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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

#141

Post by marcosdumay »

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…

The article answers your question:

> The dollar’s share had already been below 50% before, in 1990 and 1991, after a long plunge from the peak in 1977 (share of 85.5%). This plunge accompanied a deep crisis in the US with sky-high inflation and interest rates, and four recessions over those years, including the nasty double-dip recession.

Or, in other words, at 1991 the US started recovering from the Oil Crisis and the subsequent fuckery. There's a dip in that number around the time the USSR felt, but it's just a small acceleration to the trend.

> Makes me wonder: is this just an artifact of the world being relatively "stable" right now?

Do you think the world is relatively "stable" right now?

Oh, and I'd check the data before believing usage in trade debt and crisis funding are going strong. Two of those are constantly making headlines for how they are decreasing, and "crisis funding" is basically another name for "reserve currency".

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

#142

Post by llmslave2 »

laterium wrote: post #120
llmslave2 wrote: post #68

Earlier quoted context omitted.

I know you mean it as in governments won't return to a system that doesn't let them inflate the money supply, but that doesn't mean it's a bad thing...

Being able to conduct monetary policy is valuable, even if it can be misused. Otherwise all other countries would just be using USD.

Useful to facilitate a massive transfer of wealth from the working class to the asset class perhaps.

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

#143

Post by 827a »

oblio wrote: post #62
827a wrote: post #23

Earlier quoted context omitted.

In some ways, this effect can have a positive impact on US citizens; demand for the US dollar requires supply to satisfy the demand. Where does that supply come from? Oftentimes: Printing. The US generally does not make a habit of telling US dollar buyers "no, we don't have any US dollars to sell you", so less demand on the dollar for reserve holdings can have a deflationary impact on its value. This can be combined…

What about US debt? If nobody buys USD anymore, suddenly there will be a lot of excess USD.

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

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

#144

Post by marcosdumay »

mgh95 wrote: post #89
alphazard wrote: post #88

Earlier quoted context omitted.

Dollars are currently only in demand for short-term use in transactions. Most of the world still relies on dollars for transactions, because that is what all the banking and payment infrastructure uses. But no one wants to hold them because they devalue and will continue to do so at an accelerating rate. It's a game of hot potato where everyone is forced to hold equities, commodities or other assets by default in ord…

> But no one wants to hold them because they devalue and will continue to do so at an accelerating rate. Devalue against what is the main question though, isn't it? The real longer term issue is that the USD is devaluing against the Euro, but even that has serious issues for Europe's export oriented economies [1].

> but even that has serious issues for Europe's export oriented economies

Hum... There are no reliable numbers out there, but I don't think the dollar devaluation has been keeping up with the US inflation.

And if so, no, Europe's exports are becoming more competitive, not less.

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

#145

Post by JumpCrisscross »

detourdog wrote: post #117
JumpCrisscross wrote: post #105

Earlier quoted context omitted.

> steady building up of alternatives will happen until one day the reserve currency status will change hands all of a sudden This is not how it has ever happened. Instead, we’ll see a gradual erosion as the world switches to multi-polarity and spheres of influence. (And, with decreasing international trade, every country’s reserve mix will vary.)

I agree that the next wave may not be dominated by a single currency. I also think that is a superior system. I think the BRICS system is based on honoring multiple currencies rather than using a single currency for settlement.

> that is a superior system

It’s more robust and less efficient. Transaction costs—and opportunities for middlemen—will increase. But the chances that your country’s economy is entirely shut down on the whim of one man in Washington is reduced.

> the BRICS system is based on honoring multiple currencies

The BRICS system is nonsense, as evidenced by basically nobody using it beyond a totem amount. Both the PBoC and RBI have superior settlement systems they could open up if they wanted to. Neither does because neither wants an unrestricted capital account.

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

#146

Post by marcosdumay »

detourdog wrote: post #72
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…

Early 90’s during the Clinton administration (and the dot com boom) appeared to be the best run US budgeting process I have ever seen.

Yes, but global reserves are the domestic total foreign debit, and the government does not control that one. (I mean, it can weight in how it grows, but it's not the one that makes it.)

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

#148

Post by freeone3000 »

carlosjobim wrote: post #123
RealityVoid wrote: post #83

Earlier quoted context omitted.

I'd rather go back to crypto than be chained to a piece of stupid metal.

You take that back now. Gold is the best thing which has ever existed. Name one thing in the world which can even compete.

The literal idea of value.

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

#149

Post by marcosdumay »

darth_avocado wrote: post #17
ur-whale wrote: post #10

Highly unpopular opinion here and I'm going to get downvoted into the ground (who cares), but ... this has been a very long time coming and has very much been a self-inflicted change. My bet is that it will end up being a very good thing for the world at large. China has recently started to buy Arabian oil and paying with yuan. Major countries (India, China) are starting to buy Russian raw materials and paying direct…

Every time I hear people claiming India and China now not using dollar and the end of dollar’s dominance, I feel it’s coming from mostly clickbait headlines, not data. From a global payments share, dollar is still the single largest currency from a percentage standpoint, and is at historically highest share of global trade. Any changes to currency share are coming from lower volume from the Euro. On top of that, if y…

Your link has a trend graph. I recommend you look at it.

also, it ends in 2024.

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

#150

Post by marcosdumay »

AnthonyMouse wrote: post #26
ur-whale wrote: post #10

Highly unpopular opinion here and I'm going to get downvoted into the ground (who cares), but ... this has been a very long time coming and has very much been a self-inflicted change. My bet is that it will end up being a very good thing for the world at large. China has recently started to buy Arabian oil and paying with yuan. Major countries (India, China) are starting to buy Russian raw materials and paying direct…

> get the bloody USD printing machine under control The amount the US government spends on debt service is already unreasonable. If the US dollar lost reserve status, the first thing that would happen is that the Fed would have to buy the debt with newly created money to prevent bond rates from causing interest payments to explode. Meanwhile the act of other countries unloading US dollar reserves would cause signific…

> Basically, loss of reserve status = hyperinflation.

That's not exactly how hyperinflation works. You can't use this as a predictable claim, hyperinflation is never predictable.

That said, yes, that would cause a lot of inflation. Normal inflation. And there's a risk it causes hyperinflation.

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