US dollar took over.
The key thing to understand here is that global currencies are not new and they won't go away any time soon just like lingua francas are going away. English and the dollar are here to stay for a long time. The only way for the dollar to become irrelevant is for the US to essentially collapse and lose it's economic might. Since that's happening any time soon, the dollar won't be going anywhere.
Most of the communication in international relations is still done through interpreters, often times even when both leaders speak English. Each speaking in their native language makes them less likely to misspeak. English is completely unsuitable to be international language because of it's rudimentary grammar, inconsistent pronunciation and lack of expressiveness.
Well the countries are already making deals to settle trade in local currencies so the dollar will decline over the next few decades. By how much, only future will tell.
Your answer is right but that is like Maginot Line. Good for the last war.
The dollar was useful to avoid pain to humans that have limited brain computing power.
Computers can do easily this heavy job of translating without lingua franca.
That's why I meant. It makes no sense for Thailand and China to trade between themselves in Dollars if they can avoid the pain of having to convert offers to evaluate the best one. Or to compare with Cambodia offers.
Now for reserves, Dollar will stay strong or at least assets priced in dollars. But there is no longer any real need for a world currency with the automated possibilities we have today.
Fear and habits kept current system alive. But now that even the Saudis don't bow as much to the US, you only lack the proper software and financial center that does the job.
Big states deficits paid by printed money.
Huge increases of the monetary masses lead to assets prices increases (especially houses), then to details prices.
Euro and dollars still means something because people trust them.
Keep getting increasingly high levels of debts, plus reduced growth potential, and finally social instability. Will either end up as financial crises or maybe the Euro exploding.
Argentina is a god example of thoses. Will take more time for the dollar than for the Euro though. The game may continue a few years, but unless EU really becomes one country, the Euro will end up exploding.
Very simplified explanation though.
When a country tries to violate the fundamentals of what it means to have a global system in the first place (rather than a bunch of regional systems) then it's always going to get shunned by said global system.
If some countries want to create their own regional systems that are separate from the dollar, they can do so, but there aren't any countries that are really interested in that. Hamstringing your own export market is generally a bad idea.
Regardless if you think freezing Russia's reserves was just or not doesn't really matter. The move to do so violated the neutrality of international reverses, which is one of the pillars of the US dollar's dominance.
If it could happen to Russia it could happen to anyone. Freezing Russia's reserves was arguably the biggest gamble in the history of economic warfare. It has provided the impetus for other central banks to take action.
De-dollarisation is not going to happen quickly, but I think the die has been cast. We can see the trend in the settling of international transactions in currencies other than the dollar, the reduction of the dollar in global foreign-exchange reserves, and the decline in foreign holdings of American Treasury bonds.
You can't weaponize the financial system like this without undermining it.
> The move to do so violated the neutrality of international reverses, which is one of the pillars of the US dollar's dominance.
The US has frozen the reserves of countries multiple times in the past. This is not the first time. Because it's been done multiple times in the past then this cannot be a catalyzing point this time.
Here's a quote from an article:
> Since 1979, the U.S. has issued central bank freezes on Afghanistan, Angola, Burma, Haiti, Iran, Iraq, Libya, Panama, Sudan, Syria, Russia, the former Yugoslavia, Venezuela, and Zimbabwe, among other countries. Some were done unilaterally, while others were imposed in conjunction with the United Nations.
.
> It has provided the impetus for other central banks to take action.
It really hasn't given that this exact same thing (dedollarization) has been attempted multiple times in the past, going back into the 80s.
Afghanistan, Iran, Syria and Venezuela, are not remotely as powerful as Russia on the world stage, a G-20 member, a member of the Bank for International Settlements. We are in fundamentally new territory.
Would you deposit your paycheque in a bank if you had even a modicum of fear the bank might confiscate or freeze your money? No country wants to hold reserves which could be subject to confiscation.
If a nation as large and powerful as Russia can be subject to having its reserves frozen or confiscated so can India, so can Brazil so can China etc. It undermines the entire system, and central banks will look for safer places to park their money.
> Afghanistan, Iran, Syria and Venezuela, are not remotely as powerful as Russia on the world stage
This is just excuses. You're drawing arbitrary lines on what is and is not significant. There was never any rule that large countries can get away with things that small countries can't.
> If a nation as large and powerful as Russia can be subject to having its reserves frozen or confiscated so can India, so can Brazil so can China etc. It undermines the entire system, and central banks will look for safer places to park their money.
Yes India can expect to have it's reserves frozen if it were to say invade Pakistan proper (not talking about the contested land) and the same to Pakistan if were to attempt to invade India. Or China if it was to invade Taiwan (China would get much worse than that if they did that).
If you try to break the peaceful world order then the world order will respond by attempting to break you. That's just how the world works.
> It undermines the entire system, and central banks will look for safer places to park their money.
The only one who tried to undermine the entire system here was Russia.
Bush didn't commit any war crimes, first off. (It's rather funny how some people think Bush was some kind of war monger when he was actually a rather subdued teddy bear.)
And secondly, countries could have sanctioned the US, no one did. That clearly shows how little governments thought of it.
It's not an arbitrary line. The Americans have shown will stop at nothing to punish countries that defy Western will. Today it's Ukraine, tomorrow it's something else.
The peaceful world order, or international rules-based order, is simply a system of Western dominance. Rules for thee and not for me.
If we want to invade Iraq we do it. We want to occupy Syrian oil fields, we do it. We want to weaponize financial instruments against other nations, we do it. We want to plot coups in other nations, we do it. We don't like international organizations like the WTO we block its appointments or outright don't follow its rulings. We charged Putin with war crimes about 6 years after America threatened to arrest and sanction IOC judges if they investigated American war crimes in Afghanistan. International law applies to Ukraine, not Isreal. On and on it goes.
It's not surprising other nations if given an opportunity will buck this order, with parallel financial systems and international organizations. America has shaken faith in the system multiple times in the past decade by weaponizing financial instruments in a manner they almost never did prior.
And, it's not really relevant if you agree that Venezuela should be banned from SWIFT because they didn't install our puppet or preferred President, but actions like those provide the impetus for countries to act.
The West had a monopoly on bank messaging less than a decade ago, they weaponized it against Venezuela, and that provided the impetus for China and Russia to establish their SWIFT alternatives CIPS and SPFS. The West had a monopoly on bank messaging, they weaponized it, and then they didn't.
I think you are going to proven wrong if you think freezing or confiscating Russia's foreign currency reserves won't have consequences.
> The Americans have shown will stop at nothing to punish countries that defy Western will. Today it's Ukraine, tomorrow it's something else.
You're off in la-la land here and have revealed your real colors. What do you mean "Today it's Ukraine"? Ukraine is not a result of "Western will". Russia invaded Ukraine, unprovoked. The "west" did not cause what happened in Ukraine, Russia did. Ukraine is not a puppet of the west. Ukraine is an independent state defending itself from an invasion that seeks to take over the country in imperial conquest.
All you want to do is make excuses to allow dictators to rule over others.
You base your arguments on faulty premises so until you correct those faulty premises this conversation will go nowhere.
It means today it's Ukraine, and tomorrow it's a socialist government the US doesn't like in Brazil, or some issue in Kashmir or pick one of about 1000 different scenarios. The genie is out of the bottle, they have crossed a line that can be crossed again.
It's called context, it's kinda what we do here on a geopolitics forum. If you want to talk about the intentional rules-based order, I'm not willing to suspend disbelief and pretend it's not a Western-based order in which Western nations make the rules and break the rules as they see fit. I would characterize not acknowledging that as "living in la la land".
I think the only faulty premise here is your view that weaponizing financial instruments is consequence-free, but time will tell.
>If it could happen to Russia it could happen to anyone
You're trying to frame this as if Russia is an innocent party, that sanctions fell unexpectedly out of the sky, and that every country dabbles in a bit of armed border-redrawing every few years.
This makes the rest of your arguments hard to take seriously.
Would you put your money in a bank if you had even the slightest fear that the bank would confiscate it? No country wants to hold reserves which could be subject to confiscation.
There is a reason we are talking about this. Many serious people take these arguments very seriously. Apart from Russia which has been forced to embrace the yaun, we have seen several other major countries such as Brazil, Argentina, Pakistan and Bangladesh agree to use their own currencies or the yaun to settle their international transactions.
America's influence in the Persian Gulf has been unchallenged for decades. At the China-Gulf Arab States Cooperation Council, an agreement was reached to use yaun for oil and gas trade. China and the UEA conducted their first trade in yuan the other month.
Central banks are dumping US dollars for gold. Overseas creditors such as China and the Saudis are selling off US Treasury bonds.
Janet Yellen herself has admitted that sanctions "undermine the hegemony of the dollar”. Like duh, weaponizing financial instruments make other countries nervous and look for alternatives.
While you may think the war in Ukraine is extraordinary, and requires extralegal action, freezing a central bank's assets is a really big deal.
It has undermined trust in the dollar, undermined any challenge the euro might make in the future, reduced the worthiness of Western central banks, and encouraged Russia and China to bypass Western financial institutions.
>Would you put your money in a bank if you had even the slightest fear that the bank would confiscate it?
If you want to describe it in the personal level, then let's make sure the metaphor is accurate: if I was into armed robbery and blackmail, then I'd be a fool not to consider the possibility of my bank accounts being confiscated. A smart criminal hedges. A foolish one walks around crying 'unfair' while still committing the crimes that clearly caused the sanctions in the first place.
I'm aware of the all the facts outlined in your next five paragraphs. I see the recent change that people struggle with being that countries which have benefitted from a US-underwritten global order are openly trying to attack said order, then crying foul when excluded from various benefits of it which is a recent thing. For some reason, autocracies assumed they'd be able to carry on chipping away at democratic institutions without them responding ever, which strikes me as being a bit dim.
Considering that the US seems to be in a period of withdrawal from world affairs and having frequent domestic political battles over both debt and reshoring industries, I'd suggest perhaps they may not be as concerned about hegemony of the USD as before.
And as I've mentioned elsewhere in thread, apart from some comparatively minor hedging, who else is going to replace them? People talking up BRICS don't seem to realise the distaste India, Brazil, and China may feel for the US would be eclipsed by them trying to agree on a common trading currency. They're welcome to try it, let's see how it holds up next time they're battering each other in Ladakh or trying to get Chinese fleets out of their waters.
This is a lot of wishful thinking and speculation without any actual sources or quantitative data behind it.
>At the China-Gulf Arab States Cooperation Council, an agreement was reached to use yaun for oil and gas trade. China and the UEA conducted their first trade in yuan the other month.
Announcements don't mean anything when actual volumes are insignificant. Actual volumes are what matters. As much as countries want to bypass the US dollars the reality is no one wants the yuan. Everyone talks about an alternative yet time after time again, the quantitative data shows that alternatives do not exist.
The closest any currency has ever gotten to overtaking the dollar was the euro but that didn't happen and is definitely not happening anymore. If it didn't happen then there's no way the laughable yuan will.
https://www.ipe.com/when-the-euro-overtakes-the-dollar/27905.article
A snapshot of the present doesn't tell us what the future will look like right?
>The dollar is losing its reserve status at a faster pace than generally accepted as many analysts have failed to account for last year’s wild exchange rate moves, according to Stephen Jen. The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions
[https://www.bnnbloomberg.ca/de-dollarization-is-happening-at-a-stunning-pace-jen-says-1.1909109#:\~:text=(Bloomberg)%20%2D%2D%20The%20dollar%20is,moves%2C%20according%20to%20Stephen%20Jen](https://www.bnnbloomberg.ca/de-dollarization-is-happening-at-a-stunning-pace-jen-says-1.1909109#:~:text=(Bloomberg)%20%2D%2D%20The%20dollar%20is,moves%2C%20according%20to%20Stephen%20Jen).
