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USD share as global reserve currency drops to lowest since 1994

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

#131

Post by Epa095 »

kibwen wrote: post #99
JumpCrisscross wrote: post #92

Earlier quoted context omitted.

> only one is relevant to the Euro The Baltics are in the Eurozone. If Russia invaded the Baltics tomorrow, Europe would be dependent on America to stay intact. That isn’t really a risk one wants to take with a reserve asset.

It's worth emphasizing this: without the US Navy, the remaining European powers don't have the naval force to stop Russia from blockading the Baltics. And without the ability to break such a blockade, there's little hope in aiding the Baltics against a land invasion from Russia and Belarus. Russia wants a land route to Kaliningrad, and they'll take it at this rate.

Where would this blockade be? In the NATO sea (baltic sea)? Covered by European Nato countries at every direction, and then whole entry passes through Denmark.

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

#133

Post by carlosjobim »

quickthrowman wrote: post #48
tmn wrote: post #20

Earlier quoted context omitted.

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

There is a fixed supply of gold that does not correlate with economic output. It makes zero sense to tie the value of paper money to gold.

That argument comes from an ancient list of arguments against gold. But nobody seems to be able to explain why that would matter at all. There doesn't need to be any correlation with the amount of currency and the economic output. And there has never been any such correlation, including right now with the dollar or any other currency.

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

#134

Post by alphazard »

JumpCrisscross wrote: post #97
alphazard wrote: post #96

Earlier quoted context omitted.

This seems a little pedantic, but sure, no one wants to be owed debt denominated in dollars.

> no one wants debt denominated in dollars Source? Every indication is that dollar-denominated financial assets are tremendously in demand. (What metric are you looking at?) The Fed has been reducing rates while selling assets, all while U.S. public debt explodes. The Treasury is selling more debt. The Fed is selling debt. Rates went up, and then they went down. That means there is, ceteris paribus , more demand outs…

People want to be dollar debtors, not dollar creditors. When I said no one wants dollars, I was referring to people's willingness to hold actual dollars or obligations that pay them dollars in the future.

Your other comment mentions the AI bubble, and also makes me think you don't understand what I'm saying, since we seem to agree about what happens to dollars and debt in a bubble. Companies are glad to take dollars now in exchange for owing dollars in the future (something they would be less willing to do if the dollar was strong). They then turn around and spend those dollars on GPUs and electricity. They think they can get more done with a dollar this quarter by trading it to NVIDIA or a power company than by holding T bills.

Fed rates do not track the real demand to be a dollar creditor. That's kind of the point, the Fed is the lender of last resort. If no one wants to give dollars now for more later, then the Fed becomes a creditor to the treasury at an arbitrary rate.

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

#135

Post by StanislavPetrov »

JumpCrisscross wrote: post #97
alphazard wrote: post #96

Earlier quoted context omitted.

This seems a little pedantic, but sure, no one wants to be owed debt denominated in dollars.

> no one wants debt denominated in dollars Source? Every indication is that dollar-denominated financial assets are tremendously in demand. (What metric are you looking at?) The Fed has been reducing rates while selling assets, all while U.S. public debt explodes. The Treasury is selling more debt. The Fed is selling debt. Rates went up, and then they went down. That means there is, ceteris paribus , more demand outs…

You are mistaking owning US debt and having your debt denominated in dollars. Many foreign countries find it desirable to own US treasuries, but they don't want to borrow dollars and have a dollar-denominated debt. When that happens, and your own currency is devalued, you still owe the same number of dollars. You now have to buy these more expensive dollars to repay your dollar-denominated debt.

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

#136

Post by mahirsaid »

mvkel wrote: post #21

Whenever I see headlines like this, I ask: what happened in 1994? It was post-Cold War and central banks were trimming USD reserves to test alternatives. Then, crises hit (tequila, Asian, Russian, dot com) and the world reconsolidated around USD, thanks to the immense strength of the Federal Reserve and IMF. Similarly now, reserve share is falling as countries hedge sanctions and geopolitics, yet dollar usage in trad…

Something like the brics can challenge that. Having a safe currency vehicle that can sustain itself much like the dollar that the world will trust is all the momentum you need. Much like why the dollar is. You have a big player now like China backed by other large populated countries etc brazil.

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

#137

Post by roenxi »

JumpCrisscross wrote: post #97
alphazard wrote: post #96

Earlier quoted context omitted.

