It is quite plausible that bitcoin becomes the global reserve asset, just as gold was in the past. Bitcoin is superior to gold in every single aspect except for the number of years it has existed. To learn more:
Gold was a terrible reserve asset which is why we stopped using it. Recreating all the same things that made it bad, and also removing industrial applications, doesn't a good reserve make.
And any book with a [edit](foreword) by Michael Saylor, the man whose fraud basically popped the 2001 tech bubble isn't worth the paper it's printed on. The man should have at the time been banned from running any publicly traded company. [1] [edit] What's next, a medical ethics book by Elizabeth Holmes with a [edit](foreword) by Martin Shkrelli?
Gold was great, except the difficulty storing, transporting, and conducting commerce in it meant centralized institutions (the Bank of England) monopolized its storage out of convenience for international trade. Seizures, debasement, and so on until the gold standard ended. Biggest mistake ever made, but luckily bitcoin exists now.
Oil would make a far better base than gold, for a bunch of good reasons.
Not that it would be good, because it has a bunch of obvious problems, many of which would occur with gold too. Of course many commodities are used instead of currency by blocked countries. As are cryptocurrencies.
Would not gold have the superior aspect it has actual use behind its value?
Obviously the store of value part pushes up price, but there is also a big need for gold in electronics and jewellery etc. Bitcoin at the moment is largely speculation and has little use beyond that currently, though has potential to become an active currency of significance, we are yet to see that.
There is very little use for gold in electronics. In jewellry, yes. But that's only because people in developing world see their jewellry as a form of savings. Those are the same contries where the people don't buy jewellry lower than 18k.
Nobody in North America or Europe knows how to get the fair value of gold in the crappy 14k necklaces.
USD is useful because it is a meaning unit of exchange.
Not really; because the price of gold tends to the marginal cost to produce.
If a marginal producer can generate a kilo of gold for $60k, then gold is worth around $60k/kilo. Its uses or lack thereof are not that important. If all the uses of gold went away magically, it'd be worth less for various reasons but still a similar order of magnitude.
Great news. It's really unhealthy for the global economy to be so dependant on one currency. Hopefully we see the Euro and Indian Rupee grow in prominence.
When the Euro was introduced, it was set to be about the same value as $1. It's currently at $1.10 so it's actually stronger vs USD than it was initially.
> which lost almost 1/3 of its value against the USD over the past two years
Two years ago on this day the exchange rate was ~1.2 USD per 1 EUR, today it is ~1.1, so the loss is ~9%. The current exchange rate is nothing extraordinary, and has been hit many times in the past years/decades.
Your point doesn't really stand. You cherry-pick the years around 2008 to make your point, but it shouldn't be very surprising that USD was very weak back. In the years before, and after Great Recession, the exchange rate 1.1 is very boring average.
Some currencies, like Swiss Franc may outperform EUR, but are not suitable as a large scale reserve currency.
I guess we just disagree on if the euro makes sense as a reserve currency.
It’s too volatile for my taste. It observably performs poorly during times of panic. Almost all global trade is conducted in dollars. Inflation is much worse in the EU than the US.
The ECB just follows the Fed, except worse. They maintained negative interest rates for a decade!
Can you make a case for why the euro should be a reserve currency?
I sometimes feel startup founders would understand the issue with 'De dollarizing' the most.
American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)).
Looking at it from a strategy or top level point of view of course it looks like dollars are dominant, but from a customer point of view - and the US trade deficit its easy to see why: You have a customer base that is profitable, and a large amount of them. Far more than any other country. It is just very hard to get an alternative to an American consumer.
The poor rate of savings, the spending of more than you have, etc results in a pretty good deal for the person on the other side and the manifestation of it is in the accumulated dollar capital
> American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)).
It depends on where you are established or what markets are you serving.
Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible.
So if you plan on going real big and disruptive, possibly like Huawei was, going for the US market domination doesn't seem like the best idea.
> Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible.
All you have to do is not be a foreign state-controlled company and not try to circumvent sanctions to known bad actors.
Case point: Ericsson and Siemens have no issue selling in America.
Right. As I understand it, the U.S. is the largest consumptive economy, which necessarily means that, eventually, whatever you're selling needs to involve the exchange of dollars. And if the global demographic trends play out, that's not changing for a very, very long time. So why the sudden surfeit of articles suggesting the dollar-as-reserve is at risk is beyond me.
I believe the sudden dollar articles are showing up because of the Russian war and sanctions and a weaker us dollar.
Even if the demographics changes play out the issue is the growing economies are consuming out of investment and not capital, and do not run trade deficits (so the other party doesn't have Yuan saved up for example). So there is nothing to reinvest. Almost every country China trades with has a trade surplus with China. Which means everyone is buying from China and they don't save up Yuan, but save up the other countries currency.
Back in the day (like 10 years ago I think) I was speaking with an exec at the company i work for that had just come back from a business trip to China.
He told me an amazing fact that still amazes me.
The two biggest customers of china's exports are (explicitly in the following order):
Hence why looking at it in terms of total $ is an imbalanced metric, we need to look at how many units of trade / txns are conducted instead given the disparity in Purchasing Power Parity.
To illustrate one potent example - Bollywood is magnitudes larger of a movie industry (even adjusted for population), however the collections in $ vs ticket sales paints a very different picture.
Yes this is accounted for, even if you separated them all out and counted the prices people are willing to pay for from each country, the US still comes out ontop because of the consumer culture there.
The issue with Bollywood for example not being larger than Hollywood despite more films and possibly a larger view base is the price of North American tickets vs the cinema ticket prices in India for US films - even if they are made abroad that are sold to US consumers. So in aggregate the US consumer alone is quite significant in dollar (but not in individual people) terms vs everyone else.
If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries.
> If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries.
Yes correct. And this is not a good thing even for US. Since the consumption economy in US is driven largely by debt, what will happen when there is a default (which seems very likely to happen soon considering how US banks are collapsing like dominoes)? Who is going to bail out the US economy? Sure you can bail out banks when there is a banking crisis and is localized to only the banking sector (like 2008). But what will you do when there is an economic crisis that affects everyone? That is the real issue here. US National debt is at an all time high and is not slowing down. QE is still on full swing. One day it is all going to come crashing down. With de-dollarization, the strength of the US economy shifts from being able to control international trade and also drive up its own internal debt to finance World economy (by providing much needed liquidity for international trade through its SWIFT systems) to only having to drive up its own internal debt to finance US economy (which has all the potential to lead to runaway inflation). This shift is going to happen in the coming decade or two and I hope US Citizens are aware and prepared for the fallout.
> One day the US will crash and burn, but I'm betting you a dollar it won't happen in this decade or the next.
I am willing to take you up on your bet. My answer to your point is quite simple really. Consumption is going to slow down massively in USA over the next two decades because of Demographics. By current statistics itself, there is a major decline in young population in 70% of the counties in USA [1]. The median age in USA is 38.1 years. So 2 decades from now, this median age is going to shift to 50-60 because birth rates are plummeting big time. Unless US can produce more babies it is going towards an ageing society (like what Japan is experiencing right now). So when consumption falls, economy gets sluggish and that would cause downturn again. I wouldn't be surprised if the next two decades ends up worse than the Great Depression of the early 1900s considering how badly managed the current recession is.
But even Japan has still not defaulted after 30+ years of stagnation and a Debt-to-GDP ratio of 230% (US is 120%), and unemployment is basically zero.
For comparison, the great depression had >20% unemployment and -15% GDP
Anyway, let's reconvene in 20 years :)
Let me spell out my prediction for posterity:
> The US will not default on its debt in this decade or the next, and the economy will not have a crash worse than the great depression (-15% GDP and unemployment above 20%)
If you had a startup and you sold things online (outside of China), you would not find many Chinese consumers or customers, even if you allowed Unionpay or Wechat.
Sure there is a Yuan denominated market, but when it comes to consumption it is a kitten relative to China's size - because most Chinese consumers opt to not spend their money and save it instead - relative to an American consumer. And the outcome of that is in China you would on average have more savings than an American, but an American would have bought more things if everything else were equal. But on the Americans version of it those dollars they spent are saved up by the vendor and show up on stats vs everyone else and they are larger.
Do you have an example of this, as quite nearly it is the experience of every Shopify seller or SaaS vendor. You can get Chinese customers, but they'll be local customers to your market (e.g selling in America, Australia, Europe, etc) but not from China where you ship there.
There's a reason it is hard to fill container ships heading back to China.
Thats not true, there are Shopify merchants that target immigrants in countries that are exclusively in Chinese, Japanese, Malaysian.. etc
It is easy to sell to a Chinese audience in America, Europe, etc. What is almost impossible is getting Chinese people to buy your thing selling from abroad. It's possible but its out of the realm of easy by far.
And that is the point, an American consumer (even a Chinese migrant) is easily and far more profitable than targeting China directly (so you export to China from another country). And if its not infant formula, its even harder.
It is not possible to sell on Taobao with an American/European/Japanese/Australian/Singaporean,etc company, also without a physical rental or property in China. Also this conversation is becoming a bit laboured considering how obvious the differences are:
I will reiterate how easy it is to access the profitability of an American consumer vs any other country from any country.
And the impact it has on the dollars accumulated by selling to Americans is still unchallenged (its still at the top of the list). The key to changing the reserve of US dollars is attacking this fundamental truth as that is the source of the US dollars being a majority in the first place.
I understand the dislike of having US dollars so prominent but the reason they exist is simply they aren't spent by the people who sold to the US. That is the fundamental thing to change to get rid of dollar dominance as it is the root.
I would recommend to you a book by Michael Pettis, a professor at the University of Beijing called The Great Rebalancing who makes this all clear. He is also not sycophantic to the US if that is a concern
It has nothing to do with consumption demand. Countries have realized that US dollars is not a safe store of value (aka reserve currency) because of decisions taken by the US administration vis-a-vis its sanctions regime. It is not worth having your US dollars frozen and your entire Country beholden to the United States leaving you with zero options on the table (to trade with other countries) just because there are differences in opinions/ideology/politics.
This is starkly evident when US has a different set of rules for itself (my way or the highway) vs rules it expects the World to follow (rules based order). This might have worked in the past when other Countries were technologically inept at building necessary infrastructure to connect banking systems and had to rely on SWIFT. However, this is no longer the case today. Most countries now have better home grown systems where transactions are settled instantly (instead of taking multiple days) and have realized that the same can be extended when it comes to inter-country (read it as bilateral) trade too. Instead of India holding USD in a US Bank and Russia holding USD in a US Bank, and using US Bank as an intermediary for any bilateral trade (giving a cut to US Bank as well as being at mercy of the US Government), India and Russia can bypass the middleman (US Bank) and trade directly: India holding Rubles in Russian Bank, while Russia holds INR in Indian Bank. There is no SWIFT being used anywhere in between. Totally avoids sanctions as well as removes the middle man from the equation.
De-dollarization has nothing to do with US Dollars losing its value. It has more to do with the US Government losing its economic superpower status where it can control other countries through economic sanctions. Even after de-dollarization, USD might be the most sought after currency purely for its value and not for "fear of the US Government". There is no "perceived loss" for USD as such. But there is significant loss for the US Administration if it cannot use USD as a weapon against another Country. That's the point that is most important to realize. It is all about balancing power dynamics.
My argument is that the US dollars that are on these reserves only exist because consumers have spent them. The argument that this does not have anything to do with consumer demand is almost not understanding where these dollars come from. These reserves can only come from excess consumption.
To have an alternative you need another country with the type of consumption the US has. So while your argument is correct about the rules and affect of sanctions it misses the point that the dollars are basically loans to America because the other country did not save them. Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong.
It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place. If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else (the person you bought the Yuan/Rupees from) - until it is finally consumed. The issue is they never tend to be consumed.
The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.
> it misses the point that the dollars are basically loans to America because the other country did not save them
I did not understand this point. How does USD became a loan to America if say India did not save them?
> Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong.
Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here.
> It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place
Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies.
> If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else - until it is consumed.
Okay and what does it have to do with China and India trading with each other or Russia and India trading with each other? We don't need to trade using USD.
> The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.
All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that communist China is more favourable to democratic India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.
> Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here.
Again i will reiterate that this item will not change the reserves of US dollars in place, since even if dollars were used they would go down, then back up and there would be no net change. In terms of 'de dollarization' it would not have an impact on Central Bank Reserves.
> Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies.
See point above, for India and China to trade without or with US dollars the reserves dont change. Being in the middle of the transaction in a wasteful manner is not where the power of US dollars comes from.
> All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that China is more favourable than India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.
I understand what you are saying and it is correct. And there should be no reason to use US dollars in this case - but again it wouldn't reduce the reserves of US dollars. The only way to reduce reserves is to spend them or to stop America creating them by stop selling to them.
Okay I understand the point you are trying to make (your concern is more about reserves). I'll differ with you slightly here: US dollar reserves are highest purely because we use USD for imports from other countries too. That is why it is the most sought after today. We are all selling to US consumers primarily because we want those dollars to trade with other countries as all trade happens through SWIFT. However, with de-dollarization, we are trading with each other in our own currencies. Now obviously that would mean we wouldn't be storing more than what is minimally required in USD reserves as we would be holding a bigger basket of currencies instead.
Would USD reserves still exist? Yes. Would the volume of those reserves remain intact? Absolutely not. It will reduce significantly as it gets replaced by reserve currencies of the countries we have direct bilateral trade with. Is that going to reset the USD price in the market? Obviously yes. Water finds its level. So will USD. Would USD still be the most sought after? Depends on the US consumer. If the US consumer still has an appetite for goods/services it will be the most sought after.
You see, until now, all non-US countries were forced to be in the SWIFT system because we had no other way to trade. Now that we do, the reliance on USD as a reserve currency falls. USD will find its level eventually.
Also, do not forget demographics. US is losing the demographic race. The "young population" is shrinking rapidly and they are the "consumers" in any consumption economy. Like Elon Musk said recently, demographics is destiny. And US is losing that race and is not realizing it. Consumption will slow down majorly in the coming decades and other countries have to think of alternative solutions. Because consumption will move to where the "young population" is. And demographics decides that.
> Countries have realized that US dollars is not a safe store of value (aka reserve currency) because of decisions taken by the US administration vis-a-vis its sanctions regime.
Another thing that really doesn't get enough attention, is how recent events have jeopardized the peace that the United States Navy has provided for 70+ years.
I don't think that most people appreciate the role that the Navy plays in the world, basically creating a situation where the United States provides security to seafaring vessels all over the world, in exchange for an unspoken agreement that other countries won't build a massive navy. Of course, this state of affairs was in response to Germany and Japan building massive navies in the years following WW I.
I was a little curious how this compares to the use of USD during the Cold War, before USSR collapse, but it's hard to compare since so much of that period was under the Bretton Woods system. A long term historical perspective to the potential consequences of de-dollarization would be an interesting read.
There's a lot of garbage out there about de-dollarization. MMT for example, magical monetary thinking is more appropriate since it lacks any rationality or understanding of the fundamentals of who sets prices for produced goods.
While an interesting read, there were a few problems I had with it.
Specifically, it appears they didn't really do any research into what caused the Penn Railroad collapse, which was not caused by high interest rates but instead by a combination of actions which would be considered fraud today (due to conflicts of interest that would never be allowed and exceptions to financial reporting in the rail legislation).
They basically couldn't raise prices due to regulation, and no bank would loan to them. The one bank that would loan to them required they have seats on the board of directors. They loaned money at high interest rates, bought up the senior bonds with the interest payments, took control of the board, loaned money to themselves (effectively), paying dividends out of debt, and then forced bankruptcy and let it all collapse in the hope of a government bailout (which they got because rail is critical to food security and energy).
It also neglects stagflation but does mention Volcker, drawing the wrong conclusions of what really happened, doesn't mention the S&L debacle aside from a brief mention (which was huge as well), neglected the whipsaw effect.
The biggest problem I have with it, is it neglects a lot of important factors and only focuses on policy which doesn't match up with reality and largely only what fits their narrative if you didn't know better. There was also no mention of taking the currency off the gold standard in 1971. Most importantly, they don't use any of the M2 or velocity of money data. Its available from the Fed website but it doesn't support much of what they said, and shows how expansion of the money supply drives inflation in cost push or demand pull inflation.
MMT suffers from major problems. The people that subscribe to it largely only see these large sums in a very narrow context which leads to poor conclusions, and an idea that you can print money continuously into the future with no consequence. It largely was what led to quantitative easing (or money printing).
Graeber has a great book on Debt, which goes into the historical examples of what happens when you debase currency like this (no matter what you call it), and there's some very interesting research in how the Economic Calculation Problem related effects can be seen as rational pricing and price discovery fail in markets denominated in unbacked fiat. The latter being most commonly known for its historic roots as an intractable problem with non-market socialist systems where the means of production are held by a single entity. The debate/problem still isn't solved 100 years later.
Additionally, the people making policy can't control what people choose to buy and sell goods at. Inevitably you get shortages when they try, business sectors concentrate, points of failures are introduced, and people leave the business when its not profitable. Then you get things like the baby formula crisis where the only factory remaining is shut down for safety reasons (as a result of cost cutting) and no one can get baby food in Florida. Once sector concentration reaches a certain point, its a short step away from nationalization in furtherance of solving the shortages through greater regulation.
Needless to say it doesn't work, and I'd expect at least some of that to be addressed, but it wasn't. What's covered seems misleading, and very much divorced from the reality.
When I say three contradicting meanings of "money printing" I mean it.
MMT predicts that if you print money you don't necessarily end up printing money but if you print money you definitely end up printing money.
People don't understand the difference between printed money and printed money that was printed.
It should be pretty obvious. If the central bank prints money but the government doesn't print money then no money was printed except when people withdraw their printed money into printed money. If however the government does print money it will definitely cause inflation (classical economists and MMTists agree). It is especially likely if the government prints money into the form of printed money.
Also MMTists think "MMT" shouldn't be done as it is too much like printing money because MMT is a theory of money and accounting and not a theory of printing money unlike "MMT".
