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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

#211

Post by refurb »

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…

Good observations.

Not only that, I find it funny when title of “global reserve currency” is based on a static measure of what countries are holding.

This ignores transactions entirely.

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

#212

Post by refurb »

bdangubic wrote: post #182
toomuchtodo wrote: post #179

Earlier quoted context omitted.

I think it speaks volumes that Buffet has nowhere else to put that ~$382B in cash; that speaks more about current asset valuations ("everything bubble" [1]) more than that US cash is trash. If assets classes are inflated, US treasuries are no longer a safe haven, gold and other precious metals are overbought, where do you go? There is no immediate answer, imho, but only a slow burn as the world reconfigures around th…

damn shit is really bad, sky is failing, bubbles are bursting… any other clickbait I need to read up on before I go spend the last of the good days with my kid…? coolest thing about us in the 50’s is that we’ve seen and read this shit many times before and don’t fall the “bubble du jour” or “shit’s really bad this time…” - especially readers here on HN, bubbles be bursting for yeeeears now, recession is coming, crash…

Yup. It’s wild seeing the internet chat about the latest flavor of the week of “the sky is falling”.

Try going back 1 year and look at those headlines. What you’ll find seem silly looking back.

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

#213

Post by JumpCrisscross »

detourdog wrote: post #208
JumpCrisscross wrote: post #207

Earlier quoted context omitted.

> see that as a side show to the overall banking system See what? The geopolitics? The petrodollar was entirely a geopolitical affair. If anything, one could argue petrodollar recycling—together with the fall of the USSR-created the modern American banking system. (The timeline is compelling for e.g. LBO debt.)

The reaction to 70's era oil embargo as opposed to the overall global monetary system. The oil embargo was a use of the monetary system not an intrinsic part of it's development.

> oil embargo was a use of the monetary system not an intrinsic part of it's development

Oil embargo was about embargoing oil. It wasn’t monetary. It was about denying essential commodities.

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

#214

Post by cma »

JumpCrisscross wrote: post #95
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…

> Dollars are currently only in demand for short-term use in transactions This is all currencies. You store value in debt. You spend in the hot currency. > no one wants to hold them because they devalue and will continue to do so at an accelerating rate Literally what Treasuries are for. > everyone should think of their checking account as something that they pay negative real interest on for the privilege of being a…

A checking account that pays around inflation in interest doesn't net out to that unless you don't pay any tax on the interest.

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

#215

Post by mgh95 »

marcosdumay wrote: post #195
mgh95 wrote: post #166

Earlier quoted context omitted.

> Hum... There are no reliable numbers out there, but I don't think the dollar devaluation has been keeping up with the US inflation. There isn't anything like "dollar devaluation has been keeping up with the US inflation". You are interested in what is called the import/export price index [1] and for imports that has been relatively flat for the past ~24 months(import +.3%, export +3.8% for TTM). So in a sense, impo…

> It's more along the lines of "if the EUR goes to 1.5, what does this do to eurozone economies?" and the answer to that isn't pretty for europe. If all the prices rise in the US to compensate, Europe stays exactly as competitive as before. > And finally, remember: the US actually exports inflation You are blowing the horn yelling that this just stopped. Or what do you think a dollar devaluation is?

> If all the prices rise in the US to compensate, Europe stays exactly as competitive as before.

Yes, but my point is exactly the opposite has occurred for imports: the US is still roughly flat in terms of import inflation. Since Nov '22, import inflation has been sub-3% without exception and sub-2% since 2023 without exception. The US is still exporting inflation effectively, and US inflation is due to factors other than currency fluctuations.

That's the real issue: the USD weakened 8% against the EUR, and prices remain the same. For eurozone exporters to the US that's an absolute disaster.

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

#216

Post by mgh95 »

alphazard wrote: post #93
mgh95 wrote: post #89

Earlier quoted context omitted.

> 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].

> 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... I don't think that FOREX rates are the best way to think about this, but if you work in that world or otherwise have an intuition for it, then go ahead. Most of us only handle 1 currency, and reasoning in terms of 2 isn't exactly an intuition pump. Instead think about: 1. The dolla…

> I don't think that FOREX rates are the best way to think about this, but if you work in that world or otherwise have an intuition for it, then go ahead. Most of us only handle 1 currency, and reasoning in terms of 2 isn't exactly an intuition pump.

Forex rates, balance of trade, and relative strengthening are great ways of understanding international fluctuations. They are exactly the way to understand reserve currency movements

> 2. How much your personal basket of monthly expenses costs in terms of dollars. Ignore a basket that someone on the news told you to care about, like CPI. I mean your personal basket, all the stuff you personally buy, how much is it in dollars, now, a year in the future, a year earlier.

This hits at a major part of the issue: goods that have no importable replacement good (housing and healthcare, namely) are a huge part of what lead to the huge bout of inflation. But those are domestic economics, not international economics.

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

#217

Post by rep_movsd »

JumpCrisscross wrote: post #104
detourdog wrote: post #3

Earlier quoted context omitted.

My understanding is that it has happened. The oil market was tied to the USD. The BRICS have now implemented a payment system as robust as SWIFT system. Oil is now being paid for using that system.

> Oil is now being paid for using that system The petrodollar hypothesis has been a myth since the 1990s. With America a net oil exporter , it’s an entirely stupid model to keep running.

By forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing.

Also SWIFT being a means of control of movement of funds.

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

#218

Post by wakawaka28 »

throw0101c wrote: post #168
cjbgkagh wrote: post #67

Earlier quoted context omitted.

I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. You can still have fractional reserve banking with the gold standard so the gold standard alone is not sufficient to prevent that.

> I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. Contrary to popular opinion, the historical record shows that gold does not actually bring price stability; see "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts": *…

Price stability is overrated. Prices must change according to scarcity. Letting the government print money any time prices start to fall is literally letting the government profit off your back. It makes accounting easier, but it destroys market information like "Supply of goods is catching up to demand, find something better to produce".

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

#219

Post by seanieb »

Judging by the comments Americans still don’t intuitively understand what the rest of the world does. Everyone is trying to create distance from the United States. The US no longer represents the smart deal, it represents risk, risk that countries can’t afford. The US has spent the last year creating chaos and punishing its closest allies and trading partners. The instability goes beyond Trumps term too, they’re rightfully afraid of the system that elected Trump twice. When they have a choice between euro’s, dollar’s or yuan they’re going to choose dollars less frequently to avoid exposure to the US.

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

#220

Post by tsoukase »

rvnx wrote: post #174
marcosdumay wrote: post #141

Earlier quoted context omitted.

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 t…

"Stable". If any time in history where planets align so perfectly for wars it is right now. It could play out nicely for USD, if the US stays out of direct conflicts but keeps selling weapons.

We are at constant peripheral micro-wars in the last 33 years. The US are behind these, selling weapons to both sides. Nothing will change. Ukraine saga will continue as it is for many years, before the next one. God bless nuclear weapons that we don't see any direct US-Russia-China conflict.
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