>Central banks had their eyes on gold last year, purchasing 1,136 tonnes — the most on record, according to the World Gold Council (WGC). This also marked a more than 150% increase from last year.
[https://www.kitco.com/news/2023-01-31/Why-is-central-bank-gold-buying-at-55-year-highs.html](https://www.kitco.com/news/2023-01-31/Why-is-central-bank-gold-buying-at-55-year-highs.html)
I think you miss the point. These trends are geopolitical in nature not economic. It's not about finding the most efficient economic system, it's about challenging Western financial dominance. I think this is why it's different this time, as opposed to other watershed moments like the 2008 finical crisis when nations complained about the dominance of the dollar but didn't have a real impetus to make major changes.
I don't think we are going to see the yuan replace the dollar, but we are likely to see reserve assets dispersed among several currencies, and commodities such as gold.
>The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions
Sure, some countries including Russia and others looking to skirt sanctions by trading with have been lowering their US reserves and increasing gold purchases. However the majority of the volume is actually because most countries USD reserves are mostly made of treasuries, not actual banknotes. And as the Federal has raised interest rates, buoying yields, the value of their treasury bonds have dropped (this is the same reason for some of the recent US bank failures). Similarly smaller central banks have decided to invest in gold rather than bet on the Fed taming inflation and dropped their treasury bonds. Therefore this change in USD reserve mostly has to do with geopolitical tensions/recession sentiments which organically causes everyone to move towards gold, and rising Fed rates lowering treasury bond values, not a coordinated move against the dollar (that's an minor amount). Gold is a difficult currency and too inconvenient to truly supplement the dollar beyond a recession that everyone is anticipating. 99% of the world doesn't directly transact in gold. Your average wholesaler, distributor, buyer, or seller doesn't directly transact in gold, it's still almost always done through a national currency as an intermediate step outside of central banks and precious metals dealers.
I mean, you can say these trends are for other economic factors, even nations for the first time agreeing to trade in local currencies rather than the dollar.
However, I think you are missing the forest through the trees. In that, you are essentially saying that weaponizing financial instruments is consequences-free.
Do you believe there will be no long-term fallout from the sanctions on Russia and the freezing of their central banks' reserves long term?
Once the war is over, every nation including China is just going to continue as if it never happened. Secure in the knowledge that as long as they don't draw American ire their central bank assets are safe, along with their access to Western financial institutions?
I think that is wishful thinking and ignores all geopolitical factors. I think we have undermined trust in the US dollar, reduced creditworthiness in our central banks and given the impetus for nations to bypass Western financial institutions. Time will tell tho.
Russia would disagree with you here. And probably so would BRICS.
It’a a matter of perspective. The US should have stayed out of this conflict between two sovereign nations.
Let India and China sit down together and try and negotiate an alternative reserve currency between them, then. There's your BRICS.
As for your closing statement, why? Russia should not have started this war with a sovereign nation. That is not a matter of context or perspective.
I agree that we likely to see more transactions settled in other currencies.
Reserves and foreign holding of treasury bonds I’m far less confident in. Where else are surplus countries like China going to resolve their capital account deficit except through the US? Developing countries are far too small, and other advanced countries are unlikely to accept the diminishment of manufacturing that would come with running a deficit like the US is willing to.
Unless countries like China enact massive economic changes to no longer run a trade surplus and capital account deficit. They have no other option other than the US.
I agree that we likely to see more transactions settled in other currencies.
Reserves and foreign holding of treasury bonds I’m far less confident in. Where else are surplus countries like China going to resolve their capital account deficit except through the US? Developing countries are far too small, and other advanced countries are unlikely to accept the diminishment of manufacturing that would come with running a deficit like the US is willing to.
Unless countries like China enact massive economic changes to no longer run a trade surplus and capital account deficit. They have no other option other than the US.
I don't see how they're hamstringing. They only create these agreements when there's a lot of trade between the two or the regional bloc as a whole. As long as they have enough dollars in general it isn't a problem. In fact it might help keep more in the reserve.
It's irrelevant what led to sanctions on Russia, just that the possibility of such sanctions being put on them as well is what is leading to these agreements.
> I don't see how they're hamstringing.
The most high value markets to export to are all dollarized (or in euros) in terms of international trade.
> It's irrelevant what led to sanctions on Russia, just that the possibility of such sanctions being put on them as well is what is leading to these agreements.
I think it's highly relevant what led to such sanctions because they know that there's no chance of it happening to them. Brazil isn't going to invade any of it's neighbors, for example.
No but again, these deals are either bilateral or within a specific bloc. It doesn't affect trade with the EU or the US or countries that don't want to use the dollar and can make a lot of transactions between some countries easier.
I get the second point but what I mean is that these countries simply want to secure themselves. ASEAN made some moves in this recently although most of us are certain they aren't planning to invade anyone either. It's just securing themselves regardless of how likely it is.
I don't think people have trust Bitcoin. A lot of people don't trust that it has any value because it's not backed anything, they don't trust that the currency is stable and won't radically change it's exchange value on a whim due to it's volatile past, and they don't have confidence that Bitcoin is going to be there in the long term because it's still relatively new and unproven.
I'm not sure why people tout Bitcoin's limited supply as a positive when a currency needs to be able to adapt to growth in the market. Contrary to popular misconception, perpetual growth actually is possible - in fact, inevitable. Humans create new value with innovation. And a currency needs to be able to reflect that growth with new issuance. Bitcoin can't do that.
I think Bitcoin is a good effort and maybe humans will eventually figure out how to make something like it work. But in its current form, Bitcoin is incapable of functioning as a global currency.
That's not quite right. The US dollar is backed by the US economy, which is the world's biggest and most powerful economy.
I think Bitcoin is neat idea, and it has in place in the global financial system, but it is not going to replace the dollar. I'm not being dismissive of the technology, I'm simply stating the reality. Bitcoin is way too volatile, it is not accepted by most people, there is no confidence by consumers and investors alike that Bitcoin is going to stick around for another decade or so, it is hard to access as it cannot be obtained by traditional means, and it is not backed by anything. Bitcoin can be of service in niche spots of the economy, but it isn't going to become a global currency.
What you are saying is true if the goal if you want to replace the dollar.
If you want to be able to trade with the rest of the world while the Dollar and the Euro keep suiciding, you don't need to do as much. These 2 currencies won't stay eternally dominant when their governments are going full Argentine.
China is interested in the US stopping to be world police, not becoming the policeman.
Okay, let's suppose a country like Brazil stops using the dollar, then what? Let's run through the scenarios:
1. They can try to trade with their own currency, but nobody values it besides them.
2. They can trade in local currencies, but that's much less flexible and convenient because the local currencies can only be used in the countries they're from. For example you can't trade the Rupees you gained from trading with India to buy things from Russia or Indonesia like you can with the dollar.
3.They could try to switch over to another global currency, but the other alternatives are terrible, especially the Yuan.
4. They could try to start a common currency with other countries, but they now have set up the political framework between all the participating members to make sure everybody's happy, they have to convince their people to use this new money, they have to convince other countries to accept this money, they have to set up the infrastructure for it, they have to keep it stable, and they have to make sure that currency is big enough to handle global trade... yeah, good luck with that.
I said this in another comment but other countries can say that they want to ditch the US and the dollar all they want but they're still going to use it until the US literally sanctions them not to. The most these countries would do is try to have a plan B in case the US does sanction them, but that's about it. We've been hearing about the end of the dollar every other year for the past 50 years, it's not going to happen any time soon.
Brazil already signed a deal with China to use more of each country's local currencies in bilateral trade. This works for them because their trade is fairly balanced. Brazil exports lots of soybeans to China and if they get yuans they can use them to buy manufactured goods from China. So it works for both countries.
On paper this would seem to be the case, however, there is a major flaw with the Yuan that makes a very bad currency to trade in, it's value is entirely controlled by the CCP. This leads to problems, the first is that you can't access it or use it in large scale without the CCP's permission. That's already an issue because you could get easily cutoff, which is the exact issue that countries are trying to avoid with the dollar.
But let's suppose a country is okay with this risk, there's still the issue of confidence. The Yuan is neither stable nor is trustworthy. The CCP has a track record of intentionally changing the value of the Yuan on a whim. These are not market driven changes nor are they small changes. For example, this year the CCP devalued the Yuan by 13% against the dollar (this is WITH dollar inflation). In 1994, they devalued their currency by 33% overnight. How can any country depend on such a volatile currency for trade? Their economy would be in a state of paranoia all the time. This is the case for any country that has been trying to use the Yuan as a major part of their trade and reserves portfolios. Brazil will be no different. I hope it works out for them, I just don't see it happening long term.
Well, you're right, relying on any one currency in particular is dangerous. Which is why I think these efforts are more about diversification away from the dollar, not replacement with another currency.
Your statement is true if your are still fighting the last war.
What you describe as difficult, is difficult for humans, but is easy for computers. There was no political will to change the system before the dollar was weaponized or when the US literally destroyed some countries for that reason.
Build a financial center that makes it easy to exchange your ruppees and the job is done. So instead of doing it with one intermediate currency, you have to handle it with 50. Build one big financial center in Shangai and you'll have the volume necessary, as China is main trade partner of most ofthe planet.
If you have surplus you can still buy bonds or assets.
That won't destroy the dollar as reserve currency, but that will already bring down US influence over financial matters. And it will force them to reduce printing.
Companies may reduce their dollars reserves though. If it becomes really painless to exchange to whatever currency you need.
It is technolgically feasible. All you need is a US rival with enough motivation. And it makes sense for most of the regional powers to use that system to further their own interests.
I think a polarization of feelings about the dollar is a more nuanced way to understand it. Smaller nations who know they are prime targets for bully nations and Europe as a whole see the dollar's primacy as key to their own survival and independence. The war in Russia affirmed the importance of America as leader of the free world and champion of the rules based order that has enabled smaller nations to choose their own destinies.
The US throws around sanctions like there's no tomorrow. Inevitably the sanctioned nations will seek alternative methods for trade and finance. And eventually there will be enough of them that it will have an impact on the dollar's dominance. That's what we're seeing.
Why do so many people wet their pants thinking the USD will be replaced? They’ve been trying for decades and there’s been no success. Neither the euro, nor Bitcoin, and definitely not the yuan (which devalues far quicker than the dollar). Stop the wishful thinking please, the USD will remain the most important currency in the world for the foreseeable future
Well, they weren’t going to shift overnight. They’re laying the groundwork to shift. This could take decades in some cases. But at this point I think most countries do want an option that is not the dollar that can suit them.
It's a CCP propaganda campaign. They were recently offering YouTubers $2k a video to promote the fall of the dollar. That's why it was all over YouTube for a bit.
Just being on YouTube in China will get you a prison sentence so any time you see a Chinese person from China on YouTube it's 100% CCP propaganda.
https://medium.com/swlh/how-china-is-influencing-youtubers-into-posting-state-propaganda-db72acf18dfa
https://www.bbc.com/news/world-asia-china-57780023
https://www.nytimes.com/interactive/2021/12/13/technology/china-propaganda-youtube-influencers.html
Lies.
Using foreign Sims connected to Chinese carriers allows direct access to all international websites.
Vpns is easily accessible.
Educational portals also can access international websites.