I don't know why I wrote this. I believe in accounting identities which are sort of MMTish so I knee jerk when people violate accounting identities by building straw men and reusing the same words to use completely different meanings for the same of political framing.
For god's sake you can't even use money printing in its original meaning anymore. Aka governments physically creating money to increase the money supply without supplying goods in return which as I mentioned above is a bad idea.
You know the difference between the various types of "money printing" that distinguishes them from the political framing is that the ones done the most have a sort ratcheting mechanism that forces the money to come back eventually. In other words, if there was no threat of deflation, via negative interest or whatever mechanism of your choosing, then the mechanism of money creation would unwind and the money would disappear on its own without causing inflation.
Alas we don't live in that world. Deflation is scary and must be avoided so we are stuck on this inflation treadmill until people wake up and accept mitigations to the dangers of deflation which then gives central banks, governments , businesses and private citizens more leeway to steer the economy towards their preferences and away from permanent inflation and money supply increases. So the inflation treadmill it is...
I agree the corruption of language is an ongoing problem, and its often done to mislead and is easy to come to incorrect conclusions, which makes communicating about these things tangibly all the more difficult.
As for the ratcheting mechanism you speak of, that is simply tax revenue, but it only ratchets when taxes are collected, and if you have tax loopholes where you don't pay taxes it doesn't necessarily ratchet (i.e. inheritance, income, etc). In terms of math, a percentage of a percentage never actually gets to 0, it approaches a limit over time, so there is always a certain degree of expansion, and that expansion is often offset by population growth. Hitting the limits of growth (for the planet) adds additional complications.
From what you've said, I think you don't really understand how deflation occurs aside from the theory which there's a lot of crap out there, so that's understandable.
Anytime the debt % of GDP exceeds a certain point, a bubble is created, and when rates tighten coupled with the bubble pressures you get deflation. There is often a period of reflation afterwards, if the issues that sustained the downward pressure are corrected but sometimes they aren't. Japan for example has been in a self-sustaining deflationary cycle for decades, and has only kept it under control through foreign investment and debasing their currency via yield control (effectively negative rates against their future).
There's a book series of case studies called Big Debt Crises by Bridgewater, it thoroughly covers inflationary, deflationary, and hyper-inflationary debt crises, it covers the specific mechanics and has accurate charts for the periods of these crises, where they actually happened. I think you'd cut through a lot of the misunderstanding from reading it.
The lever to print money to buy stressed assets only works up to a point (debt as a percentage of GDP), then it typically breaks down as the store of value loses credibility and value in the eyes of those holding it (usually sometime after reaching a 3:1 ratio which is where effects start to become noticeable to the average person).
The Great Depression was a deflationary depression, and it was caused by a bubble that was created, where debt reached 125% of GDP at its peak. A minor 250bp rate tightening (because leverage ratios were smaller back then), triggered the deflation. Initially it was bad, but they managed (in the reflation stage) largely by unpegging the currency from gold, buying stressed assets with domestic debt, and negative interest rates over many years. The banks loaning assets were also tightly controlled at that time.
Currently banks are not very controlled, the depository requirements have been removed (see FDIC website, its at 0%), technically its no longer fractional reserve, and the reporting indicates they are loaning more debt into existence than they have assets (for the past several years).
When they fail (when the bubble pops), the government makes the survivors whole and divvies up the assets to the survivors. Assuming of course there are survivor banks. They are too big to fail, and while the Fed is supposed to be the only money printer, the large banking institutions are so centralized that they've effectively usurped this indirectly.
The shortfall in returns and production is always paid in inflation. There's a part of that curve where this is manageable, once you exceed that part (as a % of GDP), you get into those self-sustaining cycles similar to Weimar or Argentina, or deflation, or a little of both from a whipsaw.
Actions are taken based on lagging indicators; so effectively this becomes just another form of the economic calculation problem (which remains unsolved), where the knifes edge gets closer and closer until you miscalculate (because futuresight doesn't exist).
I thought it was an interesting observation that a problem normally only found non-market socialism systems can be seen in unbacked fiat based monetary systems.
I don't know why it is so popular to overload the same words with multiple meanings in pop finance until meaninglessness.
When I see people criticize "MMT" they don't even talk about the same thing. If you boil down modern monetary theory to its essence it just means that the public sectors deficit is the private sectors surplus. I.e. the government doesn't receive money via taxation, it is the source of money. If people want to hold more money then it is legitimate to have a deficit within reason. This is in comparison with the loanable funds model where the government must first collect the money from the private sector and therefore deficits are bad.
"Since it lacks any rationality". I agree magical monetary thinking lacks any rationality since it is a straw man.
It's ok I can deal with three mutually contradicting definitions of "money printing". I can deal with two contradicting definitions by now.
Curious if others are familiar with the “dollar milkshake theory” - this seems to be the first sign of it being a miscalculation. Alternatively, this rate of dedollarization may have been calculated by the fed ahead of time. I’d love to know how far off prediction this 10x acceleration is.
I'm not supporting or attacking the dollar milkshake theory but I don't think this contradicts it.
I think the theory would say that this will counterintuitively result in an eventual huge dollar spike as new dollar demand but also liquidity dry up while existing demand from existing USD loans stay constant.
I think it's too early to tell. I don't believe in his USD superspike but I do think the underlying dynamic is real and this will not result in the dollar being substantially lower in the let's say 1-3 year time frame (ie DXY < 90)
Meh. It looks like De-Dollarization is yet another 'current thing' or meme. It begins by smaller social media accounts and outlets coining a neologism, which goes viral and picked up by big media even if there is no evidence to back it. It then keeps spreading until public loses interest or replaced. There is no evidence to suggest this is happening. Look how much the Turkish Lira has fallen for example. The US dollar index is still close to 10-year highs. Look how poorly 'dollar alternatives' such as Bitcoin have performed recently. Or the Yen.
How do you hedge against this if you think the Yuan will be the dominant currency? Investing in chinese stocks is obviously very risky as you can only hold VIEs and ADRs which either the SEC or the PRC could end at a moments notice.
edit: My current viewpoint is the s&p500 is enough of a hedge given that these companies are multinationals trading in many currencies already -- I'm often wrong though :)
I think the hedge is more about not being too USD centric. I wouldn't bet on any one currency too heavily. China has its own set of problems. My guess is more likely we'll see more diverse currency in trade relevant to the trading countries.
Broader, IMO I think the USD is walking dead. I don't know when, but fundamentally you have a government debt no-one expects to be paid back, and growing quite rapidly. I respect most people would say otherwise and I'm often wrong, but I don't see how this ends with anything other than default, which will be preceeded by money printing most likely.
The US is a huge and dynamic economy, so maybe they will prove this view wrong, or more likely drag things out for a long time, but humans being humans, at the first sign people start feeling they might not get their monies worth from USD, the response will be rapid as people try to protect their worth. This de-dollarisation seems part of the process and given Ukraine/Taiwan tensions no doubt is a strong drive from other nations.
But off tangent but generally I would go with diversified vs focus on one alternative. Personally I went 15% cash and gold each from my shares a couple months back... Time will tell if I'm right or miss the next bull moment.
I’m sure the Yuan will increase somewhat as a reserve currency, but I’m skeptical it will become dominant. China has systemic issues at the moment, with a working-age population that peaked some time ago and a property market that is perpetually on the verge of implosion.
There are mounting pressures in domestic consumers, and an increasing move towards “dual circulation” (with a focus on the domestic part of that duality). Then there’s the risk of a miscalculation in the East China or South China seas.
Given that CNY trades in a tight, centrally-managed range against the USD (it’s almost always between 6-7 CNY to the dollar, and only briefly traded outside that during the pandemic), I’m not sure there’s a big incentive to use CNY as a hedge against USD.
There are more than 3,000 different China A-shares that you can purchase in Hong Kong via Stock Connect. You can also purchase any Hong Kong listed shares.
Also, China's economy is crashing hard. China is now entering its third year of its own Great Depression, with 30% unemployment rate, 90% unemployment rate for new grads (it's so bad, Guangzhou government just sent 300k youth to countryside for a program), 80% retail collapse (entirely empty malls in Beijing, Shanghai, Shenzhen), 50% real estate price collapse. Guizhou is the first province to declare bankruptcy ever.
According to the office for national statistics in China, for jan/feb of 2023 http://www.ce.cn/xwzx/gnsz/gdxw/202303/27/t20230327_38464161..., car manufacturing profits is down 41%. non-metal products manufacturing profits is down 39%. chemicals manufacturing profits is down 56%. electronics manufacturing profits is down 71%!! In fact, all businesses have dropped 22% in profit. Not to mention the 1M+ SMB that failed in the last 2 years.
Apple, dell, hp, lg, Kyocera are all shifting manufacturing out of China. Apple by 50% by 2025, Dell by 2027. It is estimated that China's portion of worldwide phone production will drop from 90% to 50% by 2025, and worldwide laptop production 70% to 30% by 2027.
Alternate explanation: there is a massive dollar shortage globally due to US based and Eurodollar banks being unable/unwilling to lend and dollars are preferentially being spent to import important goods because what else are people going to take?
There was also a lot of propping up of currencies that happened due to dollar strength. A lot of central banks sold UST they held for their local currency to stop currency free fall as rates rose.
This is a symptom of rates rising really quickly in the US than any de-dollarization I'd wager.
This article frames it starting in 2001 for a reason. Go back to 1990 and you will see that the USD only made up about 45% of reserves. It can change quickly.
It is good for the developing world, as producers/exporters subsidize countries with reserve currencies. That's why inflation in countries with reserve currencies is always a way lower than other counties. MMT claims that one can swap "printed money" with real products (such as cars, commodities, food, clothes). This kind of swapping is possible for the US, EU, UK (Mostly the Western world and Japan). Who wants to swap million barrels of oil to Zimbabwian dollars.
How is USD better than Zimbabwean dollars after the US federal reserve has quadrupled the amount of dollars in less than a year and then claimed only single digit inflation?
EDIT: I love how nobody replying is addressing my actual point
It could be worse, it could be better. All that it matters with currencies is trust. Trust that they can be exchanged and trust that they keep their value. If I go shopping tomorrow and they tell me, you can keep your euros and your dollars, we want only bricks because currencies are crashing and bricks will be useful forever, I better have to get out and find some brick. The dollar is fine until people will trust it.
Perhaps in a theoretical sense they aren’t different, they are fiat money which is basically a ledger of value (which governments manipulate).
But behind the dollar is the largest economy in the world and the largest army by a long shot, and a lot of motivation to keep the dollar as the “biggest” currency in the world.
My absolute favorite youtube finance person, Patrick Boyle, did a very interesting video about de-dollarization and brics recently, cannot recommend it (and Patrick) enough!
I find the willingness to run surpluses far more curious.
Emerging markets are surprisingly happy to give vast amounts of oil, gold and manufactured products in exchange for claims on overseas assets that can be frozen or devalued at the stroke of a pen.
This is a really weird article. It's 100% sourced from one "note" written by some guy at Eurizon, with no alternative perspectives given or seemingly even requested from anyone. (Especially weird given that economists love to talk!)
And the perspective being pushed isn't just the fact of the reserve decline, but specifically that is being driven by sanctions on Russia, which seems like a huge, huge reach to push without analysis or rebuttal.
This has the smell of a deliberate hit piece, basically.
It's trash.
Sanction on Russia might have affected the dollar as a reserve currency. But, the author is using 2001 to compare the relative decline. Russian sanctions didn't begin until 2014 and didn't serious until last year.
> More likely, the SWIFT sanctions will prove a mistake for "the West," when it realizes the downstream effects of cutting off Russia from the dominant payment network of the global reserve currency. Russian banks have already started offering accounts in yuan. This will lead to further balkanization (unfortunate pun notwithstanding) of world reserve currencies, which means increased decentralization and a reduced dependency on the dollar. Eventually the world will naturally diversify their reserve holdings to the point that the dollar loses its power as leverage in diplomatic negotiations.
And they're still not right, just like they weren't right in 2010, 2000, 1990, 1980...
The idea of the decline of the US as a reserve currency has been "about to happen" for me entire life, and yet another cherry-picked graph won't make it more likely.
Same thing with gold. Apparently I needed to be buying gold since before I was born and every year since because hyperinflation is always right around the corner.
It's the same thing as people celebrating inflation went back to 7% over here in Europe. Then i have to remind them the Euro still lost 7% of its value. If the Euro worth increased they would have used deflation and not inflation.
At least that was in my high school economics 101 classes.
I never get this. We're digging our mines deeper and deeper. Automation is improving by leaps and bounds. What happens when we start mining deeper in the crust where there is probably much more gold?
I feel like commodity prices tend to get pushed down by tech improvements.
"Probably" is doing a lot of work for you there. So far as I know, there is no reason to suppose that the chemical composition of the earth's crust is significantly higher in gold at deeper levels.
Heavier elements sink to the bottom. The liquid core is mostly iron, so I would expect the even heavier gold, uranium, platinum, etc to be distributed closer to the centre of mass than the surface.
Now the crust is not liquid but it is very old and there have been lots of plate tectonics. I imagine all the shaking and scraping would be enough to get the gold in deeper.
It's interesting to note that the richest gold field we have was created when a meteorite hit the Earth so hard, the deeper parts of the crust got bent upward and lay closer to the surface (Vredefort dome).
Not sure why this being downvoted: I can still remember people freaking about about the superior buying power and stability of the Japanese yen in the 1980s.
I think this time actually is different. For the first time ever we now have a currency that is controlled by no one, with no third party risk, that can be sent in seconds across the world. It's called Bitcoin.
I'm wondering if the countries moving off the dollar reserve are countries we would even want on the dollar. I get that Russia, China would try to diversify — not a surprise though.
(The article mentions the "Global South" - I had to look it up. That's a pretty broad region that includes all of South America, Mexico, all of Africa, South Asia.... it seems unlikely all these regions are moving off the dollar.)
> I'm wondering if the countries moving off the dollar reserve are countries we would even want on the dollar
The US Government has gone to War with or at the very least militarily involved with the entire World except for 3 countries: Andorra, Bhutan, and Liechtenstein. You vastly underestimate how much bad blood US Government has created over the years with various countries in their own capacities. Heck the USG spies on its own all-weather Allies and recently blew up the Nord Stream Pipeline (in a covert operation no less).
> I get that Russia, China would try to diversify — not a surprise though.
You might want to include India in the list too. And it should come as a surprise to you that there are plenty of other countries, who have been historically neutral, are badly wanting to diversify and de-dollarize. India now does trade directly in INR with 18 countries [1]. Just a year ago there were only 4 countries we traded in INR with (this is apart from the 18 new countries that we added recently). If this doesn't ring alarm bells nothing else will.
> (The article mentions the "Global South" - I had to look it up. That's a pretty broad region that includes all of South America, Mexico, all of Africa, South Asia.... it seems unlikely all these regions are moving off the dollar.)
> The US Government has gone on War with or at the very least militarily involved with the entire World except for 3 countries: Andorra, Bhutan, and Liechtenstein.
> and recently blew up the Nord Stream Pipeline (in a covert operation no less)
The truth is, there is no public common knowledge about who did this. So unless you are leaking confidential information here, you are just speculating.
I would be speculating if there wasn't any noise about destroying the pipelines from at least one of the parties involved. From all the sound bytes I have heard, I have never heard the Russians saying that they will blow up the pipeline. I have always heard Americans talking about how blowing up the pipeline will be a good measure to stop Putin (which to their great disappointment hasn't done anything but make it worse for Germany and Europe). Even Biden said openly that he would "bring an end to Nord Stream 2". When pressed by a journalist on how he would "bring an end to Nord Stream 2" he said it unambiguously: "We will, I promise you we will be able to do it". So there is no ambiguity as to who blew it up.
There is no ambiguity about the Biden Administration’s intent to bring an end to the project. But his answer leaves open the question of the lengths the US was willing to go in order to see that intent fulfilled. It’s plausible but not unambiguously true that the US was involved. Unless, of course there is evidence I’m not familiar with.
The "Nord Stream 1" was blown, not "Nord Stream 2".
"Nord Stream 2" was completed, but blocked by sanctions (as a result of Ukrainian War). "Nord Stream 1" was operational, but Gazprom (Russia) halted delivery at least a month before the sabotage.
So you could very easily twist the argument and say that blowing NS1 was an attempt (by Russia) to force NS2 approval and put more pressure on Germany to break sanctions. Note that immediately after that event gas prices went up, even though NS1 was not delivering gas at that time. If the winter was not mild, it could end in very favorable outcome for Russia.
Both were blown. You might want to consult better sources for your information. Infact the first explosion was in Nord Stream 2, and 17 hours later Nord Stream 1 was blown up.
> The US Government has gone to War with or at the very least militarily involved with the entire World except for 3 countries: Andorra, Bhutan, and Liechtenstein
Cyprus, Switzerland, Malta, Scandinavia, Finland, Luxembourg, Spain and Portugal (unless you count them allowing US bases as "militarily involved", but that doesn't cause bad blood so doubt it), Mongolia, Nepal, all of the former Soviet Union (except stuff like paying to get nuclear waste and weapons properly disposed of, which is even less of "militarily involved" and even less cause for bad blood), big chunks of Africa - Morocco, Algeria and Tunis (unless you count Operation Torch to free the Vichy France protectorates in favour of Free), South Africa, Rwanda, South Sudan, etc. Just off the top of my head, and I'm sure I'm missing a bunch even if I might be mistaken on one or two.
All that to say, there's no need to exaggerate American warmongering, imperialism and neo-colonialism. It has done insurmountable damage to many counties and resulted in millions if not tens of millions of dead, all for profits of American corporations. Exaggerating it makes it more easily refutable and minimises the suffering caused.
> recently blew up the Nord Stream Pipeline (in a covert operation no less).
Citation very much needed.
> You might want to include India in the list too. And it should come as a surprise to you that there are plenty of other countries, who have been historically neutral, are badly wanting to diversify and de-dollarize
Historically neural implies something has changed by de-dollarising. Nobody owes the US trade in USD. If sovereign countries want to trade with their own currencies, more power to them.
