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What De-Dollarization? The Dollar Rules the World

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Re: What De-Dollarization? The Dollar Rules the World

#31

Post by gumby »

rcme wrote: post #29
gumby wrote: post #28

Earlier quoted context omitted.

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…

> 26 countries borrow for less than the US 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.

But what has the amount being borrowed to do with being a reserve currency? The amount leant for foreign exchange reserves (by other countries) is a small percentage of the total, as you can easily look up. Most government debt in the US is held by us citizens and entities (as is true for thenother large economies)

You seem to be trying hard to make a point where neither data nor theory support it

Re: What De-Dollarization? The Dollar Rules the World

#32

Post by hakfoo »

prottog wrote: post #20
0zemp1c wrote: post #12

the Dollar "rules" by virtue of being the least dirty shirt in the laundry bin the Euro made a run at greatness twenty years ago but never gained traction Japan doesn't have its hooks into petro-politics China will try next and may succeed with the Yuan but only through conflict what Cowen isn't telling you is that it won't take that many US dollars washing back to our shores to create serous inflation...just having…

> China will try next and may succeed with the Yuan but only through conflict Nobody can tell the future, but I don't think it's looking good for the CNY. Xi Jinping's unprecedented (since Mao Zedong's demise almost 50 years ago, at any rate) third term coupled with every indication that he's going to try and hold on to power for life presents a bearish picture on the long-term stability of the country and its curren…

It's interesting to look at some of the leaders on a long-game perspective.

I feel like Fidel Castro, for example, didn't really use the office as a vehicle for self-enrichment and seemed to bow out in a graceful attempt to preserve his long-term legacy.

It seems like Xi is on a similar vector-- his domestic credibility is largely due to rising global economic and political importance, and you don't really hear rumours of grand mansions and fleets of luxury vehicles on the state's tab. Maybe from that perspective, it's a "why change horses in mid-stream" scenario in the short-mid term at least.

When we talk about how flexible and adaptable free markets are, we also forget how inertia-prone they are-- too many private businesses will let their country's future rot because they want to milk dying business plans for one more calendar quarter. China's ability to direct economic activity gives them a way to break the stiction.

Re: What De-Dollarization? The Dollar Rules the World

#33

Post by user_named »

obviouslynotme wrote: post #27
cs702 wrote: post #3

Always 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…

I agree and disagree. The USA and the US Dollar aren't going to evaporate any time soon. People have been predicting that ever since we left the gold standard. The USA may not be a unilateral superpower anymore, but it's still the largest military and has only recently been knocked off its place as the largest economy. The supremacy of the USA and US Dollar aren't going away anytime soon, even if it is in decline. De…

The USD will lose reserve status first slowly, then suddenly. You dispute the slowly part, but you will not be able to dispute the sudden part.

Re: What De-Dollarization? The Dollar Rules the World

#34

Post by user_named »

gumby wrote: post #31
rcme wrote: post #29

Earlier quoted context omitted.

> 26 countries borrow for less than the US 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.

But what has the amount being borrowed to do with being a reserve currency? The amount leant for foreign exchange reserves (by other countries) is a small percentage of the total, as you can easily look up. Most government debt in the US is held by us citizens and entities (as is true for thenother large economies) You seem to be trying hard to make a point where neither data nor theory support it

You're trying to claim there's barely any benefit to controlling the world's reserve currency - you are the one with no theory or data to back up four claim. The rest of the world would disagree with you.

Re: What De-Dollarization? The Dollar Rules the World

#35

Post by user_named »

prottog wrote: post #20
0zemp1c wrote: post #12

the Dollar "rules" by virtue of being the least dirty shirt in the laundry bin the Euro made a run at greatness twenty years ago but never gained traction Japan doesn't have its hooks into petro-politics China will try next and may succeed with the Yuan but only through conflict what Cowen isn't telling you is that it won't take that many US dollars washing back to our shores to create serous inflation...just having…

> China will try next and may succeed with the Yuan but only through conflict Nobody can tell the future, but I don't think it's looking good for the CNY. Xi Jinping's unprecedented (since Mao Zedong's demise almost 50 years ago, at any rate) third term coupled with every indication that he's going to try and hold on to power for life presents a bearish picture on the long-term stability of the country and its curren…

The CNY looks to have an excellent future. It's held up as well as the USD in this year's financial trouble, and has gained around 100% in value over the past twenty years in comparison to many smaller currencies.

Re: What De-Dollarization? The Dollar Rules the World

#36

Post by rcme »

gumby wrote: post #31
rcme wrote: post #29

Earlier quoted context omitted.

> 26 countries borrow for less than the US 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.

But what has the amount being borrowed to do with being a reserve currency? The amount leant for foreign exchange reserves (by other countries) is a small percentage of the total, as you can easily look up. Most government debt in the US is held by us citizens and entities (as is true for thenother large economies) You seem to be trying hard to make a point where neither data nor theory support it

> But what has the amount being borrowed to do with being a reserve currency? The amount leant for foreign exchange reserves (by other countries) is a small percentage of the total

Where did I mention foreign exchange reserves? I just said the US had an easier time borrowing money. That includes from other countries, institutions, and individuals.

Think about it like this: The US can say: “Hey world, I’m borrowing money at X%”. Regardless of what X is, the US will be able to borrow large amounts of money. Some of the borrowers will be foreign governments, some will private citizens, some will be institutional investors. It doesn’t really matter. There will be huge appetite for the debt regardless of yield.

Now, Portugal is free to say “Hey world, I’m borrowing money at X/2%”. That’s totally within Portugal’s rights. But they’re going to have a very difficult time borrowing any substantial amount of money. Maybe they’re ok with that. Maybe they don’t need to borrow much. But if they did want to borrow a lot they’d need to pay a premium on top of what the US was paying to borrow.

Now you’ll probably respond with something like “The BoE and ECB rates are lower than the Fed’s” and that’s true. And the reason is because there is a complicated relationship between demand for dollars and bonds, the amount the US wants to borrow, domestic monetary policy, and the opportunity cost between holding other currencies other than the US dollar. The point is that being the reserve currency allows the US to borrow more for cheaper than it otherwise would be able to. That doesn’t mean the US has the highest debt or the absolute lowest interest rate. It just means, had the US not been the reserve currency, they would have paid more for borrowing the amount of money they borrowed.

Re: What De-Dollarization? The Dollar Rules the World

#37

Post by prottog »

hakfoo wrote: post #32
prottog wrote: post #20

Earlier quoted context omitted.

> China will try next and may succeed with the Yuan but only through conflict Nobody can tell the future, but I don't think it's looking good for the CNY. Xi Jinping's unprecedented (since Mao Zedong's demise almost 50 years ago, at any rate) third term coupled with every indication that he's going to try and hold on to power for life presents a bearish picture on the long-term stability of the country and its curren…

It's interesting to look at some of the leaders on a long-game perspective. I feel like Fidel Castro, for example, didn't really use the office as a vehicle for self-enrichment and seemed to bow out in a graceful attempt to preserve his long-term legacy. It seems like Xi is on a similar vector-- his domestic credibility is largely due to rising global economic and political importance, and you don't really hear rumou…

> Fidel Castro [...] seemed to bow out in a graceful attempt to preserve his long-term legacy.

He ruled for nearly fifty years and his successor was his brother. Certainly no part of that can be described as "bowing out", gracefully or not ;-)

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