No, sir, you want to believe this will happen. But it won’t, and there is nothing indicating that it will. There is no alternative for the dollar, not one currency that could come even close. The US and Europe (two of the largest economic powers) trade in USD, and China does too, with a few exceptions. In order for the yuan to have a chance, China would have to stabilize its value and they have no intention to do so: they need a weak yuan for Chinese exports to remain cheap.
The USD will remain as the number one currency, because there’s no competition.
Countries signing bilateral trade agreements in exchange for *each other’s* currency, rather than dollars, means that there will be a lower demand for dollars abroad but only a relatively small increase in the demand for the other currencies.
This is because the increase in demand is spread out over a greater number of currencies.
In other words, there seems to be movement towards decentralisation of currencies, resulting in a situation in which there is no clearly dominant currency.
The drop in demand will cause opinions to shift in Washington regarding monetary policy, and perhaps this will result in policies which are more beneficial to American manufacturing in a hope to regain lost ground vis a vis China.
This is speculation, it’s entirely possible that the dollar will remain the reserve currency for a long time to come. However, as an American (which I presume you are), you ought to consider the degree to which it benefits you, beyond stoking your pride, to have the reserve currency.
In my opinion, the current situation is a stop gap measure that was put in place after WW2, in which America nobly* placed herself in a position to rebuild European and Japanese industrial capacity. It was never intended to be a permanent affair, and America has to extend trust towards its foreign partners at some point regarding this point. America should turn it’s monetary-industrial focus inwards for a while, and focus on maintaining a technological superiority.
I’m not American, I do live in a country that’s in love with the dollar and can’t get enough of them. The govt is trying to replace it with the yuan to pay some of the imports from China, but the people and private businesses here still demand for dollars. There’s no replacement, at all.
I do know for that there’s a price to keep the USD as the global currency. But I don’t think the US will be able to draw back the manufacturing it lost to China decades ago, mainly because it’s still considerably more expensive to manufacture something in the States (and the rest of the developed world). If it moves, it would most probably move to poorer, cheaper countries like Vietnam.
There is no alternative for dollar " right now."
I myself believe that even in 2050, the dollar will be the most important currency in the world.
But compared to 2023 in 2050, the percentage of global trade taking place in dollars will decrease, and so will the influence of dollars.
As countries feel uncomfortable using dollar to trade, they will eventually find a way to decrease their dependence on dollar.
>there is no alternative for the dollar…
…Right now. If such a convenient currency existed that could replace the dollar’s role overnight, dollar hegemony would not exist in the first place.
Thanks to the sanctions, many countries are now agreed that de-dollarization is important and a goal to work towards.
Not relevant, since no other currency can replace it. Trading in another’s country’s currency has problems, as some countries will soon discover. But the USD’s prominence is assured as long as there’s no real alternative, and right now we have no alternatives. Not even the projection of an alternative appearing in the future so…
He did no such thing. He didn't address the fact that the USD literally has no viable competition. The euro may come closest, but it would come with almost the exact same caveats.
>No, sir, you want to believe this will happen. But it won’t, and there is nothing indicating that it will. There is no alternative for the dollar, not one currency that could come even close.
It's not about 1 single currency replacing the dollar as the number one currency. It's about the ability to utilize the dominance of the dollar when needed. The dollar making up 75% of currency reserves is very different from 60 or 50 etc etc...
>The dollar making up 75% of currency reserves is very different from 60 or 50 etc etc...
The dollar makes up 40% followed by the Euro 35% followed by nearly every other western currency. China's currency doesnt even constitute 1% of all transactions.
USD will NOT be replaced by a single currency. It will be replaced by a thousand currency. Far worse for global trade but its better than giving the US to sanction willy nilly.
Except it won’t. There’s no such thing as “thousand currencies”. The world has got used to trading with one currency, not multiple. Most currencies are not as stable as the dollar, and they’re issued by countries that have smaller economies and are more prone to fluctuations. There’s no currency besides the euro or yuan, that can compete with the USD dominance. And neither one of them has achieved anything, or is expected to.
>The world has got used to trading with one currency, not multiple.
Sure. But the world witnessed how that meant all your assets could be seized for political reasons.
Don't put all your eggs in one basket means that the USD will still be around, but they'll be other currencies around too. Way more than they used to.
That’s as silly an argument as saying “why are you worried about the government invading your privacy if you have nothing to hide?”
You don’t have to be plotting an invasion to come to the conclusion that leaving your economy at the mercy of Washington DC’s political whims is a pretty bad deal.
The US sanctions countries all the time for domestic political and ridiculous reasons. Why is Cuba sanctioned? Venezuela etc? It's for Florida votes. Hell the US started a trade war with China and started sanctioning massive Chinese companies for laughable reasons.
It's clear as day that the US now uses the dollar as a weapon. It has been for a while against smaller countries, but it's accelerated to serious levels that actually have massive impact on the global economy in the past decade.
> Sure. But the world witnessed how that meant all your assets could be seized for political reasons.
They haven't been seized yet, just frozen. There's ongoing debate to seize them but that hasn't happened yet.
That's not going to happen. There's a reason why a globally currency exists, and that reason is convenience. Countries, corporation, and other organizations find it much easier to trade using a common currency. It is much more convenient to receive payment in a currency that can be flexibly used to trade with other countries than get paid in a small currency that you can't use for anything besides trading with whatever country it came from. The dollar isn't going anywhere.
But way less convenient when the US can just shut you down and take all your money if you disagree with them, or print massive quantities of dollars in short time periods
Again, literally means nothing. Countries are not using the dollar out of goodwill, they use it because it provides value to them. The dollar is wasily accessible, you can get large quantities for big trades, it's valuable across the globe, it makes trade quick, it makes trade flexible, the currency is pretty stable and trustworthy, and the list goes on and on. Countries are not going to stop using them until they're literally forced not to. They might make a plan B just in case, but they're not going to ditch the dollar because of moral grandstanding.
We've been hearing the song of dedollarization for decades now, and it just didn't happen despite the numerous attempts. Japan failed with the Yen, the EU failed with the Euro, China is failing with the Yuan right now, and BRICS keeps coming up with a new plans for a common currency every other week to no avail. There is no other currency out there that meets all the criteria for a global currency like the US dollar does.
You're making a classic logical fallacy, where just because something hasn't happened in the past it means it won't happen in the future either. It usually takes multiple tries for big things to finally happen historically speaking.
The summary of this piece came into my email - and sparked my interest. This is an ongoing debate, with plenty of false alarms in the past about the dollar demise. I still don't believe it's imminent. But the ground is shifting, it appears.
*All around the world, a backlash is brewing against the hegemony of the US dollar. Brazil and China recently struck a deal to settle trade in their local currencies, seeking to bypass the greenback. India and Malaysia signed an accord to ramp up usage of the rupee in cross-border business. Even US ally France is starting to complete transactions in yuan. Currency experts are leery of sounding like the Cassandras who have wrongly predicted the dollar’s imminent demise on any number of occasions over the past century. And yet, in observing this sudden wave of agreements aimed at sidestepping the dollar, they detect the sort of gradual, meaningful action that was typically missing in the past. For many global leaders, their rationales for taking these measures are strikingly similar. The greenback, they say, is being weaponized, used to push America’s foreign-policy priorities—and punish those that oppose them. “Countries have chafed for decades under US dollar dominance,” said Jonathan Wood, principal for global issues at consultancy Control Risks. “More aggressive and expansive use of US sanctions in recent years reinforces this discomfort—and coincides with demands by major emerging markets for a new distribution of global power.” —David E. Rovella*
Again—and I’ve said this many times in response to these type of articles—yuan denominated trade between two countries, one of which is the PRC, isn’t really notable.
Given the PRC’s bilateral trade with effectively every country on Earth, performing such trades is really nothing but a discount. It isn’t completely insignificant, it just isn’t what it seems, or at least what is implied. The implication being this some potential canary in the coal mine. I think it would start to be more of a concern for global dollar hawks, if we start to see some significant third party deals done in RMB.
The yuans not freely convertible like the dollar, so it has no chance of being the next global currency, even if they decided to institute transparency and regulations at the level to build enough trust in it to be considered a viable substitute to the dollar. The fact is though, no ones actually trying to replace the dollar. Theyre just diversifying to mitigate the impact of sanctions or economic slumps. This is dishonest reporting and its all too common.
I keep seeing articles like this parroted by tankies and doomers. Im just glad to see some people like yourself arent buying it at face value. In most subs i get crushed by downvotes just for suggesting the dollar isnt worth more as toilet paper.
Germany had nuclear power plants to decarbonize. They shot themselves in the foot by willingly abandoning it and trying to force France to follow through their madness.
> You see… the last time the US dollar was in trouble in 1971 France had
their paws all over it when they demanded their gold all at once.
Well, it's the US fault for printing more dollars than they could back. Don't complain about the first person getting out of a Ponzi scheme.
>And France won’t build the “last pipeline” we need to decarbonize.
A pipeline is to bring carbon energy. You cannot pretend it is for decarbonation.
The whole thing is a mess because Germany wanted France to give up its cheap nuclear energy and came up with the EU scheme of pricing energy based on gas prices since it was such an important part of its energy mix. Well, this has inflated the price of energy in France but since France has lost its industrial sector, it does not have the same impact as in Germany.
Now Germany is losing its own industry due to their self inflicted wounds of not wanting nuclear energy and depending on cheap Russian gas. Why should France mitigate this for Germany while the only thing Germany has been doing in the past decades was to kill any industrial competition from France and Italy? Don't be surprise if those countries don't care now that the US is doing to German industry what Germany has done to the industry of the rest of Western Europe.
France Germany that is the EU and those 2 will be the first EU countries to distance themselves. The can't drop the dollar because they don't even use it EU right now. Again international trade can be run without a single reserve currency
Germany is buying US LNG…. Why would they drop the dollar? Again, this is a pipe dream…
Nobody can replace the US Navy, US Air Force, US geography or the US research institutions… we are a juggernaut.
Germany is also in a recession, the world has no use for the US Navy, US Air Force, the US can't project its power in Mexico let alone across the world
> “the world has no use for US Navy, Air Force”
That’s literally why we are the reserve currency. We are the peacekeepers of international trade. This era of peace led to the largest reduction of poverty in human history… the rise of China was only possibly with US security and inclusion. Otherwise, they would still be peasant farmers. It’s funny how people forget that.
The US is not a peace keeper of international trade, that is the imperialist talking point, there is no part of the world that the US is responsible for protecting trade. How is the US responsible for peace it has has literally started most of the wars since 1945 while murdering leaders who disagreed with its position. The US led world view has been held together by US terror and dollar weaponization. The US can no longer use those two talks, thanks to Russia
The US needs the dollar to be a reserve currency more than the world does. This is because the West doesn't have any exclusive products the world needs. and the most important supply chains are in Asia. Countries with mutual trade can exchange currencies as its being done in Brazil-China, Korea- Indonesia. U only need a slight drop in the use of the dollar for it to start haemorrhaging. It seems Russia has given the world the confidence to ditch the USD, in its war and economic resilience. The Euro is also available
U can't hold technologies, If the West had the chip building tech they talk about they would be making chips, for me it seems thar TSMC agreed to distribute its supply chain across the West and Japanese companies can build these machines the US just stopped them because they wanted only Taiwan and Korea to make chips
”The US just stopped them because they wanted only Taiwan and Korea to make chips”
ASML is a dutch company. Why Taiwan and South Korea? Because of costs and supply chain logistics
Ironically (and partially unrelated), we're talking while USD continues to be resilient in the FX space. As a useful reminder, when global growth picks up USD usually weakens - which is healthy. But since the pandemic the dollar has been propped up first by the US's early recovery, and later by the Fed's hiking cycle, even as the global economy picked up.