Bloody hell I know the alternative was a near brain-dead wannabe neo fascist, but how did anyone vote for this guy? He can barely string a sentence together (not that Trump could, wow, the bar is extremely low in US politics), let him retire and live peacefully as an old man.
And that proves absolutely nothing. Promises and threats are cheap.
Given the choice between a fascist and a moldy piece of bread, I'm pulling the lever for the moldy bread. It's a bad choice to have to make but the choice itself is quite easy.
As an increasingly old white man, I am ready for old white men to get the hell out of the way.
No you see that's not proof. Video footage of US operators clearly wearing American flags while conducting the strike would be the bare minimum to prove American involvement. In the meanwhile we should just assume that Russia blew up its own pipeline until the US publicly admits to doing it (Biden doesn't count, either). They wouldn't lie about foreign covert operations after all!
> unless you count them allowing US bases as "militarily involved", but that doesn't cause bad blood so doubt it
Yes by militarily involved I do mean having military bases as well. "Doesn't cause bad blood" -> you are talking from perspective of a Westerner/American (I am making an assumption here). It benefits US to have a military base but need not necessarily benefit the host country. Almost always there will be a compromise, "a choosing of lesser of two evils" so to speak, when a Nation has to give up sovereign space for a military of another Nation to occupy its lands. It is out of desperation. In some cases it is out of pressure too.
Which is why I consider it "military involvement". There is a stark contrast between having an Embassy in a Country vs a Military Base in a Country. The host country can always call for shutdown of a foreign Embassy and expel Diplomats. These rules are governed by World organizations like the United Nations. However, a Host country cannot expel a military base from its land unless it is written down in the agreement between the two Nations. Even then, the actual ability to shut down an already established military base is significantly costlier on the host nation if it has lesser military strength (which it most certainly has, else why would it want to host another Nation's military in the first place?).
I also include coup-de-tats as there is covert operations which involves using militia or even military of countries where USG wants Government to be toppled. The most recent example is that of Pakistan where there is widespread allegation within the country that USG along with Pakistani military toppled the previous regime. Now whether those allegations are true or not is secondary. The sentiment within the country prevails. So when I said "bad blood" I mean it as a "perception of the people on ground" sort of thing.
> Cyprus, Switzerland, Malta, Scandinavia, Finland, Luxembourg, Spain and Portugal (unless you count them allowing US bases as "militarily involved", but that doesn't cause bad blood so doubt it), Mongolia, Nepal, all of the former Soviet Union (except stuff like paying to get nuclear waste and weapons properly disposed of, which is even less of "militarily involved" and even less cause for bad blood), big chunks of Africa - Morocco, Algeria and Tunis (unless you count Operation Torch to free the Vichy France protectorates in favour of Free), South Africa, Rwanda, South Sudan, etc. Just off the top of my head, and I'm sure I'm missing a bunch even if I might be mistaken on one or two.
I talked about military involvement. It need not necessarily mean the War was not justified. It could very well be justified and it could be fought on the sides of Allies too. However, when a foreign Nation involves in any War to assist another Nation (especially in civil wars), there will always be bad blood created within the Nation as there is one section of the populace who would be targeted by strikes. You can call them "rebels" but for those "rebels" it is an invasion of their homeland. I am sure if I do further research I'll be able to find US military involvement in every one of these countries that you listed in some form or the other. Of the top of my head, US was involved in the Nepalese Civil War where it supported the Gorkha Empire against the Communist Party of Nepal.
> All that to say, there's no need to exaggerate American warmongering, imperialism and neo-colonialism. It has done insurmountable damage to many counties and resulted in millions if not tens of millions of dead, all for profits of American corporations. Exaggerating it makes it more easily refutable and minimises the suffering caused.
Not exaggerating. "Militarily involved" does not necessarily mean going into a country guns blazing. One can always covertly bring about regime change or tilt an ongoing civil war within another count...
Here in Europe we compete over who gets the new US base first. Do you really think we'd rather be under Russian rule and the US had to do anything other than offer us protection that we gladly accepted? We actually fought hard to get the NATO to expand to us in the 90s, against US resistance. Think again.
Nobody is occupying us. We asked the US to come help us. We share culture and way of life. There were no changes about anything in our country other than increased security. Occupation looks different - look at Russian-controlled parts of Ukraine to get a feel for it.
Yes every relationship has a good point and a bad point. There was a time when Pakistan (my neighbouring country) had the best of relations with US. Lasting almost 5 decades. Even allowed US to setup military base so US could fight it's War on Terror. Now they curse US every other day.
It is not a question of whether you are more comfortable living under Russian control or US "partnership". Eventually, in the long run, relationships of this kind sour inevitably. Because there will always be divergence in interests. The moment that happens you will feel "stuck" with someone you don't want anymore but can't do anything about it. Colonization comes in various forms. Setting up military bases is one of them. This bonhomie is good as long as relationship between your country and US is good. What will you do if it turns sour in the future? No one can predict the future. Who would have predicted splitting of Germany? Who would have predicted collapse of Soviet Union? You talk of Europe as if it is one entity "sharing values" with USA. A quick look into European history and you'll see it was always engaged in Wars not just with the entire World but with each other. It's not even 80 years since Nazi Germany came attacking most European countries. Don't forget your history and think everything will be hunky dory going forward. This sort of myopic view is what causes one to become complacent and ultimately end up colonized.
If Europe is so United in its values why was there even a Brexit in the first place? If Europe could not keep the Brits within its own fold you are thinking you can keep America permanently within the fold? US is not there to help you out. It's there only for its own interests. It just so happens that at this moment in time your interests align. That's all.
The US helped us found the state over 100 years ago and was a reliable ally for decades. Unfortunately, for a short while we though the Soviet Union is a natural ally for us, but actually it was them who subverted our elections and later occupied us. We were able to get away (again with the help of US) from their influence and asked the US to come back, which they eventually did and since then have been a reliable ally for decades.
I don't know about the British, and I am not saying there is European unity. My country's partnership with the US is very natural since we share culture and way of life. There's no need to "keep the US within the fold", we simply think alike.
You comparing it to an occupation is simply absolutely wrong. The partnership is of totally different nature. We know exactly what occupation looks like - we had the Nazi occupation, and later the Soviet occupation that ended in 1989 - I remember it myself. Both of these directly changed our governments and tried to germanize or russify us. The US never did anything even remotely similar to what they did. The US came with their military hardware and used it to protect us, never anything else.
This is why you should not look into current day narratives, they are almost always wrong.
It’s good to learn from history, and I would say in Europe at least most people are very aware of the past, and many things are being done to safe guard and make sure we keep the ideals of democracy strong.
In Europe but also globally there is a problem right now of far right incursions, hate, fear mongering and strongman politics. Noticeable here is that Brexit happened under a Tory (right wing) government with barely a slitter of a majority.
That is to say, our own toxic nationalism and entrenchment in the past keeps us from moving forward. We need to build global alliances based on cooperative ideals (and there are many such platforms) and with idea of helping eachother out.
Not to exclude real-politik where nations work only for their own interests, that is pretty much a given, but unions can work, if we keep them working properly.
1. It’s an organized unincorporated territory of the United States.
2. It is neither a state nor a colony (it is an organized, unincorporated territory of the United States).
3. Citizens of Puerto Rico are American citizens, so yes. The existence of the insular cases doesn’t negate that - there are other categories of U.S. citizens who don’t receive the full protection of the constitution.
4. They do not. If and when Puerto Rico becomes a state, they will.
Is basically a nice way of saying it is a Colony. Fact is that it is a Colony. "Unincorporated territory" is a BS term created out of thin air to save the US Government from obvious criticisms. [1] If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. In this case the duck is Colonization.
2. Read 1 above
3. Those "other categories of U.S. citizens" who don't receive the full protection of the Constitution have "opted" for it (for example: members of the military are subject to the Uniform Code of Military Justice, which imposes certain restrictions on their free speech, assembly, and association rights to maintain good order and discipline within the military - however, this is an "opt in" to have individual Rights restricted). They were not "born into it". Residents of Puerto Rico on the other hand are not given the full protection of the Constitution primarily based on where they are born. That is not equality by any means.
4. Exactly. And there was no choice given to Puerto Rico residents if they want to be part of the US or not. Since technically, Puerto Rico was colonized by Spain and then colonized by USA, it hasn't had a referendum asking if people want to remain with US or not. So currently, they are neither here nor there but hanging in between. Neither a "fully incorporated state" of USA, nor a completely free, independent State. Classic characteristic of a Colony.
I would go further and include embargoes and sanctions as falling under the militarily involved banner. That already includes South Africa where I am atm. The world is playing nice with America because most countries individually are rounding errors. But collectively and once they reach a certain point, they won't play nice anymore.
Meanwhile, the US is faffing about with all sorts of internal initiatives that are detrimental and pointless on a grand scale. Every year they are poorer as a country, society and culture.
Just try and imagine how much collective brain-time is spent in the US discussing animal rights, DEI, free speech, activism, left/right politics, gun rights, drug legalization, etc.
That is brain time that could be spent feeding and uplifting the poor, building housing, mobilizing tech and military, building infrastructure and transport and and and.
> Every year they are poorer as a country, society and culture.
Please lay off the news and look at stats. Facts trump narratives. Narratives exist to get clicks. Facts exist regardless of what people think.
That there are people in the US doing things you consider a waste of time does not mean "US on the way down". Go to this chart and click on Max time frame to get an idea of what's been happening with all the "faffing about" Americans have been doing: https://tradingeconomics.com/united-states/gdp
Compare to the Eurozone, China, India, and Africa to get a relative idea. USA, China, and India have been going up like rockets.
> I would go further and include embargoes and sanctions as falling under the militarily involved banner. That already includes South Africa where I am atm
I'm inclined to agree, but you had to provide the one counterexample that actually shows sanctions being legitimately used for good against a terrible human right abusing regime.
> Just try and imagine how much collective brain-time is spent in the US discussing animal rights, DEI, free speech, activism, left/right politics, gun rights, drug legalization, etc.
> Every year they are poorer as a country, society and culture.
Agree, the US is generally on a downward spiral for multiple reasons (mostly political deadlock due to a broken political system, massive amounts of time and efforts wasted on stupid niche issues, exceptionalism making them blind to fighting with problems the rest of the developed world has solved decades ago, economic and geopolitical development in the EU, China, India, Brazil, etc.). However, as of now, and for the foreseeable future they're still the primary military and economic power in the world. However better balance, for better and worse, is on the horizon.
The Wikipedia article presents different sides of the story, and my take is that the USA wanted to carve off the Spanish Empire and would use any excuse for that, a pattern repeated many times.
Not that the USA is unique in that. The point is that there are reasons for the rest of the world to resent the USA’s unchecked power, being wielded by small groups in there often to the detriment of the USA’s general population, as is happening now with de-dollarization.
The USA and its Western European puppets are becoming a much less reliable partner than we used to be, and the alternatives do not look as bad by comparison as they once did.
In this topic, as the article mentions those alternatives are other currencies:
> The US currency now represents about 58% of total global official reserves, down from 73% in 2001 when it was the “indisputable hegemonic reserve,” the Eurizon pair said.
You know Biden talked about it right? And other sources mentioned clearly it was an US operation. Which would not be surprising since the main country involved in this proxy war is the US, in terms of support size and budget.
Because Russia is a trustworthy actor that always acts in a logical way? They literally invaded a one of the biggest countries in Europe with 40 million inhabitants, nobody can be that stupid to think they can forcibly control that much land and humans. And yet, they invaded.
with ample warnings that they would resort to force if NATO continued to push for a regime opposed to Russia on their border.
> biggest country in Europe
Size does not matter, strength does. And the Ukrainian losses are huge, but nobody is talking about it in the news, because propaganda and the media only wants to focus on Russian losses.
when you have a proxy war raging on your border having Finland part of NATO when NATO is already at your border with special forces is the least of your worries
> The US Government has gone to War with or at the very least militarily involved with the entire World except for 3 countries: Andorra, Bhutan, and Liechtenstein.
Which war do you claim that US has had with Sweden?
The US has conducted a variety of military exercises[1] in cooperation with Sweden. Guessing they are counting things like that, because that's the only way you can remotely make sense of such a ludicrous claim.
The thing is they need to sell things to pay for those dollars hence it's free goods for the us as the us does not need to pay for the dollar. Free stuff is always nice.
Well, when the US invaded Iraq, the only thing disapproving Western nations had courage to do is to produce a bunch of unsubstantiated weasel words and empty gestures.
Well it's obviously more difficult to sanction the most powerful country in the world than a much poorer country like Russia. And there is much less reason to do so when you aren't being threatened yourself.
It seems to me completely normal that the US was less sanctioned by "the West" when they invaded Iraq than how Russia was sanctioned when they invaded Europe.
Although the size of the attacker is obviously critical, I wouldn't ignore the choice of targets either.
I'm not American and I opposed the invasion at the time, but it was harder to argue because Saddam's Iraq had very few redeeming qualities, had been waging aggressive wars of its own, and its main role in international trade was as a member of the OPEC cartel.
Whereas Ukraine, for all its problems, is a far more democratic county with far more friends, no history of aggression, and a critical source of food for many nations.
If Russia had invaded Belarus or Tajikistan instead of Ukraine, I doubt there would have been any real consequences.
People like to compare the US (Iraq) with Russia, but the difference is that in the US, you can still vote and change governments. People could demonstrate and did. Newspapers could poke holes in narratives. In Russia there is no choice. It’s Putin all the way with no options for protest.
But not my point. Even if true what you are saying (and not saying either way) , I could still do a hundred things I could do in protest or as agent for change as an individual or as a group that I cannot do in Russia.
Yes it does, and it has nothing to do with ego, and I am not at least emotional about it. Let’s turn it around, so there is absolutely no distinction between Russia and the US?
So let’s demonstrate near the White House and the Kremlin. I assure you both outcomes are different. Let’s set up a fund that allows me to criticize the government, pretty sure I can do that in the US, and good luck doing that for Russia.
You get the idea. There is definitely a difference.
> Let’s turn it around, so there is absolutely no distinction between Russia and the US?
This depends on what one finds importand and what not. My wife says, for example, that there is no difference except for nature, climate and a few minor thigs.
I say - there is more than a few differences, but still two countries have more in common than people think.
>let’s demonstrate
>I assure you both outcomes are different.
If the result if the same (the government changing or not changing its policy or decisions) than there is no difference.
Yes in one scenario you may end up dead (and not necessarily in Russia) but this is not what's important here.
> hundred things I could do in protest or as agent for change as an individual or as a group that I cannot do in Russia.
yet I fail to see any single example in recent US history where citizen action has been able to stop a war in foreign lands. They were not even to stop an actual invasion of Iraq, so let me question the point of potential protests.
> If Russia had invaded Belarus or Tajikistan instead of Ukraine, I doubt there would have been any real consequences.
You don't need to speculate. There were no real consequences when Russia invaded Georgia, and that's even a democracy, although unfortunately too small to be relevant.
It was a special time. The US still had a lot of sympathy from 9/11 and yet it also burned a lot of credibility that day. Invading Iraq or its equivalent would be a hard sell today, with not only the "the West" but with its own population.
Lots of people, perhaps. But not enough. Or not enough media coverage to reach enough people.
I was there marching in DC and even my close friends and family (in suburban DC) seemed to be unaware of the protests. I thought, surely, with 100,000 people protesting in the city, Black Bloc hanging from streetlights, speeches from celebrities, Jesse Jackson, a former Defense Secretary, etc., that it would pop up on the local news. I never heard about it.
I think that was the last time a media "ignore" could be really effective. Today videos would be shared online. I read in the papers that people demonstrated, but the numbers were downplayed in the reporting IMHO. Someone should dig up some photos and compare with news articles from that time.
The idea is that the representatives of yours only do things against your wishes when they don't know what you wish for or you are in too tiny a minority for them to care. So, you make it clear what you want (or don't want) and get lots of people on board, especially ones that can influence even more people, and that causes you to be heard by the representatives, and then they (well, at least some of them) change their agendas to align with whatever it is you want (or don't want).
At least that's how I understand the idea.
It obviously doesn't always work, and in some cases simply cannot work. It does work sometimes, to an acceptable degree, but often it doesn't.
It's like gambling. You win a bit and you start overestimating your chances to win more. Here, too - you petition local authorities to put a speed limit on a road near an elementary school, you "win", the speed limit is introduced, and now you think you can do the same to influence the massive, incredibly complex system of hundreds of millions of people, the machine that's steamrolling through geopolitics and history full-speed ahead. Of course you can't - that's work for decades, generations, thousands of leaders, millions of supporters. But, nobody wants to put their whole life behind what they want (or don't want), sacrificing their well-being for uncertain result 40 years down the line. Nobody wants to be a Stallman - he reads web pages by sending an email to home server which cURL-downloads the page and sends it back to him to read... in lynx. How many people are willing to go through so much inconvenience just to state a point? And do so for decades?
So, instead, people go protest a bit, virtue-signal their discontent (or support) on social media, get into heated discussions at family events - and then go on with their lives.
The basic premise is good: people don't change their views easily, so to make a change, you need to exchange people. It's good on a local scale, but it totally breaks above that level, in multiple well-researched scenarios, most of which happen to currently, and concurrently, play out almost everywhere. Normally, we'd have a war - a serious war with tens of millions of casualties - that would cut off the bloat and really reset (though leveling it would take some work, given all the bomb craters) the playing field. We don't, and won't, because of nukes. I honestly have no idea what's next - I just hope that I'll die before the more dystopian future arrives.
> Even at the time it caused some of the largest anti war protests in history
I often see this mentioned and I don't really get it. What did people actually do besides voicing their concerns and cozily waiting for the next election cycle?
Oh wow, people understood that their country is waging a war on the other side of the planet, hooray! What did they do about it exactly? Look at Assange's sorry state.
At least Russians had balls to burn some military enlightenment offices.
Western protests (except French, French are cool) are basically fun festivities.