This seems a little pedantic, but sure, no one wants to be owed debt denominated in dollars.

> no one wants debt denominated in dollars Source? Every indication is that dollar-denominated financial assets are tremendously in demand. (What metric are you looking at?) The Fed has been reducing rates while selling assets, all while U.S. public debt explodes. The Treasury is selling more debt. The Fed is selling debt. Rates went up, and then they went down. That means there is, ceteris paribus , more demand outs…

It isn't cetiris paribus, the Fed rate tells us nothing about demand because they purposefully devalue the dollar. The entire world could be refusing to accept US debt except Broke Boris and they could technically negotiate a 4% rate with just him. Assessing demand for US debt has to be linked to real goods/services/assets somewhere along the line or there just isn't anything to say. The BRICS arguably make up around 40% of the world's economy and they appear to be either slowly evacuating or less-interested in treasuries [0]. It is by no means clear that US debt demand is up or even stable.

Great time to own gold, unfortunately. I wish mine had been a bad purchase but with all the "real growth" it has been experiencing I'm probably going to need a bigger vault box.

[0] https://ticdata.treasury.gov/resource-center/data-chart-cent...

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

#138

Post by mahirsaid »

mahirsaid wrote: post #136
mvkel wrote: post #21

Whenever I see headlines like this, I ask: what happened in 1994? It was post-Cold War and central banks were trimming USD reserves to test alternatives. Then, crises hit (tequila, Asian, Russian, dot com) and the world reconsolidated around USD, thanks to the immense strength of the Federal Reserve and IMF. Similarly now, reserve share is falling as countries hedge sanctions and geopolitics, yet dollar usage in trad…

Something like the brics can challenge that. Having a safe currency vehicle that can sustain itself much like the dollar that the world will trust is all the momentum you need. Much like why the dollar is. You have a big player now like China backed by other large populated countries etc brazil.

So yes this can change this time. Nothing stays the same. That's all of humanities experience so far if we haven't learned anything from it.

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

#139

Post by cjs_ac »

indubioprorubik wrote: post #27
mvkel wrote: post #21

Whenever I see headlines like this, I ask: what happened in 1994? It was post-Cold War and central banks were trimming USD reserves to test alternatives. Then, crises hit (tequila, Asian, Russian, dot com) and the world reconsolidated around USD, thanks to the immense strength of the Federal Reserve and IMF. Similarly now, reserve share is falling as countries hedge sanctions and geopolitics, yet dollar usage in trad…

No, each pushed alternative is just worser. The euro could take over, but europe just revealed itself as a "lawful" player with no plan and no pants (security-wise) - so the euro is just defacto tied to the dollar value wise. For without the us guarding europe, the euro is just loaded with invisible gigantic security and pension debts. BRICs is dealing in store credits and raw-materials. Every other empire and kingdo…

Everyone knows what’s going on. Europe is slowly reacquiring pants (too slowly for my taste).

The US has this ridiculous belief that Europe has no military ability. The truth is that Europe is far too skilled at war, and collectively disarmed after the Second World War and let the US make the decisions and pay for it all because that was the only way to achieve a lasting peace. European armed forces aren’t ready for war, but they are skeletons on which wartime forces can be reconstituted.

Now that the US is dropping its responsibilities it’s also losing its privileges, but everyone is moving quietly so that the amateurs in the White House don’t cotton on. The world doesn’t need a sheriff; it’s just going to have a bunch of players looking after their own interests. The historical attitude to war already prevails: ‘it’s fine as long as it doesn’t affect us.’

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

#140

Post by thisislife2 »

MagnumOpus wrote: post #24
mvkel wrote: post #21

Whenever I see headlines like this, I ask: what happened in 1994? It was post-Cold War and central banks were trimming USD reserves to test alternatives. Then, crises hit (tequila, Asian, Russian, dot com) and the world reconsolidated around USD, thanks to the immense strength of the Federal Reserve and IMF. Similarly now, reserve share is falling as countries hedge sanctions and geopolitics, yet dollar usage in trad…

No, this is an artifact of Russian reserves getting frozen in 2022 and autocracies the world round getting more careful about having all their eggs in that basket. The PRC’s SAFE is selling dollars and buying gold in a very covert but absolutely massive fashion, and most likely, so are many other countries in a smaller way.

India has also been quietly bringing back its gold reserves stored abroad. NATO west made a very bad call by freezing, and then publicising their threat to also seize, Russia's foreign reserves in their country.
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