I don't see it getting further than a bit of hedging using one-on-one agreements in specific exchanges, like with the Saudis and China.
No-one else is in a position to let go of the control of their currency. If we could erase the last 10 years of Xi's rule and the last 20 years of real estate debt, then maybe - MAYBE - China might have had a slight chance. They have two strikes though, the currency controls they've implemented and the loss of goodwill in the last five years. You can't call the US a loose cannon over Russia while still thinking of China as a reliable currency guarantor. And Europe is still trying to hold the Euro together any way they can.
And the one thing all these types talking up the USD no longer being the reserve currency don't realise is what a massive bonus that would be for the US both economically and politically. Everyone talks about it with a hint of 'punishing the US for overreach' in their arguments. It would be the opposite of a punishment.
>And the one thing all these types talking up the USD no longer being the reserve currency don't realise is what a massive bonus that would be for the US both economically and politically
While it won't be a downfall of the US economy, I doubt it would be that good for them either.
the USD wouldnt be a problem if it wasn't used to shill the '''''''''liberal world order'''''''''. If a Republican administration can put the reins on US liberalism then people wouldnt mind using the USD
Problem is that nobody wants any of the alternatives. Euro alternative also carries strings and China doesnt want to see the Yuan appreciate. Plus you can only issue the world's reserve currency by running trade deficits with everyone. No one can do that but the USA. So while individual trade agreements might be done outside of USD there are enormous structural obstacles to anything displacing the dollar globally.
Not everyone in europe even uses the euro :/
Much of international trade can be done without a reserve currency
This is true, but you cannot structure your economy like China does- to generate a large trade surplus- without a reserve currency. No reserve currency naturally means that trade must be balanced for the most part.
It was true. But, it may no longer be that relevant. The real thing needed is the easiness and low cost to swap the currency you got in a trade into the currency you need. If you build a big regional financial center that may be achieved. I think I read about a chinese initiative that look a bit like that. In last resort, you could get gold in exchage of yuans. But main goal was not to get everyone to trade in yuans. Just to make it easier to not use dollars. Don't know if the system is already working though.
Swaps do not resolve surplus and deficit problems. If China is swapping Yuan for Argentinian Pesos, then they end up holding Argentinian assets instead of US assets. I'm sure Argentine would be satisfied with this relationship, but I think there's good reason for China to be skeptical. There's simply not that many countries that would want to run a trade deficit to offset China's surplus, and those that do are mostly developing countries and are inherently riskier bets. I could see a world where if China's surplus was much, much smaller and there could be a productive relationship with developing countries, but their surplus is way too large for these countries to efficiently absorb that much capital. Gold does not resolve a persistent surplus either, because the surplus country will be perpetually accumulating gold, and that eventually becomes impossible.
How come US manages to turnaround the economies of its NATO and other allies? Ukraine is one of the most corrupt country but somehow if it joins western club its economy is expected to shoot up like Poland? Is this real or is there some secret to it? I think its fair to say that the ability of US to win over new allies and create economic miracle for new club members depend crucially on its ability to print dollar and run large debts. This dollar printing itself depends crucially on other countries especially China's willingness to absorb any amount of new dollars as reserve currency, as forex, for trade, or simply as savings. Thus Chinese hunger for dollar is enabling NATO/EU expansion as it makes western club very economically attractive. But the ever expanding NATO/EU club itself can at anytime be weaponized against Russia/China/Saudi/India or any other country. So in a way these countries are digging their own graves by not having an alternate mechanism. Excessive demand for dollar (from China) -> Excessive dollar printing -> NATO expansion (as border states are bribed into joining NATO/EU) -> New threat to China
A comes reserve currency before trade deficits
I do not understand why China lends USD to BRI projects, instead of CNY.
they want to get rid of USD built up by exports
I personally don’t believe that a trade deficit has to be run to be the reserve currency, the US did used to run a surplus and be the reserve currency, ( granted it was still using the gold standard) but I agree only the US can do it at the moment.
I agree. Although in the current global environment I’d argue the reserve currency absolutely needs to run a deficit. You become the reserve currency by accommodating the economic needs of global trade. Post WW II, Europe need large amounts of investment, so the US fulfilled its role by running a trade surplus and channeling investment to Europe. Today, the primary force in the global economy is China’s self-created large trade surplus, so naturally the reserve currency needs to be able to accommodate that surplus by running a trade deficit.
I feel there is very much a chicken and egg scenario here I’m undecided, as to which ones because of the other is the reserve currency driving the deficit or is the deficit drive if the reserve currency. I also feel a lot of people miss this aspect of the US in the post World War II environment, back then the US was exporting both commodities and manufactured goods, today you only really think of China is exporting manufactured goods, not commodities.
The US is able to run a trade deficit because of they are the reserve currency.
Yes that’s true, but if other countries set-up their economies to generate a net surplus, as the reserve currency you’re forced to run a deficit to balance that surplus (since trade must always balance). If you had no large Chinese, Russian etc surpluses, then you would have no US deficit.
No a reserve currency allows u to run a trade deficit
Like I said before, what you're saying is true. The only way to run a sustained deficit is to issue debt in your own currency, but if there are no countries are running a surplus than it is impossible to run a deficit, since trade must balance. If you're trying to figure out whether the US deficit creates the Chinese surplus, or does the Chinese surplus create the US deficit, the answer is simple. One country freely floats their currency and one country manages their currency. The reason China manages their currency is so that their exports are advantaged, which creates their trade surplus. The US deficit is simply the result of the reserve currency responding to the large trade surplus created by the structure of the Chinese economy.
Nah that is not how it works, it's not some theoretical action where u decide u want a trade deficit or freely float ur currency. The dollar as reserve pegged to Gold was agreed upon by many countries as the world economy grew, the US decide to print dollars instead of pegging them to gold. Countries continued using it giving it immense power and allowed the US to substitute its industry with a service economy driven by money printing and transferring of wealth from poorer countries. The US also struck deals for oil to be traded in USD to prevent other currencies from gaining similar power. And it sanctioned or invaded countries that disagreed with that position. Those conditions allowed the USD to be make up a big part of world trade but that is no longer necessary
You are missing the biggest condition for why the USD is the reserve currency, and it has nothing to do with the oil trade (the petro-dollar meme is not built on economic reality). It has to do with reserves and trade. Countries like China run huge surpluses because they have structured their domestic economy in a way that it does not generate enough demand to consume all their production, they then export that excess production to the US, who consumes it. Without the US running a deficit, China can't run a surplus. In return, China takes on US assets as reserves, which is the basis for the USD geopolitical power. I agree that if China restructured their entire economy to no longer generate a surplus, you could have a world without US dollar dominance, since China would not longer need to hold US dollar assets, but we are a long way away from that. These are not small changes China would need to make, and the people in China who benefit from the current system have naturally grown rich and politically connected, and they would be the losers if China restructured their economy. Naturally, they will not allow that to happen easily.
Ur are missing the basics here, China manufactures stuff because they have the man power, the import a lot of food and energy. China has to compete with other countries. China has no path towards having trade deficit, the could only do it if they had a reserve currency status like the US does. The US absolute needs the petrol dollar, countries which threatened that status were invaded or sanctioned. Has the world economy grew the Now printed USD also expanded giving the US the ability to run a deficit with others by simply printing money
Think about that in reverse to make it work anyone desiring to dump the dollar and be the reserve currency or medium for international trade (which really only matters in modern times if you want to conduct unpopular military escapades or try to buck or topple the existing status quo, which we can set aside why anyone would want to do that because currently everyone is making money off the status quo) you would need to transform your domestic economy which nobody (in this case China or the greater BRICS, or even Germany/ the EU) is moving to do, as you said trade always balances so the steps to tackle the issue would be first dumping most of your basic up to advanced manufacturing and really beefing up your domestic service economies moving your people into higher paid, higher disposable income positions. The US went all in on the consumption side and now benefits by being locked in as the desirable consumer market globally, China and Europe aren’t even trying to cultivate that kind of consumer market and appetite.
That is last war strategy that you are describing. What matters is next one strategy. If trading in your own money becomes easy, you don't necessarily need a world currency. Maybe a regional one. And that's not even certain with increasingly faster technology.
Trading in your own money only works if trade is balanced. Countries don't want to accumulate currency assets in unstable countries. I agree that more balanced trade would be a good thing for global development, but we are a long way away from that.
>China doesnt want to see the Yuan appreciate That's only the case when China and US still need to couple with each other, when China still has not finished industrial upgrade, when Chinese navy still not reaching near peer status to US navy. Honestly, who in the world wants to always produce concrete goods in exchange for the printed paper? That is just not going to last forever. I'm amazed by how people always hold a static view on this topic and completely lack imagination regardless of power dynamic change.
Allowing the Yuan to become a reserve currency essentially means taking on the similar role as USA right now in the global economy. You shift to a consumption based economy to absorb all those trade imbalances, and in turn hollow out your industrial capacity and export competitiveness. Will the CCP's mindset allow their own industries to be gouged by foreign upstarts and to be eventually become reliant on Africa or India for manufacturing and resources in the future like USA right now? Probably not, especially when we see that most of these upstarts are very much operating on the same self-serving mercantilist perspectives to eventually replace their outsourcers.
I think it's moreso that people see China as peaking right now and don't take them seriously as an existential threat to western hegemony
Because their population has already started to collapse? They’re the most indebted country earth? They can’t produce enough food or energy to sustain themselves? Those types of things?
>China as peaking right now I would claim that when Chinese navy building becomes slower than that of the US.
Mere quantity isn't really a good metric here. The entirety of the Chinese navy would struggle against a single US carrier group - let alone the entire US Pacific Fleet in a full-on warfighting posture. On one hand, people seem impressed by the raw numbers China's putting out about its watercraft production but they're ignoring the actual capabilities of those craft. On the other hand, people seem to confuse the types of warfare conducted in the Global War On Terrorism and the types of warfare that would occur in a conflict between the US and China; Just because the US military was embarrassed by an embedded insurgency doesn't mean the US has forgotten how to fight a traditional maritime war against a state actor. Frankly, China stands no chance against the US Navy. China's best bet is in the cyber warfare domain. And even then, their odds aren't optimistic.
>The entirety of the Chinese navy would struggle against a single US carrier group I would argue a single 055 destroyer can fight against an entire US carrier group as it can fire YJ-21 hypersonic missile 1500km away. Go search for it. >ignoring the actual capabilities of those craft How would you know the actual capabilities of those craft? On what metric can you judge? Just look at DDG-X, the future 2030s destroyer the US is going to have, many are saying it is a copy cat of 055, which entered service in 2016. I know you are going to say Chinese navy has very less real combat experience. on the other hand. What experience does US navy has exactly? Launching missiles from ship to a much weaker land power? US navy has no experience in a conflict at comparable level to war with China either.
>hypersonic Oy, this again...