What makes me cringe is the fact that people pose as this is some kind of a virtue. C'mon, these people live in an environment where protests are not only unrestricted, they are endorsed to some degree as a vent-out method that allows people to feel good about themselves, and governments to continue their bloody business, so people can simply excuse themselves on the next election cycle, while profiting from the spoils of war.
The US is still paying for that in terms of reputation. There is a reason a whole lot of people, even overseas, initially doubted the reports on Ukraine.
I simply don’t buy this. There’s a difference between the US’ actions towards Iraq and stating that a Russia was going to launch a campaign against a country it was already involved in a war with and had already stolen land from. It being not believed, and especially that being due to Iraq, is a Kremlin talking point.
Well, I don't know what to tell you. Whether it makes sense or not the US does have a reputation of warmongering, and I do think it's reasonable to still be bitter about Iraq if you live in a country that got pulled into that war for no good reason whatsoever.
de-dollarization is mainly happening with China, and it's only because Chinese economy is crashing fast (50% real estate price cut in matter of months, 100k+ housing inventory for sale in major tier 1 cities, 80% factory order decline from foreign companies), and it needs to have access to dollar to pay back its huge debt - 400% debt to gdp, and Guizhou just became the first Chinese province to declare bankruptcy last month.
yes. the covid lockdowns were just a tip of the iceberg, which was of course also happened to be on fire, and everything around it is on fire too.
the service-goods shift during COVID and the shiftback after, coupled with the energy and food price shocks due to Russia-Ukraine war, definitely did not help the Chinese economy, that was already faking a higher GDP growth to paper over the cracks.
geopolitical tea leaves reading experts point to the aging population of China as a massive problem (again coupled with a lot of factors that make it a worse problem than it would be with a relatively open society, etc.), the limits to efficiency gains from centralization and big infrastructure projects (only so many miles of high-speed rail have positive ROI, only so many big dams make sense, etc), and - again - the cost of maintaining the authoritarian state.
The OP speaks of tea leaf reader, which makes this a secondhand reading of tea leaves. Reading tea leaves is essentially writing fiction - is this not how the comment was meant to be read?
China does not have aspirations for Yuan to become a world reserve currency, because that would imply opening their economy to outside investors and run deficits. They want to retain control over their economy while decreasing their exposure to the dollar, so what they do is try to trade in Yuan with their direct trade partners, and any trade imbalances to be settled using gold via the Shanghai stock exchange gold futures contract.
aka, china wants to have all the advantages of a reserve currency, without suffering any of the disadvantages (yes, there are disadvantages that the US suffers from the dollar being a reserve).
I wouldn't say they would have all the advantages of a reserve currency. They will still have to find a way transform the foreign currency they accumulate into useful stuff. I think their primary concern is avoiding the dollar, since they quite a big exposure to it, and after they have seen what happened to Russia, their not too keen on maintaining the status quo.
> because that would imply opening their economy to outside investors and run deficits.
And investors ultimately choose what the priorities of the organization are…
So that means this is probably “what happened in 1971” that decoupled labor from productivity — the US ceded labor sovereignty to the “market” that is global capitalism and “the market” started treating labor as a global market but with proceeds only going to capital owners.
> Guizhou just became the first Chinese province to declare bankruptcy last month
This is false, which is sad considering you're calling someone out for being wrong.
No province in China has declared bankruptcy. You're probably conflicting this from reports from questionable sources that it might happen given Guizhou's debt and poor finances, but it didn't happen.
Isn't the Chinese Yuan pegged to the US dollar though? Therefore isn't it just a derivative of the US dollar?
It's been clear for a while that China wants to increase the dominance of it's currency. The belt and road initiative and the digital renminbi is part of that.
The swift sanctions were an accelerant, not a catalyst of de-dollarization. It was no coincidence that Russia had substantial gold reserves at the time of the invasion.
The relative strength of the two economies is really what matters, and sanctions + tariffs are a double-edged sword, the deeper you impale other countries, the deeper you impale yourself.
It started decades ago, this is not new, many pretend to have "predicted" it last year because it was more obvious and because the press started to talk about it
I shared multiple articles on that matter many years ago on hackernews
This one gets me banned, but i'll share it again, this is why the CIA/FED started the work on bitcoin and help spread the cryptocurrency fad, to crowdfund the tech they'll use in the post-dollar world, the digital fiats, it won't matter if the USD is dead if you control the networks
Yeah, I'm skeptical that the world has forgotten overnight that China is the posterchild of currency manipulation. I'm also skeptical that Russia's economy isn't entirely smoke and mirrors at this point.
Effectively, banks not in the US denote debt in dollars. The “dollars” in circulation outside the US is massively larger than the domestic supply.
“de-dollarization” is not going to happen any time soon, really. They aren’t even true “dollars”, no money or assets move. They’re completely created outside the US.
That chart is... bad. I'm not sure if there's a legitimate reason to represent the data as "percent change from Q2 2004" or if it was done intentionally to make the comparison to other currencies look worse. I don't have access to look at the data in more detail because the only way to view the full report[0] is to email Eurizon SLJ Capital.
I pulled the data from the IMF for a better chart that shows how the currencies actually relate to each other [1]. Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency.
>Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency.
The bulk of the "diversifying their portfolios" is being done by China. The de-dollarization happening in other countries is a rounding error.
Generally it is misleading to talk about the rise of "BRICS" and the "Global South". In most contexts it is only China that is relevant and the other countries are rounding errors.
> diversifying their portfolios, not fleeing the dollar for another currency
Aren't these literally the same thing? Selling dollars and buying something else is dedollarization, regardless of whether it's for diversification or some other reason.
If there’s nothing replacing the dollar as the dominant global currency then yeah, it’s a wildly different story. One is a story of diversifying investments so that your country’s wealth isn’t tied to a single country. The latter would mean a global shift in power with massive geopolitical ramifications.
One empire can crumble into nothing without another empire immediately taking it's place. Previously the rest of the world tripped over one another to put all their eggs into our basket. Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios.
The exact same sentiment was had last time. The consequences from these shenanigans last time had very little real impact - a _very_ slight increase in interest rate on treasuries.
And i predict that this time, at the last minute, the bill will pass again, like every other time. Unless the republicans truly believe that it's worth going down with the ship for.
The US Republican party, as with all parties even in America, has a continuum of members.
Some would be fine letting the US default if their demands aren't met (e.g. Tea Party types).
Others not so much.
One difference this time is the amount of trouble the House Speaker had getting elected by his own party, and any closed door concessions related to that were very likely promises around budget and the debt ceiling.
>Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios.
From who exactly? Most of developed and developing world is facing demographic collapse over the next 50 years.
The US is the largest energy producer, one of the largest food producers, the most dominant military, has relatively stable demographics and has no trouble assimilating immigrants, etc.
The first is a necessary step for the latter. There's a reason pundits have been talking about a multi-polar world for 20 years.
No country is currently strong enough to cement its position the way the US had, but the move away from the dollar will hurt the US a lot, by limiting the Fed and increasing inflation. It also enables other countries to have a foreign policy more antagonistic to the US, it takes away a good chunk of leverage.
no, the move away from the dollar will not hurt the US.
Exchange rates are the net result of trade in goods and services (and capital), it's the bottom line fudge factor that makes trade work. If a country imports too much, its currency drops making foreign goods more expensive slowing imports. If it exports too much, its currency rises making its goods more expensive and slowing exports.
If the US imports a lot, it sends dollars overseas. If the foreigners want to invest in the US economy, those dollars come back in exchange for assets and the value of a dollar is not affected. If the foreigners don't want dollar denominated assets, they just buy their preferred currency instead, sending the dollar down. (In the case of investment, the US for most of its history ran a huge trade deficit. It was not a problem because economic growth meant foreigners wanted to invest here. Much of the trade deficit was caused by the purchase of capital equipment, used in driving the economy)
People who are thinking about exchanging currencies are not doing it on whim, they are doing it for underlying reasons that have to do with economic activity, productivity, long term investment opportunities, etc. These things carry currency denominated prices, but those currency fluctuations do not affect the rates of return of the investments, rather those currency fluctuations are how the books are balanced and change the rates of ebb and flow.
> no, the move away from the dollar will not hurt the US
I doubt that. The US has been able to both support a trade imbalance and print money at prodigious rates that would be unsustainable for any other country.
I remember articles from economists pointing this out going back to the eighties.
One important reason for this is that not all dollars the US prints inflate the local money supply. Instead, they go out into the world where they are used by other countries to trade amongst themselves, without US involvement (and reserves).
It's like writing a check that is never cashed. Cool if you can pull it off.
You mention foreign investment. Well, if the value of the dollar goes down, because demand for those dollars is lower, those investments also become less attractive. Could cascade.
+All that debt will become 'real'. We could look to UK and see what happens to a nation post (currency) empire. But a word of caution here regarding the analogy: the new empire (US) were allies of the dethroned empire (UK). Come US's time, it is doubtful that the new power will be a Western power. So US will have a harder time than UK and things have not gone well for UK since WW2.
Zombie International Currency: The Pound Sterling 1945-1973, 2021:
You are not wrong, but you are missing an element. The US dollar's position as world reserve currency and preferred exchange currency artificially increases the value of the dollar. A big part of the reason that the US has been able to run a trade deficit and still maintain a strong currency is because there is demand for the currency, itself. People need dollars to use in their international trade, and countries hang on to them for their reserves (stuffing them in the figurative mattress). If people stop using the dollars for international trade, and countries start pulling them out of the mattress rather than stuffing them in, there will be a glut of unwanted dollars on the international market. As you point out, this will drive down the price of the US dollar, significantly weakening it as a currency, thus driving inflation in the US and hitting the economy HARD. Eventually, it may stimulate US exports, but things are going to settle out with Americans much poorer, overall, as their currency is no longer artificially supported.
>no, the move away from the dollar will not hurt the US.
This is wrong - as you point out. When people don't need dollars except to buy/sell from the US, the dollar is a less attractive currency to keep around.
Actually one of the main (the main?) pillar of Dollar hegemony was the USA-KSA strategic agreement for mandating the use of US Dollars for energy transactions. This is all early 70s geopolitical actions that had and continues to have significant side effects, including dropping the Shah of Iran* (and embracing KSA instead). For many nations, holding Dollar reserves is/was for buying oil and gas.
* From [1]: “Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.””
The rise of Islamic Jihadis, financed by KSA and trained by CIA, propagation of Wahabism, tolerating the replacement of a secular ally in Iran with Islamist revolutionaries, ..., are all the direct consequence of this strategic shift by the USA. This is all in the context of post-Vietnam debt, rise of OPEC, and a still very menacing Soviet Union.
The Shah had made the error of thinking that by not joining the oil embargo of Arab states he was proving yet another reason (beyond being a forward Western block allied barrier to Soviet Union’s access to the Persian Gulf) for being considered a strategic ally to US. Nixon and Kissinger publicly and privately also assured of Iran’s importance. But what actually happened was that the oil embargo demanded a reassessment of the value of Shah of Iran to US. It was seen that oil and Arab producing nations’ alignment was far more important than any value Shah’s Iran was providing as a bulwark against the Soviets. The Brezhinski doctrine effectively addressed the means of filling the vacuum: Islamic Fundamentalism.
some linger in centuries long decline, some collapse overnight
Well, imho, this question hinges more on the calculations (and subsequent actions) of US's allies rather than the counter-organizing efforts of the rebel states.
I get this seems inconceivable to those involved and so thoroughly permeated with oil == power dynamic of the 20th century.
But it's interesting this particular "power center" of the world (US dollars for oil) is weakening just as oil's grip on the world is weakening.
The world was totally beholden to oil for what, 100 years?
But everyone with a brain sees that oil demand is going to plummet with EVs and wind/solar to recharge them ... and domestic reserves will likely cover the remaining demand. The political power dynamic of the petrodollar has ... what ... a decade? Or it's already dead?
Power and economic productivity is/were hand in hand. The geopolitical dominance of oil provided direct political dominance over everyone's economy.
But Solar/Wind/EVs are largely independent of geopolitical control. Yes China appears to be dominant in EV production, batteries, and solar cells, but it isn't the ironclad grip of "we have oil underground you don't".
EV drivetrains are simple, everyone can make an electric motor. Viable EV battery chemistries are proliferating and also becoming immune to cobalt, nickel, and even lithium supply constraints. Anyone can make a wind turbine, and solar cell production will likely plummet in cost and diversify in production if/when perovskites and other non-silicon panels hit the mainstream.
But likely we are headed back to a cold war alignment, or even more fascinating, a tri-power alignment (EU, US, China), and economic alignment will be replaced with the good old protection racket of the Cold War.
Oil will probably remain as a military energy source. But likely everyone will be able to solve gas production with, at minimum, biofuels.
I didn't realize this until I came across Nate Hagens work on Oil/Gas, etc. He's got a PHD and extensive research expertise on oil and natural resources of the world. He's telling us, oil is absolutely pivotal for global GDP. Furthermore, what I found interesting about his works (very surprising): reknewable energy sources are not independent of oil, they depend on oil just like everything else. and he's got some rather stunning discoveries on oil and GDP.
Thanks for the ref. I've seen this precise thesis elsewhere (have to dig it up) and both make a completely persuasive case of centrality of energy, mainly hydrocarbons, to basically everything. (In the video below) Hagens also introduces the credit side of the equation (which is perfectly topical for this subthread).
What is interesting to me is how ignorance of the actual issue -- our civilization now depends on continual growth that we can not sustain -- shapes the discourse of alternatives to global regime du jour (with the so-called multi-polar model as the 'solution'). This would be nothing more than rearranging the chairs on the Titanic. No one is discussing alternatives that address the credit-interest-growth regime. This is the 'sacrosanct' dimension of the problem, and no one in polite society wants to touch it, anywhere.
What dependence on specifically ground-drilled fossil fuels are there in alternative energy? Aside from the fact that current grid powering the construction/manufacturing of it is currently still a lot of coal / gas turbine.
As in, I get there are current dependencies, but what is it fundamentally about the wind turbine's parts is beholden to ground-extracted oil? Plastics/fiberglass (should be replaceable)? The electric dynamo because of needed heat in metallurgy/refining?
For solar (silicon solar cells specifically), again, what is it beholden to? Silicon? Etching chemicals?
I can see oil still being used for lots of industrial processes (and plastic production), but ... EVs are going to drop a massive amount of demand for them. And while plastics suck for lots of reasons, fundamentally plastic is fossil fuel carbon that has been sequestered in a durable long-lived form.
I'll check it out, but again I wonder if the dependence is due to someone "growing up" ensconced in a petroleum world not realizing the full path forward that will eliminate so much of it, particularly the massive scale of burn-into-CO2 part.
all i can tell you is he's interviewed experts with deep extensive knowledge of how oil is used. there's one interview with a guy where the guy explains in details how all the parts of oil are used for over 45 min! most of it was over my head. some of his videos do go into great detail about how reknewables can't take the place fully. I think part of it is that wind and solar are too intermitent and that, that greatly limits their applicability.
> A big part of the reason that the US has been able to run a trade deficit and still maintain a strong currency is because there is demand for the currency, itself
No. It's a measure of much foreigners trust the Us economy and it's political and judicial system. What drives the demand for the dollar is the will of people to invest money in American securities and on the American capital market.
Chinese investors invest on the Chinese market in Yuans. Rich Chinese investors invest on the US market with US dollars.
>> because there is demand for the currency, itself
> No.
Actually, what the OP wrote is true: the use of the dollar as both a reserve currency and as a trading currency between non-US countries means there is a demand for the currency itself without actually wanting to buy goods and services from the US or invest there.
What you describe, investing in the US, also happens. But it isn't the only thing that happens, the demand for dollars without such investment also happens, and as far as I know is the larger part.
If it didn't happen the de-dollarization that the fine article talks about couldn't be happening.
If country A trades with country B, it'll either get paid or pay with country B's currency. Country A might not be interested in country B's currency, so it can use the US dollar and a US institution as a proxy between the two. But that doesn't do anything to affect the value of the three currencies. It's simply a matter of convenience (these US dollars get exchanged back into currency A or B seconds after being purchased).
What matters is how confident people are of their respective government, laws and institutions compared to the US. Would they prefer to hold assets in the United States or their own country, or country A or B.
Once again: no, they are not (just) holding US assets, they are also holding currency in order to trade.
And no, your idea that they change money into dollars, execute the trade and then change right back is an interesting theory, but not actually what happens.
Let's assume you wanted a route to send/receive money from Russia now, you could do so via India - a country in the good books of both Russia and the West.
You point to a sanctioned country where India has no choice but to figure out a new system and a move the the Yuan, a currency pegged to the dollar (so still trading in dollars, just in a really convoluted way). Not sure this shows anything?
Yes, but there's a difference between a shift of power from one entity to another and a shift of power from one entity to many entities (distributed). That's what the people above you are saying.
Yes, I expect that this isn't just de-dollarification, but a move away from any over-weighted dependency.
I.e. countries reserves will move to diversified portfolios of currencies and assets (gold, etc.) that minimize general financial risk, but also foreign economic-political influence.
I don’t think so, for example if you use dollars to buy Apple stock you are very much still long dollars because a big part of Apple’s valuation is their enormous dollar reserve including t-bills. If instead you used it to buy say Chinese real estate you could say you diversified away from dollar.
is there any data that shows the movement of the new monetary value? my guess is that, for any economy, significantly cutting down the role of the dollars requires cutting down participation in parts of the US economy that are proxies for the dollar. so, for example, china could decide to acquire lands or farms in the US. that's not necessarily long dollar. they could be buying resources in different parts of the world as well.
I'm in no way suggesting one invest in Chinese real estate.
Governments with xenophobic and nationalizing tendencies tend to be poor bets for private investment. Picking up pennies in front of a steamroller, etc.
When I posted this many of the comments were about how the Chinese currency was going to replace the dollar, which is the story the chart on Bloomberg was trying to tell. So that's what I meant—no single currency is replacing the dollar. Countries aren't fleeing American economic hegemony and running into the arms of the Chinese or any other up-and-coming hegemon, they're leery of hegemonies in general.
