The reserve currency isn't where power lies. It's convenient (at most) for people in the USA to have the dollar as the de facto reserve currency. It's also convenient for people outside the US to have a dominant reserve currency -- having a small number larger than 1 would be OK, but not especially convenient and in the end would still converge back to the largest one, which would be the incumbent. The convenience fo…
What De-Dollarization? The Dollar Rules the World
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Re: What De-Dollarization? The Dollar Rules the World
#22Re: What De-Dollarization? The Dollar Rules the World
#23The reserve currency isn't where power lies. It's convenient (at most) for people in the USA to have the dollar as the de facto reserve currency. It's also convenient for people outside the US to have a dominant reserve currency -- having a small number larger than 1 would be OK, but not especially convenient and in the end would still converge back to the largest one, which would be the incumbent. The convenience fo…
There is a huge benefit to being the reserve currency: you can issue way more debt than you would otherwise be able to. That’s a massive advantage. Unfortunately, in the US, we use that advantage to cut taxes for the rich rather than invest back into our society.
The US can afford to have a lot of debt because it has enormous, highly liquid markets without currency controls, so people want to do transactions with it. So does Japan, which is why it works out for them.
To the degree that reserve status drives debt at all: the US has to issue some debt anyway because that's how foreign countries hold dollar reserves for foreign exchange. But the US is able to issue more than is needed for that (for the reasons above) so this is irrelevant. But it's not a case that being a reserve currency allows you to issue more debt than others can.
Re: What De-Dollarization? The Dollar Rules the World
#24Earlier quoted context omitted.
There is a huge benefit to being the reserve currency: you can issue way more debt than you would otherwise be able to. That’s a massive advantage. Unfortunately, in the US, we use that advantage to cut taxes for the rich rather than invest back into our society.
That's not a property of being a reserve currency; if anything it's the opposite.. The US doesn't even have the highest ratio of debt to GDP. For example, Japan has 200%, borrowed in JPY. The US can afford to have a lot of debt because it has enormous, highly liquid markets without currency controls, so people want to do transactions with it. So does Japan, which is why it works out for them. To the degree that reser…
Re: What De-Dollarization? The Dollar Rules the World
#25>If there is any danger here, it is that the forthcoming debate in Washington over the debt ceiling somehow results in a US default This, I do not understand why the GOP goes nuts over the debt limit. If they blow it this year, inflation worries we have now will seem quaint. If China was not gaming their currency and had a real open economy, that would be a possible alternative. But with Xi in power, it will never ha…
Re: What De-Dollarization? The Dollar Rules the World
#26Whoa, so the dollar really is in danger. Damn.
Re: What De-Dollarization? The Dollar Rules the World
#27Always take everything that politicians, corporate executives, Twitter talking heads, and other public figures say about macroeconomics at face value, especially if it sounds alarmist . Lately many of them have been saying that "the US is in decline," "the dollar's dominance is ending," "a new currency block is emerging," etc. Usually, like most people, they don't understand macroeconomics. They may be parroting some…
De-dollarization has been attempted for decades. It's not a new thing. Governments around the world have tried to switch away from the dollar only to be squashed in the name of democracy. You only need to look at Gadaffi with his Gold Dinar and pan-African currency push and how that turned out. Only large governments with real militaries like Russia and China can openly defy the Petrodollar, and even then only between themselves and with great ire from the US State Department.
That being said, the continued proxy wars are wearing down the US Military and the US Government's ability to get backing for war. Even if the USA wins the current Ukranian proxy war, it no longer has the political will to declare war on BRICS directly. We are likely going to throw people into the meat grinder until both parties are exhausted. What I see as the final compromise is a new UN CBDC used for international settlements, which will still be a US win since the UN is a US puppet currently.
Re: What De-Dollarization? The Dollar Rules the World
#28Earlier quoted context omitted.
That's not a property of being a reserve currency; if anything it's the opposite.. The US doesn't even have the highest ratio of debt to GDP. For example, Japan has 200%, borrowed in JPY. The US can afford to have a lot of debt because it has enormous, highly liquid markets without currency controls, so people want to do transactions with it. So does Japan, which is why it works out for them. To the degree that reser…
The U.S. is 12th in countries ranked by debt-to-GDP. Only Venezuela, Japan, Sudan, Greece, Lebanon, Cabo Verde, Italy, Libya, Portugal, Singapore, and Bahrain. Not exactly the 11 healthiest economies I’ve ever seen. Being the reserve currency allows the US to borrow at much cheaper rates than would otherwise be possible, which allows it to take on more debt without affecting economic growth. The debt to GDP ratio doe…
> Being the reserve currency allows the US to borrow at much cheaper rates than would otherwise be possible
26 countries borrow for less than the US, and from your list those 26 include Japan (the cheapest!), Singapore and Portugal. The US is indeed in the top 1/3, but that hardly supports your claim.
In the end it's simply no big deal either way. Ego-stroking for some, infuriating to others, but at the end of the day just a snooze.
Re: What De-Dollarization? The Dollar Rules the World
#29Earlier quoted context omitted.
The U.S. is 12th in countries ranked by debt-to-GDP. Only Venezuela, Japan, Sudan, Greece, Lebanon, Cabo Verde, Italy, Libya, Portugal, Singapore, and Bahrain. Not exactly the 11 healthiest economies I’ve ever seen. Being the reserve currency allows the US to borrow at much cheaper rates than would otherwise be possible, which allows it to take on more debt without affecting economic growth. The debt to GDP ratio doe…
So what -- you are just asserting this has something to do with its role as a reserve currency. Again, how does it help ? > Being the reserve currency allows the US to borrow at much cheaper rates than would otherwise be possible 26 countries borrow for less than the US, and from your list those 26 include Japan (the cheapest!), Singapore and Portugal. The US is indeed in the top 1/3, but that hardly supports your cl…
This is so misleading. The U.S. is intentionally raising the rate at which it borrows to slow down its own economy. Also, the rate at which you borrow is only half the equation. You also need to consider the amount being borrowed.
Re: What De-Dollarization? The Dollar Rules the World
#30>If there is any danger here, it is that the forthcoming debate in Washington over the debt ceiling somehow results in a US default This, I do not understand why the GOP goes nuts over the debt limit. If they blow it this year, inflation worries we have now will seem quaint. If China was not gaming their currency and had a real open economy, that would be a possible alternative. But with Xi in power, it will never ha…
One of the reasons they continue to get away with this is that it takes a long time for the results of economic policies to become apparent - witness the overarching narrative pinning the past spate of price inflation on the current administration, when it was actually the delayed effect of all the inappropriate "stimulus" during Covid.