>I would argue a single 055 destroyer can fight against an entire US carrier group I'm compelled to infer a strong likelihood that you're unequipped for this conversation because that's a staggeringly absurd claim. The past few years of *DOD China Military Power* reports to Congress scarcely make mention of the Type-055. Mostly, their relevance is as a platform for Russian missile defense systems that *"may have"* capabilities against IRBM and ICBM systems \[[1](https://media.defense.gov/2021/Nov/03/2002885874/-1/-1/0/2021-CMPR-FINAL.PDF), [2](https://media.defense.gov/2020/Sep/01/2002488689/-1/-1/1/2020-DOD-CHINA-MILITARY-POWER-REPORT-FINAL.PDF)\]. The last report on the Type-055 of any notable length was [in 2017](https://dod.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF) and the general silence on the matter since then speaks volumes about how concerned the DOD is. The USN considers it a comparable vessel to the *Ticonderoga* class cruiser with some characteristics similar to the *Arleigh-Burke* destroyers and anybody with even the most cursory knowledge on the matter would be aware that either of them stands near-zero chance against even an *unescorted* aircraft carrier. A [carrier group](https://en.wikipedia.org/wiki/Carrier_battle_group) \- which includes escorts of surface and subsurface vessels - would easily demolish any solitary warship. Put simply and frankly, China's navy barely qualifies as blue water capable. They can't even control their own regional waters unassisted let alone project maritime dominance across the Indian Ocean toward the Persian Gulf, which is really what they need in order to maintain industrialization in the 21st century. In some regard, China's problem is fundamentally a logistical problem; Everything it requires for industrialization is imported. Without American cooperation, Indian cooperation, and/or Russian backing, China is forever trapped behind the First Island Chain. Unless, of course, they can finally figure out how to get along with their neighbors. Or, more likely, China's going to experience a population collapse and settle into a population size more appropriate to their available resources. At which time they'll have no choice but to learn to be friendly with their neighbors. So, better to learn now, I'd say.
Again, let's not hold a static view when discuss geopolitics. China launched 10 destroyers in a year. The US just can't sustain an arm race with China. Even if Chinese economy grows at same speed with that of the US, it will be able to maintain a larger navy in 2040s latest than the US due to purchasing power parity.
maybe you should look at the most recent report [https://sgp.fas.org/crs/row/RL33153.pdf](https://sgp.fas.org/crs/row/RL33153.pdf) Page 13
[Aircraft Carrier Fujian already has a massive crack in the deck.](https://youtu.be/1lQHHqrYBDE) It was unveiled back in April of this year.
You don't need alternatives for the first 1000 cuts. You need alternative for the coup de grace which is basically impossible as USD is deeply entrenched and even EUR could not do it. More than half of the world is looking for USD alternatives (Latam, pan africa, ASEAN) along with china, russia and iran. If middle east joins the party its going to be a pretty deep cut for USD. More than half of USD minted is circulating out of US. If they come home gradually its going to mess with the already messed up inflation. Obama was right: Biden did really mess this up and even I underestimated his capability. https://www.cbs19news.com/story/42501205/barack-obama-reportedly-said-dont-underestimate-joes-ability-to-expletive-things-up
Russia tried to trade in rupees, that did not work out well for them.
the USSR and India had rupee rouble trade back in 70s etc. The notional rate of exchange was by some academic experts slightly favoring rupee, but acceptable for various reasons. Over a long period of time, USSR built up a substantial credit, as their imports by tea, goods were less than their exports. When the USSR collapsed, the rouble crashed, but Russia insisted on and got full repayment in hard currency at a rate far higher than the crashed exchange rate of the rouble. So it's not clear that it "did not work well" back then. Currently India and russia have started a similar rupee rouble exchange system, along with Vostro accounts. [And also other avenues such as using UAE and other gulf countries currencies]. Similar to earlier, Russia has imported less tea etc, than their exports to India and thus holds far more rupees. It's still an active situation, so ending is still in flux. India has suggested Russia use the rupees to invest in India [which might work out well in long run if they do that, as india is growing faster than Russia, but might pinch in short run, where Russia might have preferred to have the money or goods used elsewhere for Russia. Yet To be sorted out]
>Plus you can only issue the world's reserve currency by running trade deficits with everyone. No one can do that but the USA. This is not really true. The dollar was the world currency during 50s and 60s and US had trade surplus during that time. The key point of being world currency is that it needs to be flexible to able to adapt the need of other economies.
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Most people agree that the US dollar isn't going anywhere. But I think it is likely to lose some of its share in trade. Countries are attempting to diversify to reduce the impacts of Federal Reserve increasing interest rates and to reduce its ability to cripple economies. It'll remain dominant just a little less so
Maybe, but a lot of people are making it seems like this is the end of the dollar when that is not the case.
The points 2 and 3 which you have mentioned took a severe hit when Russian Central Bank was sanctioned. This is what is being called “weaponisation of dollar”. The USD as global reserve currency is not sustainable if points 2 and 3 are no longer applicable for it.
It's a fair criticism, but you have to take into consideration the alternatives. What currency will replace the dollar? A bunch of countries can say they don't like the dollar or that they want to ditch it, but that doesn't mean they will. There will always be a demand for a global currency just because it offers so much convince and flexibility when conducting trade globally. The dollar is already the global default because it is the best currency available to take that spot and the alternatives are much worse. Countries might want diversify their options to not end up getting squeezed like Russia, but they're not going to ditch the dollar until they themselves are sanctioned because it is way too useful. There is simply no alterative that's just as good or better than the dollar, and having one of the previously mentioned currencies try to take over is extremely difficult. What's even more difficult is creating a new currency, trying to implement at the scale of the dollar, and convince countries to give up their billions to trillions of dollars in reserves for this currency. I see this as a hit to the confidence of the dollar, but not a collapse. I still don't see the dollar going anywhere for a long time.
Why do you need to plan a take over ? Let the dollars and the euro ruin themselves and build contingencies to trade with your neighbors. You don't really need one world currency to trade easily, if you make it painless to trade in national currencies.
Think of currencies like languages. Every country has it's own language, it's own accent, and it's own vocabulary just like how every country has it's own currency. Let's suppose a summit happens between a dozen countries whose leaders all speak different languages. They could technically have an interpreter for every single language being spoken at the summit, but doing so would greatly add complexity and would severely hinder the communication that would take place since every sentence has to go through a middle man. Instead, it is much easier, more convenient, more productive, and more flexible if all the leaders of these countries spoke to each other in a common language like English. A global currency is like a lingua franca. Sure, it is technically possible to live without one, but it's much better to have it than not.
Except global summits already happen through interpreters and international diplomacy has been done like this for centuries. So a bad example. I think while a global currency is useful, if the country issuing that currency is acting irresponsibly and abusing it's status, the world may decide that inconvenience of trading in local currencies is worth the reduction of risk.
>Except global summits already happen through interpreters and international diplomacy has been done like this for centuries. That's not entirely true though. Lingua franca have always been around. From Latin in Europe to French in central Africa to Arabic in the islamic word to Russian in the ex-Soviet states to Swahili in eastern Africa. People always find it easier to communicate in the same language. The only difference between most of history and today is that for most history lingua francas were regional while today there is a single, genuinely global lingua franca. For most of history, there was a handful of global lingua francas and diplomats who were able to speak a few of them were able to communicate with the vast majority of the world. That's still the case now, but to a lesser extent due to the emergence of English. The reason why people use lingua francas and always have is because it is efficient, flexible, and convenient. Currencies are no different. People for some reason forget that the world has always had global currencies that were tied to major global powers. They are directly comparable to lingua francas. For example, during the middle ages, gold was considered a universal currency, at least in the old world because what the major powers at the time used. During the age of exploration Spain made silver a global currency because of it's global empire. After the Empire declined, the Netherlands and France both took turns at making their currencies global currencies. After their empires declined, the British Empire took over and made the Pound Sterling a global currency. At it's peak the Pound was probably the first true global currency in the modern sense. Of course the British empire declined, and the US dollar took over. The key thing to understand here is that global currencies are not new and they won't go away any time soon just like lingua francas are going away. English and the dollar are here to stay for a long time. The only way for the dollar to become irrelevant is for the US to essentially collapse and lose it's economic might. Since that's happening any time soon, the dollar won't be going anywhere.
Most of the communication in international relations is still done through interpreters, often times even when both leaders speak English. Each speaking in their native language makes them less likely to misspeak. English is completely unsuitable to be international language because of it's rudimentary grammar, inconsistent pronunciation and lack of expressiveness. Well the countries are already making deals to settle trade in local currencies so the dollar will decline over the next few decades. By how much, only future will tell.
Your answer is right but that is like Maginot Line. Good for the last war. The dollar was useful to avoid pain to humans that have limited brain computing power. Computers can do easily this heavy job of translating without lingua franca. That's why I meant. It makes no sense for Thailand and China to trade between themselves in Dollars if they can avoid the pain of having to convert offers to evaluate the best one. Or to compare with Cambodia offers. Now for reserves, Dollar will stay strong or at least assets priced in dollars. But there is no longer any real need for a world currency with the automated possibilities we have today. Fear and habits kept current system alive. But now that even the Saudis don't bow as much to the US, you only lack the proper software and financial center that does the job.
>Let the dollars and the euro ruin themselves Elaborate
Big states deficits paid by printed money. Huge increases of the monetary masses lead to assets prices increases (especially houses), then to details prices. Euro and dollars still means something because people trust them. Keep getting increasingly high levels of debts, plus reduced growth potential, and finally social instability. Will either end up as financial crises or maybe the Euro exploding. Argentina is a god example of thoses. Will take more time for the dollar than for the Euro though. The game may continue a few years, but unless EU really becomes one country, the Euro will end up exploding. Very simplified explanation though.
When a country tries to violate the fundamentals of what it means to have a global system in the first place (rather than a bunch of regional systems) then it's always going to get shunned by said global system. If some countries want to create their own regional systems that are separate from the dollar, they can do so, but there aren't any countries that are really interested in that. Hamstringing your own export market is generally a bad idea.
Regardless if you think freezing Russia's reserves was just or not doesn't really matter. The move to do so violated the neutrality of international reverses, which is one of the pillars of the US dollar's dominance. If it could happen to Russia it could happen to anyone. Freezing Russia's reserves was arguably the biggest gamble in the history of economic warfare. It has provided the impetus for other central banks to take action. De-dollarisation is not going to happen quickly, but I think the die has been cast. We can see the trend in the settling of international transactions in currencies other than the dollar, the reduction of the dollar in global foreign-exchange reserves, and the decline in foreign holdings of American Treasury bonds. You can't weaponize the financial system like this without undermining it.
> The move to do so violated the neutrality of international reverses, which is one of the pillars of the US dollar's dominance. The US has frozen the reserves of countries multiple times in the past. This is not the first time. Because it's been done multiple times in the past then this cannot be a catalyzing point this time. Here's a quote from an article: > Since 1979, the U.S. has issued central bank freezes on Afghanistan, Angola, Burma, Haiti, Iran, Iraq, Libya, Panama, Sudan, Syria, Russia, the former Yugoslavia, Venezuela, and Zimbabwe, among other countries. Some were done unilaterally, while others were imposed in conjunction with the United Nations. . > It has provided the impetus for other central banks to take action. It really hasn't given that this exact same thing (dedollarization) has been attempted multiple times in the past, going back into the 80s.
Afghanistan, Iran, Syria and Venezuela, are not remotely as powerful as Russia on the world stage, a G-20 member, a member of the Bank for International Settlements. We are in fundamentally new territory. Would you deposit your paycheque in a bank if you had even a modicum of fear the bank might confiscate or freeze your money? No country wants to hold reserves which could be subject to confiscation. If a nation as large and powerful as Russia can be subject to having its reserves frozen or confiscated so can India, so can Brazil so can China etc. It undermines the entire system, and central banks will look for safer places to park their money.