It's not that there's not a story here, it's that the chart they used wildly misrepresents what the story is.
(EDIT: In fact, as I write this the second highest comment on the main thread[0] is speculation about the Yuan becoming the world reserve currency, which is a reasonable line of thinking if you only look at the Eurizon chart and don't realize how misleading it is.)
If you're from the US, then they're the same thing. For the average person (again, from the US), it means an inflation rate more directly coupled to money supply (i.e. the opposite of how it was in the past; some of this is of course already very evident and has been, for about a year and change--modern monetary theory notwithstanding).
Also I think people are confusing the two uses of the dollar: one as a reserve currency (money in your mattress) another one is for international trade
It seems it's the latter that's most affected (as per the link 1 you posted)
> While the Global South seems unwilling to continue to hold dollar assets, they do not seem to have the ability to divest from the US dollar as an international currency, particularly for financial transactions. We suspect it will be very difficult to overcome the strong network effects that have been behind the dollar’s international currency status.
An issue with dollar as international trade currency is that all transactions are performed via US banks. And US is not a reliable party anymore, because they could freeze your accounts or decline your transaction if they don't like something about you. So governments which want to have some degree of freedom and independence in their actions will naturally move to other currencies.
Good alternative could be a P2P currency which does not require any particular center to handle a transaction. Switching dollar to ruble or yuan does not seem like it could change something drastically.
Though I don't really understand why governments need a single currency. Just use your own currency and exchange other currencies, it'll settle down eventually.
The problem is it doesn't. It does balance out if you're a big wealthy nation with imports and exports. If you're a small poor nation with limited resources, money only ever flows out, and barely ever in, depleting the nation's treasury.
Often things like IMF loans that massively burden countries with debt to first world countries - with the money mostly going into infrastructure for extractive industries like mining so the countries who indebted them can buy their resources cheap, and also get to suck extra money out of their economy for the interest payments. These kind of things often just happen to end up that the people of a nation end up with the burden of the debt, austerity, etc. while a smaller group of well connected people and companies end up with the benefits.
US trade balance is negative for decades, exactly because dollars go to developing countries (in the form of direct investment and also as the classic paying for things, and also because tourists leaving hard cash at the locals)
IMF loans are better than austerity. and structural reforms as conditions of IMF loans are better than selling natural resource extraction rights for 99 years to private companies.
are these development programs perfect? of course not, but the mindless and ignorant vilification is just propaganda at this point.
These vilification are propaganda, likely covert operations from places like china or russia.
The IMF is no saint, but they at least is looking to improve things, despite not acting altruistically. Their loans are contingent on economic reforms - e.g., Pakistan's default is in part due to state subsidies and inefficient tax allocation, etc. In the short term, reforming these things looks like causing of suffering for the population, but so does alcohol/drug withdrawal. In the long term, it produces a better economic outcome imho.
Contrast this with stuff like the Belt and Road initiative.
There’s nothing stopping a non-US bank having a vault full of actual US currency backing its US-denominated accounts. And settling transactions by sending physical cash on a plane. It is more expensive than using a US bank which makes it much more electronic, but has the advantage that the US government cannot stop it except by shooting down that plane
>Though I don't really understand why governments need a single currency. Just use your own currency and exchange other currencies, it'll settle down eventually.
Because commerce is much easier if everyone uses the same currency, plus the more countries use a currency the more stable the currency gets. This where two big reasons why in EU most countries decided to use Euro.
It's not that commerce is easier: currency exchange is pretty frictionless nowadays. It's that the value of inputs and outputs, which are critical to running a company doing part of its business abroad, or buing inputs from abroad, is much easier to calculate without having to account for exchange rate fluctuations.
I'd put it is that conducting international trade in a single currency is more systemically stable.
Iow, the currency's ubiquity and total amount buffer shocks to the system, in a way that multi-polar currency use could not tolerate.
If some folks decide to break {insert smaller international currency here} because they think it's overvalued and they don't use it, they probably have the means. But it's difficult to tip over a world-economy sized apple cart.
And a single trade currency also mostly keeps nation-states out of the currency warfare game, because it's a gun pointed back at their head too.
> Though I don't really understand why governments need a single currency.
"need" is probably too strong a word. A single currency just makes things easier.
Having a single currency, or using many different currencies is sort of like the difference between a barter system vs a money system (multiple currencies is equivalent to bartering). If the buyer is trying to buy in a currency that is not desired by the seller (i.e. there is nothing that they want being sold in that currency), the seller has to offload it somehow to someone that does want it. There is a cost to that, in additional risk and effort.
Bartering works ok, up until a point. But a shared currency just removes friction, so is preferable.
only that those two are intimately related.
Countries don't hold US treasuries because they're great investments (..... obviously). They hold them BECAUSE they have liabilities in USD BECAUSE their international trade is in USD, and having to covert their local currency to USD not only introduces a currency risk.
The world financial system is also organized to make local currencies of poorer countries depreciate over time, more than the USD does. Just like inflation is a silent tax that robs wealth from the poorer stratums inside a country, faster inflation/depreciation in the global south than in the north does the same on a global scale; it's a means of exploitation. Holding USD treasuries protects against that, at least a little.
The fall in USD use in world trade doesn't immediately translate into an equivalent fall of reserve holdings because the trade isn't the only reason they hold them. The other big one is serving international debt, also in USD (for.. the same reasons as above, again an exploitation mechanism). So even if you stopped ALL trade in USD tomorrow, countries would have years' worth of USD denominated debt to pay off (which, of course, never pays off, because just like student loans, it accrues fees and interest and will never be paid down under "normal" circumstances, just rolled over).
So there's a second change to watch: the change in debt denominated in other countires' currencies. It's a slow moving train.
I dont thinks its a means of exploitation in the sense that controling inflation is not something anyone has mastered in hundreds of years of trying all kinds of things.
Inflation is a consequence of the conditions that permit economic growth (fractional reserve banking / currency creation, credit extension / investment / speculation).
We could "solve" inflation tomorrow, but we'd also be zeroing growth.
Ergo why the usual target is a small but acceptable bit of inflation. E.g. the US Fed's 2%
Note the reason the dollar works is that USA past wwII became the number one importer due to the baby boomer generation of consumers. Past the demographic shift, i.e. when Z gen become full time consumers, the country that has the most of those is still the USA, followed by Canada and Mexico.
So its somewhat a false narrative on those basic facts.
When you can't intermediate in dollars (sanctions) you don't intermediate in dollars.
Sometimes, you want the explosives or oil more than you care about price.
The question really is, what % of world economy will be de-dollarised in 25 years time, assuming sanctions at scale end in 25 years (they haven't for Iran. Uk and Us still hold bank assets and have unfullfilled but fully paid up weapons orders on the books from the 1970s.)
I would be surprised if there isn't a significant grey market at world scale in goods transfer which simply isn't denominated at all -The "fictional" value of drugs for instance, is almost meaningless when randomly 75% of your supply chain is lost at sea. "street price" is whatever you can get. How much it's "worth" would demand somebody does realistic pricing against the % of drug supply which even resembles what it's called.
Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Does Russia really care what currency its denominated in, if it gets a truckload of SAM missile parts?
If you were supplying goods and services to a narco-economy, what currency do you really want anyway? You can buy goods and services with drugs. Why bother with money?
> Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine.
Not really. Trade continues at a lower pace. Many countries "launder" the origin of Russian oil. And the western world turns a blind eye because of economic interests.
Just to be clear, there’s a reason this chart cuts off in mid 2022.
What the authors are doing is saying “well the dollar is stronger vs. other currencies. Let’s equate that with those other currencies being worth more in our hypothetical baseline.”
This is a bad analysis because
1) exchange rates aren’t like inflation. They move in random directions, so “correcting” the way they did is sort of nonsensical (if they extended the analysis to now, the US would be rapidly gaining share as the currency weak waned)
2) Currencies change value due to supply and demand. The dollar became strong because demand increased, but in this model that causes the dollar to lose share.
3) Add Argentinian pesos to this list and it’s the worlds true reserve currency.
Competition in the currency space is good just as it’s good for tech to have competition.
But what it means — if the dollar really is waning in influence — it means tough time for the soft power that the US and it’s banking system is able to exert on other nations without firing a single round.
Wonder how far the US is ready to go to keep that tool functioning. Will we soon see it sabotage the EUR ?
USD is such a fundamental leverage for the us diplomacy, i don’t think they’ll let it go without a fight. The end of USD hegemony would also probably mean the greatest economy crash since the 1920s…
Soon? It's already been happening. This a main thrust of opposition to Nord Stream, as the Euro was essentially a "petro"-Euro for cheap Russian gas that Europeans had control of.
Also, Saddam Hussein switched to the Euro for his oil exports in 2000. Then later the US invaded and switched it back to the $.
Low-key maneuvering against the Euro has been ongoing for years.
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[ 3.2 ms ] story [ 312 ms ] threadhttps://www.amazon.com/Bitcoin-Standard-Decentralized-Altern...
And any book with a [edit](foreword) by Michael Saylor, the man whose fraud basically popped the 2001 tech bubble isn't worth the paper it's printed on. The man should have at the time been banned from running any publicly traded company. [1] [edit] What's next, a medical ethics book by Elizabeth Holmes with a [edit](foreword) by Martin Shkrelli?
[1] https://www.computerworld.com/article/2589923/update--micros...
Not that it would be good, because it has a bunch of obvious problems, many of which would occur with gold too. Of course many commodities are used instead of currency by blocked countries. As are cryptocurrencies.
Also I think you meant to write "foreword"
Obviously the store of value part pushes up price, but there is also a big need for gold in electronics and jewellery etc. Bitcoin at the moment is largely speculation and has little use beyond that currently, though has potential to become an active currency of significance, we are yet to see that.
Nobody in North America or Europe knows how to get the fair value of gold in the crappy 14k necklaces.
USD is useful because it is a meaning unit of exchange.
If a marginal producer can generate a kilo of gold for $60k, then gold is worth around $60k/kilo. Its uses or lack thereof are not that important. If all the uses of gold went away magically, it'd be worth less for various reasons but still a similar order of magnitude.
The euro is an extremely young currency which lost almost 1/3 of its value against the USD over the past two years.
…at a time when the dollar saw the worst inflation in 40 years!
Two years ago on this day the exchange rate was ~1.2 USD per 1 EUR, today it is ~1.1, so the loss is ~9%. The current exchange rate is nothing extraordinary, and has been hit many times in the past years/decades.
My main point still stands though. Take a look at the historic volatility: https://www.macrotrends.net/2548/euro-dollar-exchange-rate-h...
The exchange rate ~2010 hovered around 1.5 and recent dipped as low as 1:1 party.
Compare that to something like the Swiss franc which has actually appreciated against the dollar over the same period and has a much longer history: https://www.macrotrends.net/2558/us-dollar-swiss-franc-excha...
Some currencies, like Swiss Franc may outperform EUR, but are not suitable as a large scale reserve currency.
It’s too volatile for my taste. It observably performs poorly during times of panic. Almost all global trade is conducted in dollars. Inflation is much worse in the EU than the US.
The ECB just follows the Fed, except worse. They maintained negative interest rates for a decade!
Can you make a case for why the euro should be a reserve currency?
American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)).
Looking at it from a strategy or top level point of view of course it looks like dollars are dominant, but from a customer point of view - and the US trade deficit its easy to see why: You have a customer base that is profitable, and a large amount of them. Far more than any other country. It is just very hard to get an alternative to an American consumer.
The poor rate of savings, the spending of more than you have, etc results in a pretty good deal for the person on the other side and the manifestation of it is in the accumulated dollar capital
It depends on where you are established or what markets are you serving.
Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible.
So if you plan on going real big and disruptive, possibly like Huawei was, going for the US market domination doesn't seem like the best idea.
All you have to do is not be a foreign state-controlled company and not try to circumvent sanctions to known bad actors.
Case point: Ericsson and Siemens have no issue selling in America.
Even if the demographics changes play out the issue is the growing economies are consuming out of investment and not capital, and do not run trade deficits (so the other party doesn't have Yuan saved up for example). So there is nothing to reinvest. Almost every country China trades with has a trade surplus with China. Which means everyone is buying from China and they don't save up Yuan, but save up the other countries currency.
He told me an amazing fact that still amazes me. The two biggest customers of china's exports are (explicitly in the following order):
Walmart
The United states of America...
*in that order*
To illustrate one potent example - Bollywood is magnitudes larger of a movie industry (even adjusted for population), however the collections in $ vs ticket sales paints a very different picture.
The issue with Bollywood for example not being larger than Hollywood despite more films and possibly a larger view base is the price of North American tickets vs the cinema ticket prices in India for US films - even if they are made abroad that are sold to US consumers. So in aggregate the US consumer alone is quite significant in dollar (but not in individual people) terms vs everyone else.
If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries.
Yes correct. And this is not a good thing even for US. Since the consumption economy in US is driven largely by debt, what will happen when there is a default (which seems very likely to happen soon considering how US banks are collapsing like dominoes)? Who is going to bail out the US economy? Sure you can bail out banks when there is a banking crisis and is localized to only the banking sector (like 2008). But what will you do when there is an economic crisis that affects everyone? That is the real issue here. US National debt is at an all time high and is not slowing down. QE is still on full swing. One day it is all going to come crashing down. With de-dollarization, the strength of the US economy shifts from being able to control international trade and also drive up its own internal debt to finance World economy (by providing much needed liquidity for international trade through its SWIFT systems) to only having to drive up its own internal debt to finance US economy (which has all the potential to lead to runaway inflation). This shift is going to happen in the coming decade or two and I hope US Citizens are aware and prepared for the fallout.
That's why there's the recurring scene of Democrats and Republicans fighting to raise the debt ceiling.
One day the US will crash and burn, but I'm betting you a dollar it won't happen in this decade or the next.
I am willing to take you up on your bet. My answer to your point is quite simple really. Consumption is going to slow down massively in USA over the next two decades because of Demographics. By current statistics itself, there is a major decline in young population in 70% of the counties in USA [1]. The median age in USA is 38.1 years. So 2 decades from now, this median age is going to shift to 50-60 because birth rates are plummeting big time. Unless US can produce more babies it is going towards an ageing society (like what Japan is experiencing right now). So when consumption falls, economy gets sluggish and that would cause downturn again. I wouldn't be surprised if the next two decades ends up worse than the Great Depression of the early 1900s considering how badly managed the current recession is.
[1]: https://www.census.gov/library/stories/2022/06/fewer-younger...
The death by demographic would have happened a long time a go in the US if it was not for immigration. Japan has not fared so well.
Theres a reason the south of europe has massive population drain as well as the demographic issue you're describing.
For comparison, the great depression had >20% unemployment and -15% GDP
Anyway, let's reconvene in 20 years :)
Let me spell out my prediction for posterity:
> The US will not default on its debt in this decade or the next, and the economy will not have a crash worse than the great depression (-15% GDP and unemployment above 20%)
Sure there is a Yuan denominated market, but when it comes to consumption it is a kitten relative to China's size - because most Chinese consumers opt to not spend their money and save it instead - relative to an American consumer. And the outcome of that is in China you would on average have more savings than an American, but an American would have bought more things if everything else were equal. But on the Americans version of it those dollars they spent are saved up by the vendor and show up on stats vs everyone else and they are larger.
There's a reason it is hard to fill container ships heading back to China.
It is easy to sell to a Chinese audience in America, Europe, etc. What is almost impossible is getting Chinese people to buy your thing selling from abroad. It's possible but its out of the realm of easy by far.
And that is the point, an American consumer (even a Chinese migrant) is easily and far more profitable than targeting China directly (so you export to China from another country). And if its not infant formula, its even harder.
I will reiterate how easy it is to access the profitability of an American consumer vs any other country from any country.
And the impact it has on the dollars accumulated by selling to Americans is still unchallenged (its still at the top of the list). The key to changing the reserve of US dollars is attacking this fundamental truth as that is the source of the US dollars being a majority in the first place.
I understand the dislike of having US dollars so prominent but the reason they exist is simply they aren't spent by the people who sold to the US. That is the fundamental thing to change to get rid of dollar dominance as it is the root.
I would recommend to you a book by Michael Pettis, a professor at the University of Beijing called The Great Rebalancing who makes this all clear. He is also not sycophantic to the US if that is a concern
This is starkly evident when US has a different set of rules for itself (my way or the highway) vs rules it expects the World to follow (rules based order). This might have worked in the past when other Countries were technologically inept at building necessary infrastructure to connect banking systems and had to rely on SWIFT. However, this is no longer the case today. Most countries now have better home grown systems where transactions are settled instantly (instead of taking multiple days) and have realized that the same can be extended when it comes to inter-country (read it as bilateral) trade too. Instead of India holding USD in a US Bank and Russia holding USD in a US Bank, and using US Bank as an intermediary for any bilateral trade (giving a cut to US Bank as well as being at mercy of the US Government), India and Russia can bypass the middleman (US Bank) and trade directly: India holding Rubles in Russian Bank, while Russia holds INR in Indian Bank. There is no SWIFT being used anywhere in between. Totally avoids sanctions as well as removes the middle man from the equation.
De-dollarization has nothing to do with US Dollars losing its value. It has more to do with the US Government losing its economic superpower status where it can control other countries through economic sanctions. Even after de-dollarization, USD might be the most sought after currency purely for its value and not for "fear of the US Government". There is no "perceived loss" for USD as such. But there is significant loss for the US Administration if it cannot use USD as a weapon against another Country. That's the point that is most important to realize. It is all about balancing power dynamics.
To have an alternative you need another country with the type of consumption the US has. So while your argument is correct about the rules and affect of sanctions it misses the point that the dollars are basically loans to America because the other country did not save them. Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong.
It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place. If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else (the person you bought the Yuan/Rupees from) - until it is finally consumed. The issue is they never tend to be consumed.
The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.
I did not understand this point. How does USD became a loan to America if say India did not save them?
> Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong.
Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here.
> It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place
Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies.
> If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else - until it is consumed.
Okay and what does it have to do with China and India trading with each other or Russia and India trading with each other? We don't need to trade using USD.
