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USD share as global reserve currency drops to lowest since 1994

wolfstreet.com

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Re: USD share as global reserve currency drops to lowest since 1994

#31

Post by GenerocUsername »

somenameforme wrote: post #11
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

Imagine how red 100 years of economists faces will be when the world ends up back on a gold backed currency.

Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.

Re: USD share as global reserve currency drops to lowest since 1994

#32

Post by rcarr »

somenameforme wrote: post #11
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

We almost got that with Bretton Woods 1.0:

https://en.wikipedia.org/wiki/Bancor

Re: USD share as global reserve currency drops to lowest since 1994

#33

Post by selectodude »

HPsquared wrote: post #14
somenameforme wrote: post #11

Earlier quoted context omitted.

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

With highly liquid capital markets, why wouldn't the dynamics be more like a bank run?

Because dumping all of your US treasuries is a political statement. You can only sell to a willing buyer and announcing that you’re going to do that is tantamount to lighting wealth on fire. Treasuries are assets so there’s no counterparty that will “run out”.

Re: USD share as global reserve currency drops to lowest since 1994

#34

Post by daedrdev »

somenameforme wrote: post #11
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

No, physically backed currencies will not return because physical goods do not correlate with the size of an economy, especially the amount of gold

Re: USD share as global reserve currency drops to lowest since 1994

#35

Post by skybrian »

There’s more to international trade than what central banks do. The US is still a good place to invest overall, which is why we can run trade deficits. The money earned by foreigners, whether it’s from selling oil, cars, or anything else, goes into US investment of all kinds. Foreigners can buy the S&P 500 just as easily as bonds.

US interest rates have been declining lately, so perhaps other investments are more attractive.

Re: USD share as global reserve currency drops to lowest since 1994

#36

Post by daedrdev »

tmn wrote: post #20
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

There’s nothing fundamentally stopping all currencies from floating against gold and gold being the base asset

If your economy grows by 100 percent, and the supply of gold grows by 10 percent, its a massive problem

Re: USD share as global reserve currency drops to lowest since 1994

#37

Post by chhxdjsj »

tmn wrote: post #20
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

There’s nothing fundamentally stopping all currencies from floating against gold and gold being the base asset

Imagine if there was a gold which could be transferred across borders easily and completely securely within seconds, proof of holdings and ownership could be easily proven, and there was no future risk of gold supply shocks (eg gold asteroid hitting earth or alchemy becomes viable).

Re: USD share as global reserve currency drops to lowest since 1994

#38

Post by vkou »

GenerocUsername wrote: post #31
somenameforme wrote: post #11

Earlier quoted context omitted.

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

Imagine how red 100 years of economists faces will be when the world ends up back on a gold backed currency. Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.

There were, of course, no economic disasters back when the world operated on gold-backed currencies.

The goldbugs won't be red in the face, though, because they are never wrong and are constitutionally incapable of feeling any shame.

Re: USD share as global reserve currency drops to lowest since 1994

#39

Post by delfinom »

GenerocUsername wrote: post #31
somenameforme wrote: post #11

Earlier quoted context omitted.

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

Imagine how red 100 years of economists faces will be when the world ends up back on a gold backed currency. Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.

Works until we have someone mining asteroids for gold. Then the gold backed currency collapses overnight.

Re: USD share as global reserve currency drops to lowest since 1994

#40

Post by ajross »

somenameforme wrote: post #11
duttish wrote: post #4

I'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a worl…

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation i…

> The replacement will probably be a multinational currency with strictly controlled quantity tied to [...] probably [...] gold.

This is econolibertarian fan fiction. Literally no one wants that except people already involved in speculating[1] on gold. Are there bad externalities to relying on a unlitaterally controlled reserve currency? Yes. Are they made better by handing financial control over to a bunch of fucking mine and vault operators? Let's be real, here.

Basically this idea appeals to people who've convinced themselves they can get rich betting on financial policy and stay rich by burying their loot in their metaphorical backyard.

[1] The very fact that such speculation even exists should be a triple exclamation point red flag on any argument about hard currency, but alas no.

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