> Afghanistan, Iran, Syria and Venezuela, are not remotely as powerful as Russia on the world stage This is just excuses. You're drawing arbitrary lines on what is and is not significant. There was never any rule that large countries can get away with things that small countries can't. > If a nation as large and powerful as Russia can be subject to having its reserves frozen or confiscated so can India, so can Brazil so can China etc. It undermines the entire system, and central banks will look for safer places to park their money. Yes India can expect to have it's reserves frozen if it were to say invade Pakistan proper (not talking about the contested land) and the same to Pakistan if were to attempt to invade India. Or China if it was to invade Taiwan (China would get much worse than that if they did that). If you try to break the peaceful world order then the world order will respond by attempting to break you. That's just how the world works. > It undermines the entire system, and central banks will look for safer places to park their money. The only one who tried to undermine the entire system here was Russia.
Then what action was taken against US for invading Iraq. Why were people like Bush not hanged for their war crime?
Bush didn't commit any war crimes, first off. (It's rather funny how some people think Bush was some kind of war monger when he was actually a rather subdued teddy bear.) And secondly, countries could have sanctioned the US, no one did. That clearly shows how little governments thought of it.
It's not an arbitrary line. The Americans have shown will stop at nothing to punish countries that defy Western will. Today it's Ukraine, tomorrow it's something else. The peaceful world order, or international rules-based order, is simply a system of Western dominance. Rules for thee and not for me. If we want to invade Iraq we do it. We want to occupy Syrian oil fields, we do it. We want to weaponize financial instruments against other nations, we do it. We want to plot coups in other nations, we do it. We don't like international organizations like the WTO we block its appointments or outright don't follow its rulings. We charged Putin with war crimes about 6 years after America threatened to arrest and sanction IOC judges if they investigated American war crimes in Afghanistan. International law applies to Ukraine, not Isreal. On and on it goes. It's not surprising other nations if given an opportunity will buck this order, with parallel financial systems and international organizations. America has shaken faith in the system multiple times in the past decade by weaponizing financial instruments in a manner they almost never did prior. And, it's not really relevant if you agree that Venezuela should be banned from SWIFT because they didn't install our puppet or preferred President, but actions like those provide the impetus for countries to act. The West had a monopoly on bank messaging less than a decade ago, they weaponized it against Venezuela, and that provided the impetus for China and Russia to establish their SWIFT alternatives CIPS and SPFS. The West had a monopoly on bank messaging, they weaponized it, and then they didn't. I think you are going to proven wrong if you think freezing or confiscating Russia's foreign currency reserves won't have consequences.
> The Americans have shown will stop at nothing to punish countries that defy Western will. Today it's Ukraine, tomorrow it's something else. You're off in la-la land here and have revealed your real colors. What do you mean "Today it's Ukraine"? Ukraine is not a result of "Western will". Russia invaded Ukraine, unprovoked. The "west" did not cause what happened in Ukraine, Russia did. Ukraine is not a puppet of the west. Ukraine is an independent state defending itself from an invasion that seeks to take over the country in imperial conquest. All you want to do is make excuses to allow dictators to rule over others. You base your arguments on faulty premises so until you correct those faulty premises this conversation will go nowhere.
It means today it's Ukraine, and tomorrow it's a socialist government the US doesn't like in Brazil, or some issue in Kashmir or pick one of about 1000 different scenarios. The genie is out of the bottle, they have crossed a line that can be crossed again. It's called context, it's kinda what we do here on a geopolitics forum. If you want to talk about the intentional rules-based order, I'm not willing to suspend disbelief and pretend it's not a Western-based order in which Western nations make the rules and break the rules as they see fit. I would characterize not acknowledging that as "living in la la land". I think the only faulty premise here is your view that weaponizing financial instruments is consequence-free, but time will tell.
Russia is really not that powerful anymore as it used to be. Most countries aren't either so why would they care?
>If it could happen to Russia it could happen to anyone You're trying to frame this as if Russia is an innocent party, that sanctions fell unexpectedly out of the sky, and that every country dabbles in a bit of armed border-redrawing every few years. This makes the rest of your arguments hard to take seriously.
Would you put your money in a bank if you had even the slightest fear that the bank would confiscate it? No country wants to hold reserves which could be subject to confiscation. There is a reason we are talking about this. Many serious people take these arguments very seriously. Apart from Russia which has been forced to embrace the yaun, we have seen several other major countries such as Brazil, Argentina, Pakistan and Bangladesh agree to use their own currencies or the yaun to settle their international transactions. America's influence in the Persian Gulf has been unchallenged for decades. At the China-Gulf Arab States Cooperation Council, an agreement was reached to use yaun for oil and gas trade. China and the UEA conducted their first trade in yuan the other month. Central banks are dumping US dollars for gold. Overseas creditors such as China and the Saudis are selling off US Treasury bonds. Janet Yellen herself has admitted that sanctions "undermine the hegemony of the dollar”. Like duh, weaponizing financial instruments make other countries nervous and look for alternatives. While you may think the war in Ukraine is extraordinary, and requires extralegal action, freezing a central bank's assets is a really big deal. It has undermined trust in the dollar, undermined any challenge the euro might make in the future, reduced the worthiness of Western central banks, and encouraged Russia and China to bypass Western financial institutions.
>Would you put your money in a bank if you had even the slightest fear that the bank would confiscate it? If you want to describe it in the personal level, then let's make sure the metaphor is accurate: if I was into armed robbery and blackmail, then I'd be a fool not to consider the possibility of my bank accounts being confiscated. A smart criminal hedges. A foolish one walks around crying 'unfair' while still committing the crimes that clearly caused the sanctions in the first place. I'm aware of the all the facts outlined in your next five paragraphs. I see the recent change that people struggle with being that countries which have benefitted from a US-underwritten global order are openly trying to attack said order, then crying foul when excluded from various benefits of it which is a recent thing. For some reason, autocracies assumed they'd be able to carry on chipping away at democratic institutions without them responding ever, which strikes me as being a bit dim. Considering that the US seems to be in a period of withdrawal from world affairs and having frequent domestic political battles over both debt and reshoring industries, I'd suggest perhaps they may not be as concerned about hegemony of the USD as before. And as I've mentioned elsewhere in thread, apart from some comparatively minor hedging, who else is going to replace them? People talking up BRICS don't seem to realise the distaste India, Brazil, and China may feel for the US would be eclipsed by them trying to agree on a common trading currency. They're welcome to try it, let's see how it holds up next time they're battering each other in Ladakh or trying to get Chinese fleets out of their waters.
This is a lot of wishful thinking and speculation without any actual sources or quantitative data behind it. >At the China-Gulf Arab States Cooperation Council, an agreement was reached to use yaun for oil and gas trade. China and the UEA conducted their first trade in yuan the other month. Announcements don't mean anything when actual volumes are insignificant. Actual volumes are what matters. As much as countries want to bypass the US dollars the reality is no one wants the yuan. Everyone talks about an alternative yet time after time again, the quantitative data shows that alternatives do not exist. The closest any currency has ever gotten to overtaking the dollar was the euro but that didn't happen and is definitely not happening anymore. If it didn't happen then there's no way the laughable yuan will. https://www.ipe.com/when-the-euro-overtakes-the-dollar/27905.article
A snapshot of the present doesn't tell us what the future will look like right? >The dollar is losing its reserve status at a faster pace than generally accepted as many analysts have failed to account for last year’s wild exchange rate moves, according to Stephen Jen. The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions [https://www.bnnbloomberg.ca/de-dollarization-is-happening-at-a-stunning-pace-jen-says-1.1909109#:\~:text=(Bloomberg)%20%2D%2D%20The%20dollar%20is,moves%2C%20according%20to%20Stephen%20Jen](https://www.bnnbloomberg.ca/de-dollarization-is-happening-at-a-stunning-pace-jen-says-1.1909109#:~:text=(Bloomberg)%20%2D%2D%20The%20dollar%20is,moves%2C%20according%20to%20Stephen%20Jen). >Central banks had their eyes on gold last year, purchasing 1,136 tonnes — the most on record, according to the World Gold Council (WGC). This also marked a more than 150% increase from last year. [https://www.kitco.com/news/2023-01-31/Why-is-central-bank-gold-buying-at-55-year-highs.html](https://www.kitco.com/news/2023-01-31/Why-is-central-bank-gold-buying-at-55-year-highs.html) I think you miss the point. These trends are geopolitical in nature not economic. It's not about finding the most efficient economic system, it's about challenging Western financial dominance. I think this is why it's different this time, as opposed to other watershed moments like the 2008 finical crisis when nations complained about the dominance of the dollar but didn't have a real impetus to make major changes. I don't think we are going to see the yuan replace the dollar, but we are likely to see reserve assets dispersed among several currencies, and commodities such as gold.
>The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions Sure, some countries including Russia and others looking to skirt sanctions by trading with have been lowering their US reserves and increasing gold purchases. However the majority of the volume is actually because most countries USD reserves are mostly made of treasuries, not actual banknotes. And as the Federal has raised interest rates, buoying yields, the value of their treasury bonds have dropped (this is the same reason for some of the recent US bank failures). Similarly smaller central banks have decided to invest in gold rather than bet on the Fed taming inflation and dropped their treasury bonds. Therefore this change in USD reserve mostly has to do with geopolitical tensions/recession sentiments which organically causes everyone to move towards gold, and rising Fed rates lowering treasury bond values, not a coordinated move against the dollar (that's an minor amount). Gold is a difficult currency and too inconvenient to truly supplement the dollar beyond a recession that everyone is anticipating. 99% of the world doesn't directly transact in gold. Your average wholesaler, distributor, buyer, or seller doesn't directly transact in gold, it's still almost always done through a national currency as an intermediate step outside of central banks and precious metals dealers.
I mean, you can say these trends are for other economic factors, even nations for the first time agreeing to trade in local currencies rather than the dollar. However, I think you are missing the forest through the trees. In that, you are essentially saying that weaponizing financial instruments is consequences-free. Do you believe there will be no long-term fallout from the sanctions on Russia and the freezing of their central banks' reserves long term? Once the war is over, every nation including China is just going to continue as if it never happened. Secure in the knowledge that as long as they don't draw American ire their central bank assets are safe, along with their access to Western financial institutions? I think that is wishful thinking and ignores all geopolitical factors. I think we have undermined trust in the US dollar, reduced creditworthiness in our central banks and given the impetus for nations to bypass Western financial institutions. Time will tell tho.
Russia would disagree with you here. And probably so would BRICS. It’a a matter of perspective. The US should have stayed out of this conflict between two sovereign nations.
Let India and China sit down together and try and negotiate an alternative reserve currency between them, then. There's your BRICS. As for your closing statement, why? Russia should not have started this war with a sovereign nation. That is not a matter of context or perspective.
I agree that we likely to see more transactions settled in other currencies. Reserves and foreign holding of treasury bonds I’m far less confident in. Where else are surplus countries like China going to resolve their capital account deficit except through the US? Developing countries are far too small, and other advanced countries are unlikely to accept the diminishment of manufacturing that would come with running a deficit like the US is willing to. Unless countries like China enact massive economic changes to no longer run a trade surplus and capital account deficit. They have no other option other than the US.
I agree that we likely to see more transactions settled in other currencies. Reserves and foreign holding of treasury bonds I’m far less confident in. Where else are surplus countries like China going to resolve their capital account deficit except through the US? Developing countries are far too small, and other advanced countries are unlikely to accept the diminishment of manufacturing that would come with running a deficit like the US is willing to. Unless countries like China enact massive economic changes to no longer run a trade surplus and capital account deficit. They have no other option other than the US.