> The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.
All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that communist China is more favourable to democratic India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.
Again i will reiterate that this item will not change the reserves of US dollars in place, since even if dollars were used they would go down, then back up and there would be no net change. In terms of 'de dollarization' it would not have an impact on Central Bank Reserves.
> Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies.
See point above, for India and China to trade without or with US dollars the reserves dont change. Being in the middle of the transaction in a wasteful manner is not where the power of US dollars comes from.
> All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that China is more favourable than India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.
I understand what you are saying and it is correct. And there should be no reason to use US dollars in this case - but again it wouldn't reduce the reserves of US dollars. The only way to reduce reserves is to spend them or to stop America creating them by stop selling to them.
Would USD reserves still exist? Yes. Would the volume of those reserves remain intact? Absolutely not. It will reduce significantly as it gets replaced by reserve currencies of the countries we have direct bilateral trade with. Is that going to reset the USD price in the market? Obviously yes. Water finds its level. So will USD. Would USD still be the most sought after? Depends on the US consumer. If the US consumer still has an appetite for goods/services it will be the most sought after.
You see, until now, all non-US countries were forced to be in the SWIFT system because we had no other way to trade. Now that we do, the reliance on USD as a reserve currency falls. USD will find its level eventually.
Also, do not forget demographics. US is losing the demographic race. The "young population" is shrinking rapidly and they are the "consumers" in any consumption economy. Like Elon Musk said recently, demographics is destiny. And US is losing that race and is not realizing it. Consumption will slow down majorly in the coming decades and other countries have to think of alternative solutions. Because consumption will move to where the "young population" is. And demographics decides that.
Another thing that really doesn't get enough attention, is how recent events have jeopardized the peace that the United States Navy has provided for 70+ years.
I don't think that most people appreciate the role that the Navy plays in the world, basically creating a situation where the United States provides security to seafaring vessels all over the world, in exchange for an unspoken agreement that other countries won't build a massive navy. Of course, this state of affairs was in response to Germany and Japan building massive navies in the years following WW I.
https://www.nobelprize.org/prizes/economic-sciences/2008/kru...
The Denver Post ran Krugman in the business section, and offered a special on line place for businessmen to sound off against him. Quite hilarious.
Specifically, it appears they didn't really do any research into what caused the Penn Railroad collapse, which was not caused by high interest rates but instead by a combination of actions which would be considered fraud today (due to conflicts of interest that would never be allowed and exceptions to financial reporting in the rail legislation).
They basically couldn't raise prices due to regulation, and no bank would loan to them. The one bank that would loan to them required they have seats on the board of directors. They loaned money at high interest rates, bought up the senior bonds with the interest payments, took control of the board, loaned money to themselves (effectively), paying dividends out of debt, and then forced bankruptcy and let it all collapse in the hope of a government bailout (which they got because rail is critical to food security and energy).
It also neglects stagflation but does mention Volcker, drawing the wrong conclusions of what really happened, doesn't mention the S&L debacle aside from a brief mention (which was huge as well), neglected the whipsaw effect.
The biggest problem I have with it, is it neglects a lot of important factors and only focuses on policy which doesn't match up with reality and largely only what fits their narrative if you didn't know better. There was also no mention of taking the currency off the gold standard in 1971. Most importantly, they don't use any of the M2 or velocity of money data. Its available from the Fed website but it doesn't support much of what they said, and shows how expansion of the money supply drives inflation in cost push or demand pull inflation.
MMT suffers from major problems. The people that subscribe to it largely only see these large sums in a very narrow context which leads to poor conclusions, and an idea that you can print money continuously into the future with no consequence. It largely was what led to quantitative easing (or money printing).
Graeber has a great book on Debt, which goes into the historical examples of what happens when you debase currency like this (no matter what you call it), and there's some very interesting research in how the Economic Calculation Problem related effects can be seen as rational pricing and price discovery fail in markets denominated in unbacked fiat. The latter being most commonly known for its historic roots as an intractable problem with non-market socialist systems where the means of production are held by a single entity. The debate/problem still isn't solved 100 years later.
Additionally, the people making policy can't control what people choose to buy and sell goods at. Inevitably you get shortages when they try, business sectors concentrate, points of failures are introduced, and people leave the business when its not profitable. Then you get things like the baby formula crisis where the only factory remaining is shut down for safety reasons (as a result of cost cutting) and no one can get baby food in Florida. Once sector concentration reaches a certain point, its a short step away from nationalization in furtherance of solving the shortages through greater regulation.
Needless to say it doesn't work, and I'd expect at least some of that to be addressed, but it wasn't. What's covered seems misleading, and very much divorced from the reality.
MMT predicts that if you print money you don't necessarily end up printing money but if you print money you definitely end up printing money.
People don't understand the difference between printed money and printed money that was printed.
It should be pretty obvious. If the central bank prints money but the government doesn't print money then no money was printed except when people withdraw their printed money into printed money. If however the government does print money it will definitely cause inflation (classical economists and MMTists agree). It is especially likely if the government prints money into the form of printed money.
Also MMTists think "MMT" shouldn't be done as it is too much like printing money because MMT is a theory of money and accounting and not a theory of printing money unlike "MMT".
I don't know why I wrote this. I believe in accounting identities which are sort of MMTish so I knee jerk when people violate accounting identities by building straw men and reusing the same words to use completely different meanings for the same of political framing.
For god's sake you can't even use money printing in its original meaning anymore. Aka governments physically creating money to increase the money supply without supplying goods in return which as I mentioned above is a bad idea.
You know the difference between the various types of "money printing" that distinguishes them from the political framing is that the ones done the most have a sort ratcheting mechanism that forces the money to come back eventually. In other words, if there was no threat of deflation, via negative interest or whatever mechanism of your choosing, then the mechanism of money creation would unwind and the money would disappear on its own without causing inflation.
Alas we don't live in that world. Deflation is scary and must be avoided so we are stuck on this inflation treadmill until people wake up and accept mitigations to the dangers of deflation which then gives central banks, governments , businesses and private citizens more leeway to steer the economy towards their preferences and away from permanent inflation and money supply increases. So the inflation treadmill it is...
As for the ratcheting mechanism you speak of, that is simply tax revenue, but it only ratchets when taxes are collected, and if you have tax loopholes where you don't pay taxes it doesn't necessarily ratchet (i.e. inheritance, income, etc). In terms of math, a percentage of a percentage never actually gets to 0, it approaches a limit over time, so there is always a certain degree of expansion, and that expansion is often offset by population growth. Hitting the limits of growth (for the planet) adds additional complications.
From what you've said, I think you don't really understand how deflation occurs aside from the theory which there's a lot of crap out there, so that's understandable.
Anytime the debt % of GDP exceeds a certain point, a bubble is created, and when rates tighten coupled with the bubble pressures you get deflation. There is often a period of reflation afterwards, if the issues that sustained the downward pressure are corrected but sometimes they aren't. Japan for example has been in a self-sustaining deflationary cycle for decades, and has only kept it under control through foreign investment and debasing their currency via yield control (effectively negative rates against their future).
There's a book series of case studies called Big Debt Crises by Bridgewater, it thoroughly covers inflationary, deflationary, and hyper-inflationary debt crises, it covers the specific mechanics and has accurate charts for the periods of these crises, where they actually happened. I think you'd cut through a lot of the misunderstanding from reading it.
The lever to print money to buy stressed assets only works up to a point (debt as a percentage of GDP), then it typically breaks down as the store of value loses credibility and value in the eyes of those holding it (usually sometime after reaching a 3:1 ratio which is where effects start to become noticeable to the average person).
The Great Depression was a deflationary depression, and it was caused by a bubble that was created, where debt reached 125% of GDP at its peak. A minor 250bp rate tightening (because leverage ratios were smaller back then), triggered the deflation. Initially it was bad, but they managed (in the reflation stage) largely by unpegging the currency from gold, buying stressed assets with domestic debt, and negative interest rates over many years. The banks loaning assets were also tightly controlled at that time.
Currently banks are not very controlled, the depository requirements have been removed (see FDIC website, its at 0%), technically its no longer fractional reserve, and the reporting indicates they are loaning more debt into existence than they have assets (for the past several years).
When they fail (when the bubble pops), the government makes the survivors whole and divvies up the assets to the survivors. Assuming of course there are survivor banks. They are too big to fail, and while the Fed is supposed to be the only money printer, the large banking institutions are so centralized that they've effectively usurped this indirectly.
The shortfall in returns and production is always paid in inflation. There's a part of that curve where this is manageable, once you exceed that part (as a % of GDP), you get into those self-sustaining cycles similar to Weimar or Argentina, or deflation, or a little of both from a whipsaw.
Actions are taken based on lagging indicators; so effectively this becomes just another form of the economic calculation problem (which remains unsolved), where the knifes edge gets closer and closer until you miscalculate (because futuresight doesn't exist).
I thought it was an interesting observation that a problem normally only found non-market socialism systems can be seen in unbacked fiat based monetary systems.
When I see people criticize "MMT" they don't even talk about the same thing. If you boil down modern monetary theory to its essence it just means that the public sectors deficit is the private sectors surplus. I.e. the government doesn't receive money via taxation, it is the source of money. If people want to hold more money then it is legitimate to have a deficit within reason. This is in comparison with the loanable funds model where the government must first collect the money from the private sector and therefore deficits are bad.
"Since it lacks any rationality". I agree magical monetary thinking lacks any rationality since it is a straw man.
It's ok I can deal with three mutually contradicting definitions of "money printing". I can deal with two contradicting definitions by now.
I think the theory would say that this will counterintuitively result in an eventual huge dollar spike as new dollar demand but also liquidity dry up while existing demand from existing USD loans stay constant.
I think it's too early to tell. I don't believe in his USD superspike but I do think the underlying dynamic is real and this will not result in the dollar being substantially lower in the let's say 1-3 year time frame (ie DXY < 90)
For perspective, not much has changed:
https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/...
or here
https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d...
A small uptick of dollar alternatives
edit: My current viewpoint is the s&p500 is enough of a hedge given that these companies are multinationals trading in many currencies already -- I'm often wrong though :)
Broader, IMO I think the USD is walking dead. I don't know when, but fundamentally you have a government debt no-one expects to be paid back, and growing quite rapidly. I respect most people would say otherwise and I'm often wrong, but I don't see how this ends with anything other than default, which will be preceeded by money printing most likely.
The US is a huge and dynamic economy, so maybe they will prove this view wrong, or more likely drag things out for a long time, but humans being humans, at the first sign people start feeling they might not get their monies worth from USD, the response will be rapid as people try to protect their worth. This de-dollarisation seems part of the process and given Ukraine/Taiwan tensions no doubt is a strong drive from other nations.
But off tangent but generally I would go with diversified vs focus on one alternative. Personally I went 15% cash and gold each from my shares a couple months back... Time will tell if I'm right or miss the next bull moment.
There are mounting pressures in domestic consumers, and an increasing move towards “dual circulation” (with a focus on the domestic part of that duality). Then there’s the risk of a miscalculation in the East China or South China seas.
Given that CNY trades in a tight, centrally-managed range against the USD (it’s almost always between 6-7 CNY to the dollar, and only briefly traded outside that during the pandemic), I’m not sure there’s a big incentive to use CNY as a hedge against USD.
No. Just No.
Yuan is not convertible and volatile. it's only 3% of global currency reserve, behind dollar (60%) and euro (20%) https://carnegieendowment.org/politika/88926. Even Russians don't want yuan, Russia has been selling renminbi since the beginning of this year https://asiatimes.com/2023/04/rmb-based-trade-hasnt-worked-o...
Also, China's economy is crashing hard. China is now entering its third year of its own Great Depression, with 30% unemployment rate, 90% unemployment rate for new grads (it's so bad, Guangzhou government just sent 300k youth to countryside for a program), 80% retail collapse (entirely empty malls in Beijing, Shanghai, Shenzhen), 50% real estate price collapse. Guizhou is the first province to declare bankruptcy ever.
According to the office for national statistics in China, for jan/feb of 2023 http://www.ce.cn/xwzx/gnsz/gdxw/202303/27/t20230327_38464161..., car manufacturing profits is down 41%. non-metal products manufacturing profits is down 39%. chemicals manufacturing profits is down 56%. electronics manufacturing profits is down 71%!! In fact, all businesses have dropped 22% in profit. Not to mention the 1M+ SMB that failed in the last 2 years.
Apple, dell, hp, lg, Kyocera are all shifting manufacturing out of China. Apple by 50% by 2025, Dell by 2027. It is estimated that China's portion of worldwide phone production will drop from 90% to 50% by 2025, and worldwide laptop production 70% to 30% by 2027.
China's export is never recovering, when 83% of American, the world's biggest consumer segment, have negative views of China https://www.rfa.org/english/news/china/pew-china-enemy-04122...
This is equivalent to "there was abnormal amount of snow last week so global warming must not be real"
https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/...
or here
https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d...
The headline is technically correct just exaggerated https://upload.wikimedia.org/wikipedia/commons/a/a7/Global_R...
It wouldn’t be surprising if this were mostly China.
This is a symptom of rates rising really quickly in the US than any de-dollarization I'd wager.
The article is trying to imply the USD lost weight compared to renminbi/won but that has been very very marginal.
EDIT: I love how nobody replying is addressing my actual point
It’s backed by the most powerful nation in the world.
Inflation is a measure of how much things cost, not of how much money exists.
Perhaps in a theoretical sense they aren’t different, they are fiat money which is basically a ledger of value (which governments manipulate).
But behind the dollar is the largest economy in the world and the largest army by a long shot, and a lot of motivation to keep the dollar as the “biggest” currency in the world.
https://www.youtube.com/watch?v=JHZnVdBZJfA
Also interesting: de-dollarization may benefit the US by increasing domestic growth and investment.
To me it is obvious that any country in the world would do systematic deficits if they could do it without tanking the value of their currency.
Emerging markets are surprisingly happy to give vast amounts of oil, gold and manufactured products in exchange for claims on overseas assets that can be frozen or devalued at the stroke of a pen.
In any case, the secular dollar shorts are a perennial watering hole for our FX community. Similar to gold or commodity ETFers.
https://en.m.wikipedia.org/wiki/File:British_Isles_location....
https://www.youtube.com/watch?v=sehmmzbi3UI
And the perspective being pushed isn't just the fact of the reserve decline, but specifically that is being driven by sanctions on Russia, which seems like a huge, huge reach to push without analysis or rebuttal.
This has the smell of a deliberate hit piece, basically.
> More likely, the SWIFT sanctions will prove a mistake for "the West," when it realizes the downstream effects of cutting off Russia from the dominant payment network of the global reserve currency. Russian banks have already started offering accounts in yuan. This will lead to further balkanization (unfortunate pun notwithstanding) of world reserve currencies, which means increased decentralization and a reduced dependency on the dollar. Eventually the world will naturally diversify their reserve holdings to the point that the dollar loses its power as leverage in diplomatic negotiations.
[0] https://news.ycombinator.com/item?id=30633595
The idea of the decline of the US as a reserve currency has been "about to happen" for me entire life, and yet another cherry-picked graph won't make it more likely.
The price of gold going up is the opposite of inflation. Hyper-inflation is when the "price" (value) of a currency massively decreases, not increases.
At least that was in my high school economics 101 classes.
I feel like commodity prices tend to get pushed down by tech improvements.
Now the crust is not liquid but it is very old and there have been lots of plate tectonics. I imagine all the shaking and scraping would be enough to get the gold in deeper.
It's interesting to note that the richest gold field we have was created when a meteorite hit the Earth so hard, the deeper parts of the crust got bent upward and lay closer to the surface (Vredefort dome).
https://en.wikipedia.org/wiki/Vredefort_impact_structure
(The article mentions the "Global South" - I had to look it up. That's a pretty broad region that includes all of South America, Mexico, all of Africa, South Asia.... it seems unlikely all these regions are moving off the dollar.)
The US Government has gone to War with or at the very least militarily involved with the entire World except for 3 countries: Andorra, Bhutan, and Liechtenstein. You vastly underestimate how much bad blood US Government has created over the years with various countries in their own capacities. Heck the USG spies on its own all-weather Allies and recently blew up the Nord Stream Pipeline (in a covert operation no less).
> I get that Russia, China would try to diversify — not a surprise though.
You might want to include India in the list too. And it should come as a surprise to you that there are plenty of other countries, who have been historically neutral, are badly wanting to diversify and de-dollarize. India now does trade directly in INR with 18 countries [1]. Just a year ago there were only 4 countries we traded in INR with (this is apart from the 18 new countries that we added recently). If this doesn't ring alarm bells nothing else will.
> (The article mentions the "Global South" - I had to look it up. That's a pretty broad region that includes all of South America, Mexico, all of Africa, South Asia.... it seems unlikely all these regions are moving off the dollar.)
You are unfortunately living in a bubble.
[1]: https://www.wionews.com/business-economy/rbi-allows-banks-fr...
This is bullshit.
The truth is, there is no public common knowledge about who did this. So unless you are leaking confidential information here, you are just speculating.
There is no ambiguity about the Biden Administration’s intent to bring an end to the project. But his answer leaves open the question of the lengths the US was willing to go in order to see that intent fulfilled. It’s plausible but not unambiguously true that the US was involved. Unless, of course there is evidence I’m not familiar with.
"Nord Stream 2" was completed, but blocked by sanctions (as a result of Ukrainian War). "Nord Stream 1" was operational, but Gazprom (Russia) halted delivery at least a month before the sabotage.
So you could very easily twist the argument and say that blowing NS1 was an attempt (by Russia) to force NS2 approval and put more pressure on Germany to break sanctions. Note that immediately after that event gas prices went up, even though NS1 was not delivering gas at that time. If the winter was not mild, it could end in very favorable outcome for Russia.
It's literally a Google search away.