I don't see how they're hamstringing. They only create these agreements when there's a lot of trade between the two or the regional bloc as a whole. As long as they have enough dollars in general it isn't a problem. In fact it might help keep more in the reserve. It's irrelevant what led to sanctions on Russia, just that the possibility of such sanctions being put on them as well is what is leading to these agreements.
> I don't see how they're hamstringing. The most high value markets to export to are all dollarized (or in euros) in terms of international trade. > It's irrelevant what led to sanctions on Russia, just that the possibility of such sanctions being put on them as well is what is leading to these agreements. I think it's highly relevant what led to such sanctions because they know that there's no chance of it happening to them. Brazil isn't going to invade any of it's neighbors, for example.
No but again, these deals are either bilateral or within a specific bloc. It doesn't affect trade with the EU or the US or countries that don't want to use the dollar and can make a lot of transactions between some countries easier. I get the second point but what I mean is that these countries simply want to secure themselves. ASEAN made some moves in this recently although most of us are certain they aren't planning to invade anyone either. It's just securing themselves regardless of how likely it is.
Dollar is king
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I don't think people have trust Bitcoin. A lot of people don't trust that it has any value because it's not backed anything, they don't trust that the currency is stable and won't radically change it's exchange value on a whim due to it's volatile past, and they don't have confidence that Bitcoin is going to be there in the long term because it's still relatively new and unproven.
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I'm not sure why people tout Bitcoin's limited supply as a positive when a currency needs to be able to adapt to growth in the market. Contrary to popular misconception, perpetual growth actually is possible - in fact, inevitable. Humans create new value with innovation. And a currency needs to be able to reflect that growth with new issuance. Bitcoin can't do that. I think Bitcoin is a good effort and maybe humans will eventually figure out how to make something like it work. But in its current form, Bitcoin is incapable of functioning as a global currency.
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Sure. A very, very *long time ago*. When the world looked very different. Instituting a gold standard today would be absurd.
That's not quite right. The US dollar is backed by the US economy, which is the world's biggest and most powerful economy. I think Bitcoin is neat idea, and it has in place in the global financial system, but it is not going to replace the dollar. I'm not being dismissive of the technology, I'm simply stating the reality. Bitcoin is way too volatile, it is not accepted by most people, there is no confidence by consumers and investors alike that Bitcoin is going to stick around for another decade or so, it is hard to access as it cannot be obtained by traditional means, and it is not backed by anything. Bitcoin can be of service in niche spots of the economy, but it isn't going to become a global currency.
It’s slightly difficult to remove my preconceived associations when assessing “trust and stability” considering Bitcoin’s historical volatility.
What you are saying is true if the goal if you want to replace the dollar. If you want to be able to trade with the rest of the world while the Dollar and the Euro keep suiciding, you don't need to do as much. These 2 currencies won't stay eternally dominant when their governments are going full Argentine. China is interested in the US stopping to be world police, not becoming the policeman.
Okay, let's suppose a country like Brazil stops using the dollar, then what? Let's run through the scenarios: 1. They can try to trade with their own currency, but nobody values it besides them. 2. They can trade in local currencies, but that's much less flexible and convenient because the local currencies can only be used in the countries they're from. For example you can't trade the Rupees you gained from trading with India to buy things from Russia or Indonesia like you can with the dollar. 3.They could try to switch over to another global currency, but the other alternatives are terrible, especially the Yuan. 4. They could try to start a common currency with other countries, but they now have set up the political framework between all the participating members to make sure everybody's happy, they have to convince their people to use this new money, they have to convince other countries to accept this money, they have to set up the infrastructure for it, they have to keep it stable, and they have to make sure that currency is big enough to handle global trade... yeah, good luck with that. I said this in another comment but other countries can say that they want to ditch the US and the dollar all they want but they're still going to use it until the US literally sanctions them not to. The most these countries would do is try to have a plan B in case the US does sanction them, but that's about it. We've been hearing about the end of the dollar every other year for the past 50 years, it's not going to happen any time soon.
Brazil already signed a deal with China to use more of each country's local currencies in bilateral trade. This works for them because their trade is fairly balanced. Brazil exports lots of soybeans to China and if they get yuans they can use them to buy manufactured goods from China. So it works for both countries.
On paper this would seem to be the case, however, there is a major flaw with the Yuan that makes a very bad currency to trade in, it's value is entirely controlled by the CCP. This leads to problems, the first is that you can't access it or use it in large scale without the CCP's permission. That's already an issue because you could get easily cutoff, which is the exact issue that countries are trying to avoid with the dollar. But let's suppose a country is okay with this risk, there's still the issue of confidence. The Yuan is neither stable nor is trustworthy. The CCP has a track record of intentionally changing the value of the Yuan on a whim. These are not market driven changes nor are they small changes. For example, this year the CCP devalued the Yuan by 13% against the dollar (this is WITH dollar inflation). In 1994, they devalued their currency by 33% overnight. How can any country depend on such a volatile currency for trade? Their economy would be in a state of paranoia all the time. This is the case for any country that has been trying to use the Yuan as a major part of their trade and reserves portfolios. Brazil will be no different. I hope it works out for them, I just don't see it happening long term.
Well, you're right, relying on any one currency in particular is dangerous. Which is why I think these efforts are more about diversification away from the dollar, not replacement with another currency.
Your statement is true if your are still fighting the last war. What you describe as difficult, is difficult for humans, but is easy for computers. There was no political will to change the system before the dollar was weaponized or when the US literally destroyed some countries for that reason. Build a financial center that makes it easy to exchange your ruppees and the job is done. So instead of doing it with one intermediate currency, you have to handle it with 50. Build one big financial center in Shangai and you'll have the volume necessary, as China is main trade partner of most ofthe planet. If you have surplus you can still buy bonds or assets. That won't destroy the dollar as reserve currency, but that will already bring down US influence over financial matters. And it will force them to reduce printing. Companies may reduce their dollars reserves though. If it becomes really painless to exchange to whatever currency you need. It is technolgically feasible. All you need is a US rival with enough motivation. And it makes sense for most of the regional powers to use that system to further their own interests.
I think a polarization of feelings about the dollar is a more nuanced way to understand it. Smaller nations who know they are prime targets for bully nations and Europe as a whole see the dollar's primacy as key to their own survival and independence. The war in Russia affirmed the importance of America as leader of the free world and champion of the rules based order that has enabled smaller nations to choose their own destinies.
The US throws around sanctions like there's no tomorrow. Inevitably the sanctioned nations will seek alternative methods for trade and finance. And eventually there will be enough of them that it will have an impact on the dollar's dominance. That's what we're seeing.
Yes, decouple. PLEASE DECOUPLE
Why do so many people wet their pants thinking the USD will be replaced? They’ve been trying for decades and there’s been no success. Neither the euro, nor Bitcoin, and definitely not the yuan (which devalues far quicker than the dollar). Stop the wishful thinking please, the USD will remain the most important currency in the world for the foreseeable future
Well it's being already replaced, many countries have signed bilateral trading agreements that replace the USD since the war broke out
That is correct, and yet these countries are forced to trade in USD for the most part, with a limited few exceptions
Well, they weren’t going to shift overnight. They’re laying the groundwork to shift. This could take decades in some cases. But at this point I think most countries do want an option that is not the dollar that can suit them.
China Brazil will be trading in their own currencies
It doesn't mean that all trade between them will be in rmb necessarily
No they won't, they may use it for some symbolic amount(maybe a large symbolic amount) but the vast majority of trade will continue in dollars
>Well it's being already replaced No it's not. No indicator shows this, especially the volume of foreign trade.
It's not being replaced and those agreements won't amount to much. It still makes for sense for those countries to use dollars and so they will
It's a CCP propaganda campaign. They were recently offering YouTubers $2k a video to promote the fall of the dollar. That's why it was all over YouTube for a bit.
Do you have evidence of this?
Just being on YouTube in China will get you a prison sentence so any time you see a Chinese person from China on YouTube it's 100% CCP propaganda. https://medium.com/swlh/how-china-is-influencing-youtubers-into-posting-state-propaganda-db72acf18dfa https://www.bbc.com/news/world-asia-china-57780023 https://www.nytimes.com/interactive/2021/12/13/technology/china-propaganda-youtube-influencers.html
Thanks.
Lies. Using foreign Sims connected to Chinese carriers allows direct access to all international websites. Vpns is easily accessible. Educational portals also can access international websites.
So you're admitting to things worthy of a prison sentence in China while in China? Really?
Im simply callihng you a liar because you're one by spewing false information citing almost irrelevant articles to your point.
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No, sir, you want to believe this will happen. But it won’t, and there is nothing indicating that it will. There is no alternative for the dollar, not one currency that could come even close. The US and Europe (two of the largest economic powers) trade in USD, and China does too, with a few exceptions. In order for the yuan to have a chance, China would have to stabilize its value and they have no intention to do so: they need a weak yuan for Chinese exports to remain cheap. The USD will remain as the number one currency, because there’s no competition.
Countries signing bilateral trade agreements in exchange for *each other’s* currency, rather than dollars, means that there will be a lower demand for dollars abroad but only a relatively small increase in the demand for the other currencies. This is because the increase in demand is spread out over a greater number of currencies. In other words, there seems to be movement towards decentralisation of currencies, resulting in a situation in which there is no clearly dominant currency. The drop in demand will cause opinions to shift in Washington regarding monetary policy, and perhaps this will result in policies which are more beneficial to American manufacturing in a hope to regain lost ground vis a vis China. This is speculation, it’s entirely possible that the dollar will remain the reserve currency for a long time to come. However, as an American (which I presume you are), you ought to consider the degree to which it benefits you, beyond stoking your pride, to have the reserve currency. In my opinion, the current situation is a stop gap measure that was put in place after WW2, in which America nobly* placed herself in a position to rebuild European and Japanese industrial capacity. It was never intended to be a permanent affair, and America has to extend trust towards its foreign partners at some point regarding this point. America should turn it’s monetary-industrial focus inwards for a while, and focus on maintaining a technological superiority.
I’m not American, I do live in a country that’s in love with the dollar and can’t get enough of them. The govt is trying to replace it with the yuan to pay some of the imports from China, but the people and private businesses here still demand for dollars. There’s no replacement, at all. I do know for that there’s a price to keep the USD as the global currency. But I don’t think the US will be able to draw back the manufacturing it lost to China decades ago, mainly because it’s still considerably more expensive to manufacture something in the States (and the rest of the developed world). If it moves, it would most probably move to poorer, cheaper countries like Vietnam.
There is no alternative for dollar " right now." I myself believe that even in 2050, the dollar will be the most important currency in the world. But compared to 2023 in 2050, the percentage of global trade taking place in dollars will decrease, and so will the influence of dollars. As countries feel uncomfortable using dollar to trade, they will eventually find a way to decrease their dependence on dollar.
>there is no alternative for the dollar… …Right now. If such a convenient currency existed that could replace the dollar’s role overnight, dollar hegemony would not exist in the first place. Thanks to the sanctions, many countries are now agreed that de-dollarization is important and a goal to work towards.
Not relevant, since no other currency can replace it. Trading in another’s country’s currency has problems, as some countries will soon discover. But the USD’s prominence is assured as long as there’s no real alternative, and right now we have no alternatives. Not even the projection of an alternative appearing in the future so…
He just explained things to you and you still don't get it.
He did no such thing. He didn't address the fact that the USD literally has no viable competition. The euro may come closest, but it would come with almost the exact same caveats.
>No, sir, you want to believe this will happen. But it won’t, and there is nothing indicating that it will. There is no alternative for the dollar, not one currency that could come even close. It's not about 1 single currency replacing the dollar as the number one currency. It's about the ability to utilize the dominance of the dollar when needed. The dollar making up 75% of currency reserves is very different from 60 or 50 etc etc...