Cyprus, Switzerland, Malta, Scandinavia, Finland, Luxembourg, Spain and Portugal (unless you count them allowing US bases as "militarily involved", but that doesn't cause bad blood so doubt it), Mongolia, Nepal, all of the former Soviet Union (except stuff like paying to get nuclear waste and weapons properly disposed of, which is even less of "militarily involved" and even less cause for bad blood), big chunks of Africa - Morocco, Algeria and Tunis (unless you count Operation Torch to free the Vichy France protectorates in favour of Free), South Africa, Rwanda, South Sudan, etc. Just off the top of my head, and I'm sure I'm missing a bunch even if I might be mistaken on one or two.
All that to say, there's no need to exaggerate American warmongering, imperialism and neo-colonialism. It has done insurmountable damage to many counties and resulted in millions if not tens of millions of dead, all for profits of American corporations. Exaggerating it makes it more easily refutable and minimises the suffering caused.
> recently blew up the Nord Stream Pipeline (in a covert operation no less).
Citation very much needed.
> You might want to include India in the list too. And it should come as a surprise to you that there are plenty of other countries, who have been historically neutral, are badly wanting to diversify and de-dollarize
Historically neural implies something has changed by de-dollarising. Nobody owes the US trade in USD. If sovereign countries want to trade with their own currencies, more power to them.
https://www.youtube.com/shorts/FVbEoZXhCrM
And that proves absolutely nothing. Promises and threats are cheap.
As an increasingly old white man, I am ready for old white men to get the hell out of the way.
Yes by militarily involved I do mean having military bases as well. "Doesn't cause bad blood" -> you are talking from perspective of a Westerner/American (I am making an assumption here). It benefits US to have a military base but need not necessarily benefit the host country. Almost always there will be a compromise, "a choosing of lesser of two evils" so to speak, when a Nation has to give up sovereign space for a military of another Nation to occupy its lands. It is out of desperation. In some cases it is out of pressure too.
Which is why I consider it "military involvement". There is a stark contrast between having an Embassy in a Country vs a Military Base in a Country. The host country can always call for shutdown of a foreign Embassy and expel Diplomats. These rules are governed by World organizations like the United Nations. However, a Host country cannot expel a military base from its land unless it is written down in the agreement between the two Nations. Even then, the actual ability to shut down an already established military base is significantly costlier on the host nation if it has lesser military strength (which it most certainly has, else why would it want to host another Nation's military in the first place?).
I also include coup-de-tats as there is covert operations which involves using militia or even military of countries where USG wants Government to be toppled. The most recent example is that of Pakistan where there is widespread allegation within the country that USG along with Pakistani military toppled the previous regime. Now whether those allegations are true or not is secondary. The sentiment within the country prevails. So when I said "bad blood" I mean it as a "perception of the people on ground" sort of thing.
> Cyprus, Switzerland, Malta, Scandinavia, Finland, Luxembourg, Spain and Portugal (unless you count them allowing US bases as "militarily involved", but that doesn't cause bad blood so doubt it), Mongolia, Nepal, all of the former Soviet Union (except stuff like paying to get nuclear waste and weapons properly disposed of, which is even less of "militarily involved" and even less cause for bad blood), big chunks of Africa - Morocco, Algeria and Tunis (unless you count Operation Torch to free the Vichy France protectorates in favour of Free), South Africa, Rwanda, South Sudan, etc. Just off the top of my head, and I'm sure I'm missing a bunch even if I might be mistaken on one or two.
I talked about military involvement. It need not necessarily mean the War was not justified. It could very well be justified and it could be fought on the sides of Allies too. However, when a foreign Nation involves in any War to assist another Nation (especially in civil wars), there will always be bad blood created within the Nation as there is one section of the populace who would be targeted by strikes. You can call them "rebels" but for those "rebels" it is an invasion of their homeland. I am sure if I do further research I'll be able to find US military involvement in every one of these countries that you listed in some form or the other. Of the top of my head, US was involved in the Nepalese Civil War where it supported the Gorkha Empire against the Communist Party of Nepal.
> All that to say, there's no need to exaggerate American warmongering, imperialism and neo-colonialism. It has done insurmountable damage to many counties and resulted in millions if not tens of millions of dead, all for profits of American corporations. Exaggerating it makes it more easily refutable and minimises the suffering caused.
Not exaggerating. "Militarily involved" does not necessarily mean going into a country guns blazing. One can always covertly bring about regime change or tilt an ongoing civil war within another count...
Nobody is occupying us. We asked the US to come help us. We share culture and way of life. There were no changes about anything in our country other than increased security. Occupation looks different - look at Russian-controlled parts of Ukraine to get a feel for it.
It is not a question of whether you are more comfortable living under Russian control or US "partnership". Eventually, in the long run, relationships of this kind sour inevitably. Because there will always be divergence in interests. The moment that happens you will feel "stuck" with someone you don't want anymore but can't do anything about it. Colonization comes in various forms. Setting up military bases is one of them. This bonhomie is good as long as relationship between your country and US is good. What will you do if it turns sour in the future? No one can predict the future. Who would have predicted splitting of Germany? Who would have predicted collapse of Soviet Union? You talk of Europe as if it is one entity "sharing values" with USA. A quick look into European history and you'll see it was always engaged in Wars not just with the entire World but with each other. It's not even 80 years since Nazi Germany came attacking most European countries. Don't forget your history and think everything will be hunky dory going forward. This sort of myopic view is what causes one to become complacent and ultimately end up colonized.
If Europe is so United in its values why was there even a Brexit in the first place? If Europe could not keep the Brits within its own fold you are thinking you can keep America permanently within the fold? US is not there to help you out. It's there only for its own interests. It just so happens that at this moment in time your interests align. That's all.
I don't know about the British, and I am not saying there is European unity. My country's partnership with the US is very natural since we share culture and way of life. There's no need to "keep the US within the fold", we simply think alike.
You comparing it to an occupation is simply absolutely wrong. The partnership is of totally different nature. We know exactly what occupation looks like - we had the Nazi occupation, and later the Soviet occupation that ended in 1989 - I remember it myself. Both of these directly changed our governments and tried to germanize or russify us. The US never did anything even remotely similar to what they did. The US came with their military hardware and used it to protect us, never anything else.
It’s good to learn from history, and I would say in Europe at least most people are very aware of the past, and many things are being done to safe guard and make sure we keep the ideals of democracy strong.
In Europe but also globally there is a problem right now of far right incursions, hate, fear mongering and strongman politics. Noticeable here is that Brexit happened under a Tory (right wing) government with barely a slitter of a majority.
That is to say, our own toxic nationalism and entrenchment in the past keeps us from moving forward. We need to build global alliances based on cooperative ideals (and there are many such platforms) and with idea of helping eachother out.
Not to exclude real-politik where nations work only for their own interests, that is pretty much a given, but unions can work, if we keep them working properly.
We can ask USA to leave and take their soldiers with them. And I have high confidence they will do just that.
That worked very well for Cuba and Guantanamo Bay since 1934.
Let us put your confidence to the litmus test:
1. What is the legal status of Puerto Rico?
2. Is it a State in USA or a Colony of USA?
3. Are Constitutional Rights defined in US Constitution applicable to residents of Puerto Rico?
4. Do they have voting representation in the US Congress?
> We can ask USA to leave and take their soldiers with them.
Good luck with that!
2. It is neither a state nor a colony (it is an organized, unincorporated territory of the United States).
3. Citizens of Puerto Rico are American citizens, so yes. The existence of the insular cases doesn’t negate that - there are other categories of U.S. citizens who don’t receive the full protection of the constitution.
4. They do not. If and when Puerto Rico becomes a state, they will.
Is basically a nice way of saying it is a Colony. Fact is that it is a Colony. "Unincorporated territory" is a BS term created out of thin air to save the US Government from obvious criticisms. [1] If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. In this case the duck is Colonization.
2. Read 1 above
3. Those "other categories of U.S. citizens" who don't receive the full protection of the Constitution have "opted" for it (for example: members of the military are subject to the Uniform Code of Military Justice, which imposes certain restrictions on their free speech, assembly, and association rights to maintain good order and discipline within the military - however, this is an "opt in" to have individual Rights restricted). They were not "born into it". Residents of Puerto Rico on the other hand are not given the full protection of the Constitution primarily based on where they are born. That is not equality by any means.
4. Exactly. And there was no choice given to Puerto Rico residents if they want to be part of the US or not. Since technically, Puerto Rico was colonized by Spain and then colonized by USA, it hasn't had a referendum asking if people want to remain with US or not. So currently, they are neither here nor there but hanging in between. Neither a "fully incorporated state" of USA, nor a completely free, independent State. Classic characteristic of a Colony.
[1]: https://ccrjustice.org/home/blog/2021/10/20/colony-colony-co....
Meanwhile, the US is faffing about with all sorts of internal initiatives that are detrimental and pointless on a grand scale. Every year they are poorer as a country, society and culture.
Just try and imagine how much collective brain-time is spent in the US discussing animal rights, DEI, free speech, activism, left/right politics, gun rights, drug legalization, etc.
That is brain time that could be spent feeding and uplifting the poor, building housing, mobilizing tech and military, building infrastructure and transport and and and.
Please lay off the news and look at stats. Facts trump narratives. Narratives exist to get clicks. Facts exist regardless of what people think.
That there are people in the US doing things you consider a waste of time does not mean "US on the way down". Go to this chart and click on Max time frame to get an idea of what's been happening with all the "faffing about" Americans have been doing: https://tradingeconomics.com/united-states/gdp
Compare to the Eurozone, China, India, and Africa to get a relative idea. USA, China, and India have been going up like rockets.
I'm inclined to agree, but you had to provide the one counterexample that actually shows sanctions being legitimately used for good against a terrible human right abusing regime.
> Just try and imagine how much collective brain-time is spent in the US discussing animal rights, DEI, free speech, activism, left/right politics, gun rights, drug legalization, etc.
> Every year they are poorer as a country, society and culture.
Agree, the US is generally on a downward spiral for multiple reasons (mostly political deadlock due to a broken political system, massive amounts of time and efforts wasted on stupid niche issues, exceptionalism making them blind to fighting with problems the rest of the developed world has solved decades ago, economic and geopolitical development in the EU, China, India, Brazil, etc.). However, as of now, and for the foreseeable future they're still the primary military and economic power in the world. However better balance, for better and worse, is on the horizon.
The USA went to war against Spain on false pretenses, that was more than 100 years ago but not a small thing.
https://en.wikipedia.org/wiki/Spanish%E2%80%93American_War#U...
The Wikipedia article presents different sides of the story, and my take is that the USA wanted to carve off the Spanish Empire and would use any excuse for that, a pattern repeated many times.
Not that the USA is unique in that. The point is that there are reasons for the rest of the world to resent the USA’s unchecked power, being wielded by small groups in there often to the detriment of the USA’s general population, as is happening now with de-dollarization.
The USA and its Western European puppets are becoming a much less reliable partner than we used to be, and the alternatives do not look as bad by comparison as they once did.
> The US currency now represents about 58% of total global official reserves, down from 73% in 2001 when it was the “indisputable hegemonic reserve,” the Eurizon pair said.
i hope you dont believe the absurb propaganda BS that Russia blew up their own pipeline...
Source?
> And other sources mentioned clearly it was an US operation.
You mean the Danish ones which point at Russian naval activity in the vicinity in the time shortly preceding the explosions?
https://www.newsweek.com/video-biden-saying-end-nord-stream-...
Are you living under a rock?
with ample warnings that they would resort to force if NATO continued to push for a regime opposed to Russia on their border.
> biggest country in Europe
Size does not matter, strength does. And the Ukrainian losses are huge, but nobody is talking about it in the news, because propaganda and the media only wants to focus on Russian losses.
Which war do you claim that US has had with Sweden?
[1] https://www.stripes.com/branches/marine_corps/2023-04-18/swe...
Of course he goes down the road to the next bar where he hasn’t gotten a reputation yet, we’ll see how long it takes him to get kicked out of there.
It seems to me completely normal that the US was less sanctioned by "the West" when they invaded Iraq than how Russia was sanctioned when they invaded Europe.
I'm not American and I opposed the invasion at the time, but it was harder to argue because Saddam's Iraq had very few redeeming qualities, had been waging aggressive wars of its own, and its main role in international trade was as a member of the OPEC cartel.
Whereas Ukraine, for all its problems, is a far more democratic county with far more friends, no history of aggression, and a critical source of food for many nations.
If Russia had invaded Belarus or Tajikistan instead of Ukraine, I doubt there would have been any real consequences.
War making is the universal party in the US.
This is like shouting at a wall.
So let’s demonstrate near the White House and the Kremlin. I assure you both outcomes are different. Let’s set up a fund that allows me to criticize the government, pretty sure I can do that in the US, and good luck doing that for Russia.
You get the idea. There is definitely a difference.
This depends on what one finds importand and what not. My wife says, for example, that there is no difference except for nature, climate and a few minor thigs.
I say - there is more than a few differences, but still two countries have more in common than people think.
>let’s demonstrate >I assure you both outcomes are different.
If the result if the same (the government changing or not changing its policy or decisions) than there is no difference.
Yes in one scenario you may end up dead (and not necessarily in Russia) but this is not what's important here.
yet I fail to see any single example in recent US history where citizen action has been able to stop a war in foreign lands. They were not even to stop an actual invasion of Iraq, so let me question the point of potential protests.
You don't need to speculate. There were no real consequences when Russia invaded Georgia, and that's even a democracy, although unfortunately too small to be relevant.
I was there marching in DC and even my close friends and family (in suburban DC) seemed to be unaware of the protests. I thought, surely, with 100,000 people protesting in the city, Black Bloc hanging from streetlights, speeches from celebrities, Jesse Jackson, a former Defense Secretary, etc., that it would pop up on the local news. I never heard about it.
How is this substantial?
I don't get it. If all you do is give speeches and march, what is even the incentive?
At least that's how I understand the idea.
It obviously doesn't always work, and in some cases simply cannot work. It does work sometimes, to an acceptable degree, but often it doesn't.
It's like gambling. You win a bit and you start overestimating your chances to win more. Here, too - you petition local authorities to put a speed limit on a road near an elementary school, you "win", the speed limit is introduced, and now you think you can do the same to influence the massive, incredibly complex system of hundreds of millions of people, the machine that's steamrolling through geopolitics and history full-speed ahead. Of course you can't - that's work for decades, generations, thousands of leaders, millions of supporters. But, nobody wants to put their whole life behind what they want (or don't want), sacrificing their well-being for uncertain result 40 years down the line. Nobody wants to be a Stallman - he reads web pages by sending an email to home server which cURL-downloads the page and sends it back to him to read... in lynx. How many people are willing to go through so much inconvenience just to state a point? And do so for decades?
So, instead, people go protest a bit, virtue-signal their discontent (or support) on social media, get into heated discussions at family events - and then go on with their lives.
The basic premise is good: people don't change their views easily, so to make a change, you need to exchange people. It's good on a local scale, but it totally breaks above that level, in multiple well-researched scenarios, most of which happen to currently, and concurrently, play out almost everywhere. Normally, we'd have a war - a serious war with tens of millions of casualties - that would cut off the bloat and really reset (though leveling it would take some work, given all the bomb craters) the playing field. We don't, and won't, because of nukes. I honestly have no idea what's next - I just hope that I'll die before the more dystopian future arrives.
I often see this mentioned and I don't really get it. What did people actually do besides voicing their concerns and cozily waiting for the next election cycle?
Oh wow, people understood that their country is waging a war on the other side of the planet, hooray! What did they do about it exactly? Look at Assange's sorry state.
At least Russians had balls to burn some military enlightenment offices.
Western protests (except French, French are cool) are basically fun festivities.
How exactly would that proceed in your imagination ?
What makes me cringe is the fact that people pose as this is some kind of a virtue. C'mon, these people live in an environment where protests are not only unrestricted, they are endorsed to some degree as a vent-out method that allows people to feel good about themselves, and governments to continue their bloody business, so people can simply excuse themselves on the next election cycle, while profiting from the spoils of war.
I just don’t want to see it going to far and sabotaging itself. I also want to see a peaceful adjustment to a multipolar world.
Yuan is still only 3% of global currency reserve, behind dollar (60%) and euro (20%). https://carnegieendowment.org/politika/88926. up from 2% in 2017...
China is Russia's ally in the war, and even Russians don't even want yuan - it has been selling renminbi since the beginning of this year https://asiatimes.com/2023/04/rmb-based-trade-hasnt-worked-o....
de-dollarization is mainly happening with China, and it's only because Chinese economy is crashing fast (50% real estate price cut in matter of months, 100k+ housing inventory for sale in major tier 1 cities, 80% factory order decline from foreign companies), and it needs to have access to dollar to pay back its huge debt - 400% debt to gdp, and Guizhou just became the first Chinese province to declare bankruptcy last month.
the service-goods shift during COVID and the shiftback after, coupled with the energy and food price shocks due to Russia-Ukraine war, definitely did not help the Chinese economy, that was already faking a higher GDP growth to paper over the cracks.
geopolitical tea leaves reading experts point to the aging population of China as a massive problem (again coupled with a lot of factors that make it a worse problem than it would be with a relatively open society, etc.), the limits to efficiency gains from centralization and big infrastructure projects (only so many miles of high-speed rail have positive ROI, only so many big dams make sense, etc), and - again - the cost of maintaining the authoritarian state.
Peter Zeihan https://m.youtube.com/watch?v=pKVQDUQR8I4
https://www.noahpinion.blog/archive?sort=search&search=china
https://www.stlouisfed.org/publications/regional-economist/s...
Blogs that literally have "opinion" in the title as sources for sensational claims?
Try harder.
Don't get me wrong, people like you are the reason I can buy Chinese stocks dirt cheap. I'm still waiting for the 50% property price cuts.
Try harder please.
I heard their rail service is in massive debt too. They overbuild it.
Can you share a source for the 50% price real estate cut and 80% factory order decline estimates?
And investors ultimately choose what the priorities of the organization are…
So that means this is probably “what happened in 1971” that decoupled labor from productivity — the US ceded labor sovereignty to the “market” that is global capitalism and “the market” started treating labor as a global market but with proceeds only going to capital owners.
Wow!!