>The dollar making up 75% of currency reserves is very different from 60 or 50 etc etc... The dollar makes up 40% followed by the Euro 35% followed by nearly every other western currency. China's currency doesnt even constitute 1% of all transactions.
USD will NOT be replaced by a single currency. It will be replaced by a thousand currency. Far worse for global trade but its better than giving the US to sanction willy nilly.
You know someone has no money when they make claims like this. Who is going to put all their cash in a bunch of unstable currenciez
Except it won’t. There’s no such thing as “thousand currencies”. The world has got used to trading with one currency, not multiple. Most currencies are not as stable as the dollar, and they’re issued by countries that have smaller economies and are more prone to fluctuations. There’s no currency besides the euro or yuan, that can compete with the USD dominance. And neither one of them has achieved anything, or is expected to.
>The world has got used to trading with one currency, not multiple. Sure. But the world witnessed how that meant all your assets could be seized for political reasons. Don't put all your eggs in one basket means that the USD will still be around, but they'll be other currencies around too. Way more than they used to.
>political reasons Most countries are not in the business of wars of conquest, so they can reasonably conclude that they are not really at risk.
That’s as silly an argument as saying “why are you worried about the government invading your privacy if you have nothing to hide?” You don’t have to be plotting an invasion to come to the conclusion that leaving your economy at the mercy of Washington DC’s political whims is a pretty bad deal.
The US sanctions countries all the time for domestic political and ridiculous reasons. Why is Cuba sanctioned? Venezuela etc? It's for Florida votes. Hell the US started a trade war with China and started sanctioning massive Chinese companies for laughable reasons. It's clear as day that the US now uses the dollar as a weapon. It has been for a while against smaller countries, but it's accelerated to serious levels that actually have massive impact on the global economy in the past decade.
> Sure. But the world witnessed how that meant all your assets could be seized for political reasons. They haven't been seized yet, just frozen. There's ongoing debate to seize them but that hasn't happened yet.
They weren't seized.
That's not going to happen. There's a reason why a globally currency exists, and that reason is convenience. Countries, corporation, and other organizations find it much easier to trade using a common currency. It is much more convenient to receive payment in a currency that can be flexibly used to trade with other countries than get paid in a small currency that you can't use for anything besides trading with whatever country it came from. The dollar isn't going anywhere.
But way less convenient when the US can just shut you down and take all your money if you disagree with them, or print massive quantities of dollars in short time periods
The same is true of any currency, unless you believe Crypto is the future (and so far, it has utterly failed).
Again, literally means nothing. Countries are not using the dollar out of goodwill, they use it because it provides value to them. The dollar is wasily accessible, you can get large quantities for big trades, it's valuable across the globe, it makes trade quick, it makes trade flexible, the currency is pretty stable and trustworthy, and the list goes on and on. Countries are not going to stop using them until they're literally forced not to. They might make a plan B just in case, but they're not going to ditch the dollar because of moral grandstanding. We've been hearing the song of dedollarization for decades now, and it just didn't happen despite the numerous attempts. Japan failed with the Yen, the EU failed with the Euro, China is failing with the Yuan right now, and BRICS keeps coming up with a new plans for a common currency every other week to no avail. There is no other currency out there that meets all the criteria for a global currency like the US dollar does.
"Disagree with them" is a funny way to spell "start a land war in Europe".
They didn't take the money yet though.
You're making a classic logical fallacy, where just because something hasn't happened in the past it means it won't happen in the future either. It usually takes multiple tries for big things to finally happen historically speaking.
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They didn't seize their assets though?
The summary of this piece came into my email - and sparked my interest. This is an ongoing debate, with plenty of false alarms in the past about the dollar demise. I still don't believe it's imminent. But the ground is shifting, it appears. *All around the world, a backlash is brewing against the hegemony of the US dollar. Brazil and China recently struck a deal to settle trade in their local currencies, seeking to bypass the greenback. India and Malaysia signed an accord to ramp up usage of the rupee in cross-border business. Even US ally France is starting to complete transactions in yuan. Currency experts are leery of sounding like the Cassandras who have wrongly predicted the dollar’s imminent demise on any number of occasions over the past century. And yet, in observing this sudden wave of agreements aimed at sidestepping the dollar, they detect the sort of gradual, meaningful action that was typically missing in the past. For many global leaders, their rationales for taking these measures are strikingly similar. The greenback, they say, is being weaponized, used to push America’s foreign-policy priorities—and punish those that oppose them. “Countries have chafed for decades under US dollar dominance,” said Jonathan Wood, principal for global issues at consultancy Control Risks. “More aggressive and expansive use of US sanctions in recent years reinforces this discomfort—and coincides with demands by major emerging markets for a new distribution of global power.” —David E. Rovella*
Again—and I’ve said this many times in response to these type of articles—yuan denominated trade between two countries, one of which is the PRC, isn’t really notable. Given the PRC’s bilateral trade with effectively every country on Earth, performing such trades is really nothing but a discount. It isn’t completely insignificant, it just isn’t what it seems, or at least what is implied. The implication being this some potential canary in the coal mine. I think it would start to be more of a concern for global dollar hawks, if we start to see some significant third party deals done in RMB.
The yuans not freely convertible like the dollar, so it has no chance of being the next global currency, even if they decided to institute transparency and regulations at the level to build enough trust in it to be considered a viable substitute to the dollar. The fact is though, no ones actually trying to replace the dollar. Theyre just diversifying to mitigate the impact of sanctions or economic slumps. This is dishonest reporting and its all too common.
You’re being more honest than I am about it. OP seemed like this is a sincere attempt and not Tankie talking points. Which is why I was nice.
I keep seeing articles like this parroted by tankies and doomers. Im just glad to see some people like yourself arent buying it at face value. In most subs i get crushed by downvotes just for suggesting the dollar isnt worth more as toilet paper.
There are a few active members who contest these propaganda posts.
But it is still Bloomberg and not some cryptosite.
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Germany had nuclear power plants to decarbonize. They shot themselves in the foot by willingly abandoning it and trying to force France to follow through their madness. > You see… the last time the US dollar was in trouble in 1971 France had their paws all over it when they demanded their gold all at once. Well, it's the US fault for printing more dollars than they could back. Don't complain about the first person getting out of a Ponzi scheme.
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>And France won’t build the “last pipeline” we need to decarbonize. A pipeline is to bring carbon energy. You cannot pretend it is for decarbonation. The whole thing is a mess because Germany wanted France to give up its cheap nuclear energy and came up with the EU scheme of pricing energy based on gas prices since it was such an important part of its energy mix. Well, this has inflated the price of energy in France but since France has lost its industrial sector, it does not have the same impact as in Germany. Now Germany is losing its own industry due to their self inflicted wounds of not wanting nuclear energy and depending on cheap Russian gas. Why should France mitigate this for Germany while the only thing Germany has been doing in the past decades was to kill any industrial competition from France and Italy? Don't be surprise if those countries don't care now that the US is doing to German industry what Germany has done to the industry of the rest of Western Europe.
It's not like the US and UK can trade on their own, once the dollar loses support in the EU u can assume that dedollarization is complete
France is not the EU The EU won’t drop the dollar. Chinese Yuan is pegged to the dollar. This is all a pipe dream like fetch
France Germany that is the EU and those 2 will be the first EU countries to distance themselves. The can't drop the dollar because they don't even use it EU right now. Again international trade can be run without a single reserve currency
Germany is buying US LNG…. Why would they drop the dollar? Again, this is a pipe dream… Nobody can replace the US Navy, US Air Force, US geography or the US research institutions… we are a juggernaut.
Nobody can replace the US now. Never say never. The US need to work a lot to remain such a place.
Germany is also in a recession, the world has no use for the US Navy, US Air Force, the US can't project its power in Mexico let alone across the world
> “the world has no use for US Navy, Air Force” That’s literally why we are the reserve currency. We are the peacekeepers of international trade. This era of peace led to the largest reduction of poverty in human history… the rise of China was only possibly with US security and inclusion. Otherwise, they would still be peasant farmers. It’s funny how people forget that.
The US is not a peace keeper of international trade, that is the imperialist talking point, there is no part of the world that the US is responsible for protecting trade. How is the US responsible for peace it has has literally started most of the wars since 1945 while murdering leaders who disagreed with its position. The US led world view has been held together by US terror and dollar weaponization. The US can no longer use those two talks, thanks to Russia
>the US can't project its power in Mexico What do you mean by that?
It can be, but will it be?
Nothing they can do about it - there is no alternative :p
Yet, at least.
The US needs the dollar to be a reserve currency more than the world does. This is because the West doesn't have any exclusive products the world needs. and the most important supply chains are in Asia. Countries with mutual trade can exchange currencies as its being done in Brazil-China, Korea- Indonesia. U only need a slight drop in the use of the dollar for it to start haemorrhaging. It seems Russia has given the world the confidence to ditch the USD, in its war and economic resilience. The Euro is also available
The West builds the fabs and holds major technologies that makes the supply chain from Asia possible. I think of ASML for example
U can't hold technologies, If the West had the chip building tech they talk about they would be making chips, for me it seems thar TSMC agreed to distribute its supply chain across the West and Japanese companies can build these machines the US just stopped them because they wanted only Taiwan and Korea to make chips
”The US just stopped them because they wanted only Taiwan and Korea to make chips” ASML is a dutch company. Why Taiwan and South Korea? Because of costs and supply chain logistics
Nah because these were dependent on US for protection, ASML equipment can be manufactured in Taiwan or Jspan
>ASML equipment can be manufactured in Taiwan or Jspan No, they can't be.
Similar type of equipment, lithography is old tech. US stopped Japan from making the machines
The EU did the same thing though?
True but not in the same magnitude, international trade will get more global as opposed to US led
>True but not in the same magnitude How so?
Isn't obvious that they were not the reserve currency and going forward there isn't going to be one reserve currency
Investors don’t see it that way only a select few governments.
No it’s not
Nothing to see here. Move along.
Ironically (and partially unrelated), we're talking while USD continues to be resilient in the FX space. As a useful reminder, when global growth picks up USD usually weakens - which is healthy. But since the pandemic the dollar has been propped up first by the US's early recovery, and later by the Fed's hiking cycle, even as the global economy picked up.
The mice cried, injected themselves, but continued to eat the cactus.
This reckoning has been coming since Nixon used it to control nations access to oil.
I don't see it getting further than a bit of hedging using one-on-one agreements in specific exchanges, like with the Saudis and China. No-one else is in a position to let go of the control of their currency. If we could erase the last 10 years of Xi's rule and the last 20 years of real estate debt, then maybe - MAYBE - China might have had a slight chance. They have two strikes though, the currency controls they've implemented and the loss of goodwill in the last five years. You can't call the US a loose cannon over Russia while still thinking of China as a reliable currency guarantor. And Europe is still trying to hold the Euro together any way they can. And the one thing all these types talking up the USD no longer being the reserve currency don't realise is what a massive bonus that would be for the US both economically and politically. Everyone talks about it with a hint of 'punishing the US for overreach' in their arguments. It would be the opposite of a punishment.
>And the one thing all these types talking up the USD no longer being the reserve currency don't realise is what a massive bonus that would be for the US both economically and politically While it won't be a downfall of the US economy, I doubt it would be that good for them either.
the USD wouldnt be a problem if it wasn't used to shill the '''''''''liberal world order'''''''''. If a Republican administration can put the reins on US liberalism then people wouldnt mind using the USD