Which is half of the Yen and Pound, and not far off from the CA$ and AU$:
* https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A...
Australia is a country of 25M people.
This is false, which is sad considering you're calling someone out for being wrong.
No province in China has declared bankruptcy. You're probably conflicting this from reports from questionable sources that it might happen given Guizhou's debt and poor finances, but it didn't happen.
It's been clear for a while that China wants to increase the dominance of it's currency. The belt and road initiative and the digital renminbi is part of that.
The swift sanctions were an accelerant, not a catalyst of de-dollarization. It was no coincidence that Russia had substantial gold reserves at the time of the invasion.
The relative strength of the two economies is really what matters, and sanctions + tariffs are a double-edged sword, the deeper you impale other countries, the deeper you impale yourself.
[1]https://www.finanzen.ch/devisen/us_dollar-renminbi_yuan-kurs
I shared multiple articles on that matter many years ago on hackernews
This one for example: https://www.theguardian.com/business/2003/feb/16/iraq.theeur...
This one gets me banned, but i'll share it again, this is why the CIA/FED started the work on bitcoin and help spread the cryptocurrency fad, to crowdfund the tech they'll use in the post-dollar world, the digital fiats, it won't matter if the USD is dead if you control the networks
Anyways, attach your seatbelt, turbulence ahead!
Except if you want no transparency and want to be bullied around.
None of china's neighbors even trust them, I sure of hell wouldn't ( perhaps Vietnam, who gets a lot of china's sanctioned businesses).
Note : I'm Belgian, not American.
Here is a good list involving dozens of countries: https://en.m.wikipedia.org/wiki/United_States_involvement_in...
PS. Regime changes isn't what I'm saying, you're changing the subject.
Which countries are bullied now? Not 80 years ago. All neighboors of China NOW are being bullied.
I'm from Belgium and there's also something to say about something similar in our history, because of 1 king we had...
https://en.m.wikipedia.org/wiki/Cuba%E2%80%93United_States_r...
Nothing really changed in the last 50 years. 8 years ago, it improved a bit.
In recent news ( last 30 days). China bullied Taiwan with missiles ( again), Philippines, all post USSR countries, international waters, Japan, ...
Even today ( Soloman Islands) - https://www.rfa.org/english/news/pacific/solomon-islands-050...
Yeah, that's definitely the same...
Worse than being in the crosshairs of China as a country is actually being it's friend:
- North Korea
- Russia ( since it's friends without limits statement)
- Pakistan ( referenced as top of the one road one belt) => debts...
- ... ( Also debts)
US forced china's neighbors to the US because US bullied them. Sure.
Believe what your want.
https://m.youtube.com/watch?v=ye8dbEmBimg&pp=ygUKRXVyb2RvbGx...
Effectively, banks not in the US denote debt in dollars. The “dollars” in circulation outside the US is massively larger than the domestic supply.
“de-dollarization” is not going to happen any time soon, really. They aren’t even true “dollars”, no money or assets move. They’re completely created outside the US.
I pulled the data from the IMF for a better chart that shows how the currencies actually relate to each other [1]. Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency.
[0] https://www.eurizonsljcapital.com/dollar-smile/rapid-erosion...
[1] It's a bit slow to load, but here's the link: https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa5215...
The bulk of the "diversifying their portfolios" is being done by China. The de-dollarization happening in other countries is a rounding error.
Generally it is misleading to talk about the rise of "BRICS" and the "Global South". In most contexts it is only China that is relevant and the other countries are rounding errors.
Aren't these literally the same thing? Selling dollars and buying something else is dedollarization, regardless of whether it's for diversification or some other reason.
And i predict that this time, at the last minute, the bill will pass again, like every other time. Unless the republicans truly believe that it's worth going down with the ship for.
Some would be fine letting the US default if their demands aren't met (e.g. Tea Party types).
Others not so much.
One difference this time is the amount of trouble the House Speaker had getting elected by his own party, and any closed door concessions related to that were very likely promises around budget and the debt ceiling.
From who exactly? Most of developed and developing world is facing demographic collapse over the next 50 years.
The US is the largest energy producer, one of the largest food producers, the most dominant military, has relatively stable demographics and has no trouble assimilating immigrants, etc.
No country is currently strong enough to cement its position the way the US had, but the move away from the dollar will hurt the US a lot, by limiting the Fed and increasing inflation. It also enables other countries to have a foreign policy more antagonistic to the US, it takes away a good chunk of leverage.
Exchange rates are the net result of trade in goods and services (and capital), it's the bottom line fudge factor that makes trade work. If a country imports too much, its currency drops making foreign goods more expensive slowing imports. If it exports too much, its currency rises making its goods more expensive and slowing exports.
If the US imports a lot, it sends dollars overseas. If the foreigners want to invest in the US economy, those dollars come back in exchange for assets and the value of a dollar is not affected. If the foreigners don't want dollar denominated assets, they just buy their preferred currency instead, sending the dollar down. (In the case of investment, the US for most of its history ran a huge trade deficit. It was not a problem because economic growth meant foreigners wanted to invest here. Much of the trade deficit was caused by the purchase of capital equipment, used in driving the economy)
People who are thinking about exchanging currencies are not doing it on whim, they are doing it for underlying reasons that have to do with economic activity, productivity, long term investment opportunities, etc. These things carry currency denominated prices, but those currency fluctuations do not affect the rates of return of the investments, rather those currency fluctuations are how the books are balanced and change the rates of ebb and flow.
I doubt that. The US has been able to both support a trade imbalance and print money at prodigious rates that would be unsustainable for any other country.
I remember articles from economists pointing this out going back to the eighties.
One important reason for this is that not all dollars the US prints inflate the local money supply. Instead, they go out into the world where they are used by other countries to trade amongst themselves, without US involvement (and reserves).
It's like writing a check that is never cashed. Cool if you can pull it off.
You mention foreign investment. Well, if the value of the dollar goes down, because demand for those dollars is lower, those investments also become less attractive. Could cascade.
+All that debt will become 'real'. We could look to UK and see what happens to a nation post (currency) empire. But a word of caution here regarding the analogy: the new empire (US) were allies of the dethroned empire (UK). Come US's time, it is doubtful that the new power will be a Western power. So US will have a harder time than UK and things have not gone well for UK since WW2.
Zombie International Currency: The Pound Sterling 1945-1973, 2021:
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP...
This is wrong - as you point out. When people don't need dollars except to buy/sell from the US, the dollar is a less attractive currency to keep around.
This is going to hurt...
[1] https://www.bloomberg.com/news/features/2016-05-30/the-untol... (https://archive.is/kRW9c)
[2] https://www.currencytransfer.com/blog/expert-analysis/saudi-...
* From [1]: “Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.””
https://www.semanticscholar.org/paper/Showdown-at-Doha%3A-th...
The rise of Islamic Jihadis, financed by KSA and trained by CIA, propagation of Wahabism, tolerating the replacement of a secular ally in Iran with Islamist revolutionaries, ..., are all the direct consequence of this strategic shift by the USA. This is all in the context of post-Vietnam debt, rise of OPEC, and a still very menacing Soviet Union.
The Shah had made the error of thinking that by not joining the oil embargo of Arab states he was proving yet another reason (beyond being a forward Western block allied barrier to Soviet Union’s access to the Persian Gulf) for being considered a strategic ally to US. Nixon and Kissinger publicly and privately also assured of Iran’s importance. But what actually happened was that the oil embargo demanded a reassessment of the value of Shah of Iran to US. It was seen that oil and Arab producing nations’ alignment was far more important than any value Shah’s Iran was providing as a bulwark against the Soviets. The Brezhinski doctrine effectively addressed the means of filling the vacuum: Islamic Fundamentalism.
https://www.zerohedge.com/geopolitical/five-arab-states-plus...
some linger in centuries long decline, some collapse overnight
Well, imho, this question hinges more on the calculations (and subsequent actions) of US's allies rather than the counter-organizing efforts of the rebel states.
But it's interesting this particular "power center" of the world (US dollars for oil) is weakening just as oil's grip on the world is weakening.
The world was totally beholden to oil for what, 100 years?
But everyone with a brain sees that oil demand is going to plummet with EVs and wind/solar to recharge them ... and domestic reserves will likely cover the remaining demand. The political power dynamic of the petrodollar has ... what ... a decade? Or it's already dead?
Power and economic productivity is/were hand in hand. The geopolitical dominance of oil provided direct political dominance over everyone's economy.
But Solar/Wind/EVs are largely independent of geopolitical control. Yes China appears to be dominant in EV production, batteries, and solar cells, but it isn't the ironclad grip of "we have oil underground you don't".
EV drivetrains are simple, everyone can make an electric motor. Viable EV battery chemistries are proliferating and also becoming immune to cobalt, nickel, and even lithium supply constraints. Anyone can make a wind turbine, and solar cell production will likely plummet in cost and diversify in production if/when perovskites and other non-silicon panels hit the mainstream.
But likely we are headed back to a cold war alignment, or even more fascinating, a tri-power alignment (EU, US, China), and economic alignment will be replaced with the good old protection racket of the Cold War.
Oil will probably remain as a military energy source. But likely everyone will be able to solve gas production with, at minimum, biofuels.
What is interesting to me is how ignorance of the actual issue -- our civilization now depends on continual growth that we can not sustain -- shapes the discourse of alternatives to global regime du jour (with the so-called multi-polar model as the 'solution'). This would be nothing more than rearranging the chairs on the Titanic. No one is discussing alternatives that address the credit-interest-growth regime. This is the 'sacrosanct' dimension of the problem, and no one in polite society wants to touch it, anywhere.
The Human Predicament, Nate Hagens (57m) https://www.youtube.com/watch?v=MNzLkdr7UIU
As in, I get there are current dependencies, but what is it fundamentally about the wind turbine's parts is beholden to ground-extracted oil? Plastics/fiberglass (should be replaceable)? The electric dynamo because of needed heat in metallurgy/refining?
For solar (silicon solar cells specifically), again, what is it beholden to? Silicon? Etching chemicals?
I can see oil still being used for lots of industrial processes (and plastic production), but ... EVs are going to drop a massive amount of demand for them. And while plastics suck for lots of reasons, fundamentally plastic is fossil fuel carbon that has been sequestered in a durable long-lived form.
I'll check it out, but again I wonder if the dependence is due to someone "growing up" ensconced in a petroleum world not realizing the full path forward that will eliminate so much of it, particularly the massive scale of burn-into-CO2 part.
No. It's a measure of much foreigners trust the Us economy and it's political and judicial system. What drives the demand for the dollar is the will of people to invest money in American securities and on the American capital market.
Chinese investors invest on the Chinese market in Yuans. Rich Chinese investors invest on the US market with US dollars.
> No.
Actually, what the OP wrote is true: the use of the dollar as both a reserve currency and as a trading currency between non-US countries means there is a demand for the currency itself without actually wanting to buy goods and services from the US or invest there.
What you describe, investing in the US, also happens. But it isn't the only thing that happens, the demand for dollars without such investment also happens, and as far as I know is the larger part.
If it didn't happen the de-dollarization that the fine article talks about couldn't be happening.
If country A trades with country B, it'll either get paid or pay with country B's currency. Country A might not be interested in country B's currency, so it can use the US dollar and a US institution as a proxy between the two. But that doesn't do anything to affect the value of the three currencies. It's simply a matter of convenience (these US dollars get exchanged back into currency A or B seconds after being purchased).
What matters is how confident people are of their respective government, laws and institutions compared to the US. Would they prefer to hold assets in the United States or their own country, or country A or B.
And no, your idea that they change money into dollars, execute the trade and then change right back is an interesting theory, but not actually what happens.
Some of the things that have been happening are grossly underreported on, like this: https://thewire.in/diplomacy/india-signs-deal-to-adopt-mosco...
Let's assume you wanted a route to send/receive money from Russia now, you could do so via India - a country in the good books of both Russia and the West.
Iran has been settling oil sales to China in Yuan more and more over time: https://www.silkroadbriefing.com/news/2023/02/21/iran-increa...
Assuming the dollar gets replaced by one reserve currency is the fallacy. Like with geopolitics, we're seeing a multipolar world return.
Yes, but there's a difference between a shift of power from one entity to another and a shift of power from one entity to many entities (distributed). That's what the people above you are saying.
Tldr: Swap != diversification
https://markets.businessinsider.com/news/currencies/russia-d...
I.e. countries reserves will move to diversified portfolios of currencies and assets (gold, etc.) that minimize general financial risk, but also foreign economic-political influence.
Believe parent's comment was that you would want something where no/minimal part of its 'value ecosystem' touches dollars.
E.g. Chinese real estate, with rent paid in yuan and sales transactions happening in yuan
They have no laws protecting foreigners from theft/fraud. Its encouraged.
The yuan also has its own issues.
Governments with xenophobic and nationalizing tendencies tend to be poor bets for private investment. Picking up pennies in front of a steamroller, etc.
It's not that there's not a story here, it's that the chart they used wildly misrepresents what the story is.
(EDIT: In fact, as I write this the second highest comment on the main thread[0] is speculation about the Yuan becoming the world reserve currency, which is a reasonable line of thinking if you only look at the Eurizon chart and don't realize how misleading it is.)
[0] https://news.ycombinator.com/item?id=35800862
It seems it's the latter that's most affected (as per the link 1 you posted)
> While the Global South seems unwilling to continue to hold dollar assets, they do not seem to have the ability to divest from the US dollar as an international currency, particularly for financial transactions. We suspect it will be very difficult to overcome the strong network effects that have been behind the dollar’s international currency status.
Well no crap Sherlock
Good alternative could be a P2P currency which does not require any particular center to handle a transaction. Switching dollar to ruble or yuan does not seem like it could change something drastically.
Though I don't really understand why governments need a single currency. Just use your own currency and exchange other currencies, it'll settle down eventually.
IMF loans are better than austerity. and structural reforms as conditions of IMF loans are better than selling natural resource extraction rights for 99 years to private companies.
are these development programs perfect? of course not, but the mindless and ignorant vilification is just propaganda at this point.
The IMF is no saint, but they at least is looking to improve things, despite not acting altruistically. Their loans are contingent on economic reforms - e.g., Pakistan's default is in part due to state subsidies and inefficient tax allocation, etc. In the short term, reforming these things looks like causing of suffering for the population, but so does alcohol/drug withdrawal. In the long term, it produces a better economic outcome imho.
Contrast this with stuff like the Belt and Road initiative.
Source?
> The IMF is no saint, but they at least is looking to improve things, despite not acting altruistically.
Should I consider you likely covert operation from China or Russia because of the accusation that IMF is no saint and does not act altruistically?
Not necessarily. The US dollar is fully convertible and several countries offer accounts in USD
(though a lot of places rely happily on SWIFT)
Because commerce is much easier if everyone uses the same currency, plus the more countries use a currency the more stable the currency gets. This where two big reasons why in EU most countries decided to use Euro.
Iow, the currency's ubiquity and total amount buffer shocks to the system, in a way that multi-polar currency use could not tolerate.
If some folks decide to break {insert smaller international currency here} because they think it's overvalued and they don't use it, they probably have the means. But it's difficult to tip over a world-economy sized apple cart.
And a single trade currency also mostly keeps nation-states out of the currency warfare game, because it's a gun pointed back at their head too.
"need" is probably too strong a word. A single currency just makes things easier.
Having a single currency, or using many different currencies is sort of like the difference between a barter system vs a money system (multiple currencies is equivalent to bartering). If the buyer is trying to buy in a currency that is not desired by the seller (i.e. there is nothing that they want being sold in that currency), the seller has to offload it somehow to someone that does want it. There is a cost to that, in additional risk and effort.
Bartering works ok, up until a point. But a shared currency just removes friction, so is preferable.
We could "solve" inflation tomorrow, but we'd also be zeroing growth.
Ergo why the usual target is a small but acceptable bit of inflation. E.g. the US Fed's 2%
Maybe a better metric would be: How much dollar denominated debt is out there?
So its somewhat a false narrative on those basic facts.
Sometimes, you want the explosives or oil more than you care about price.
The question really is, what % of world economy will be de-dollarised in 25 years time, assuming sanctions at scale end in 25 years (they haven't for Iran. Uk and Us still hold bank assets and have unfullfilled but fully paid up weapons orders on the books from the 1970s.)
I would be surprised if there isn't a significant grey market at world scale in goods transfer which simply isn't denominated at all -The "fictional" value of drugs for instance, is almost meaningless when randomly 75% of your supply chain is lost at sea. "street price" is whatever you can get. How much it's "worth" would demand somebody does realistic pricing against the % of drug supply which even resembles what it's called.
Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Does Russia really care what currency its denominated in, if it gets a truckload of SAM missile parts?
If you were supplying goods and services to a narco-economy, what currency do you really want anyway? You can buy goods and services with drugs. Why bother with money?
Not really. Trade continues at a lower pace. Many countries "launder" the origin of Russian oil. And the western world turns a blind eye because of economic interests.
https://www.forbes.com/sites/jeffmcmahon/2023/04/18/these-fi...
What the authors are doing is saying “well the dollar is stronger vs. other currencies. Let’s equate that with those other currencies being worth more in our hypothetical baseline.”
This is a bad analysis because
1) exchange rates aren’t like inflation. They move in random directions, so “correcting” the way they did is sort of nonsensical (if they extended the analysis to now, the US would be rapidly gaining share as the currency weak waned)
2) Currencies change value due to supply and demand. The dollar became strong because demand increased, but in this model that causes the dollar to lose share.
3) Add Argentinian pesos to this list and it’s the worlds true reserve currency.
But what it means — if the dollar really is waning in influence — it means tough time for the soft power that the US and it’s banking system is able to exert on other nations without firing a single round.
USD is such a fundamental leverage for the us diplomacy, i don’t think they’ll let it go without a fight. The end of USD hegemony would also probably mean the greatest economy crash since the 1920s…
Also, Saddam Hussein switched to the Euro for his oil exports in 2000. Then later the US invaded and switched it back to the $.
Low-key maneuvering against the Euro has been ongoing for years.