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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

#241

Post by carlosjobim »

immibis wrote: post #234
carlosjobim wrote: post #133

Earlier quoted context omitted.

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.

If you want an economy to prosper the currency value has to remain stable. That means it has to scale with economic output. You can, of course, not do that, if you want to kneecap yourself.

Both the dollar and the euro have lost 70% of their value in the last 20 years. Most other currencies more than that.

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

#242

Post by expedition32 »

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.

The US is now openly threatening countries not to create an alternative to the dollar.

Ofcourse this does not work with PRC they are perfectly capable and willing to sink carrier groups if it comes down to it.

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

#243

Post by expedition32 »

KaiserPro wrote: post #47
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…

Its only really a crisis for people who are dependent on the US for protection. The whole compact is that you use the dollar, and the US will look after you (ie House of Saud, Europe, taiwan, south korea, etc) But that isn't really certain anymore. You need to make tributes to the suntan king, and he is most capricious and likley to tariff the fuck out of you. So alternative destination for your goods is a necessity…

Putting trade tariffs on countries like Vietnam should have gotten Trump deposed. He is literally the Manchurian candidate.

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

#244

Post by stevenjgarner »

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 dollar's share hit a historical bottom around 45-46% in the early 1990s (specifically hitting roughly 45.8% in 1991 and remaining in the high 40s/low 50s through 1994). By the end of 1994 and into 1995, the share began to rise again, eventually peaking at over 70% in 2001.

Another factor was that the 1990's was the Pre-Euro Era, the peak of the "multi-polar" reserve system. Before the Euro was launched in 1999, global reserves were split among many more national currencies (the French franc, the Dutch guilder, etc.), which naturally diluted the dollar's total share more than the current "USD vs. Euro" system.

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

#245

Post by artirdx »

maxglute wrote: post #199
JumpCrisscross wrote: post #102

Earlier quoted context omitted.

> countries (emerging markets / BRI recipients) who would have borrowed USD from FED (or US influenced IMF/WB) now borrow from USD from PRC -> reduce US treasuries demand This makes no sense. If the PRC is lending U.S. dollars, that doesn’t reduce Treasury demand. It increases demand for dollar-denominated assets, goods and service providers. The borrowing country has to spend those lent dollars after all.

PRC lending their USD surplus to countries to buy more PRC shit. "Increases demand for dollar-denominated assets, goods and service" =/= increase demand for US treasury, aka it doesn't fund US deficits. The attack is not on dollar circulation / liquidity but cost of treasury Old: PRC recycle surplus USD into US bonds, increase US treasury demand, subsidizes cheap US debt. New: PRC recycle surplus USD into BRI finance…

Could you explain what do BRICS do with dollars they borrowed from PRC? Buy oil and so the dollars flow to SA. Then what do BRICS do when the dollars loan to PRC is due?

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

#246

Post by detourdog »

JumpCrisscross wrote: post #213
detourdog wrote: post #208

Earlier quoted context omitted.

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.

Yes, we reacted with a financial tool. Everyone uses the influence they have.

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

#247

Post by quickthrowman »

carlosjobim wrote: post #241
immibis wrote: post #234

Earlier quoted context omitted.

If you want an economy to prosper the currency value has to remain stable. That means it has to scale with economic output. You can, of course, not do that, if you want to kneecap yourself.

Both the dollar and the euro have lost 70% of their value in the last 20 years. Most other currencies more than that.

OK, now do dollar-denominated assets. Stocks, bonds, commodities, real estate. How have those fared over the same time period? Those types of assets are where I put my money for long-term savings.

Only idiots that don’t understand inflation hold lots of cash, bringing that up is a strawman. Cash is not a store of value, it’s a unit of exchange and unit of account. Again, cash is not for saving, it should be used to purchase assets if you want to create long-term wealth.

Inflation is a tool used to encourage people to spend or invest their money instead of hoarding it. By spending it or investing it in dollar denominated assets, economic activity and GDP increased. Hoarding cash doesn’t help anyone.

Have you ever considered that perhaps your ideas about the monetary system are wrong?

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

#248

Post by throw0101c »

wakawaka28 wrote: post #218
throw0101c wrote: post #168

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. 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".

> Price stability is overrated.

Tell that to Biden/Harris. Dissatisfaction about prices helped get Trump elected (and now is causing him troubles with popularity as well).

> Letting the government print money any time prices start to fall is literally letting the government profit off your back.

The vast, vast majority of money that is "printed" is created by private banks through credit creation:

* https://www.bankofengland.co.uk/explainers/how-is-money-crea...

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

And the money supply that is created by government(-ish) institutions is by central banks, which—in modern times—are generally operated independently from the government (except in, e.g., Turkey; and some folks want less independence). Central banks often work in opposition to what politicians want: just ask Powell.

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

#249

Post by somenameforme »

immibis wrote: post #236
somenameforme wrote: post #233

Earlier quoted context omitted.

The amount of currency does not have to correlate with the size of an economy. When the economy grows while the amount of currency stays the same then your money simply becomes worth more. For the overwhelming majority of history this was taken to be a good thing. The argument for inflation is that if money become worth more over time then it would discourage investment and encourage money hoarding. That's probably n…

If you want to see how much a deflationary currency fails as a currency, just look at bitcoin. The wild value swings are caused by more people hoarding it than using it as a currency, which is caused by it being deflationary. Now look at monero, which is inflationary, is largely used for day to day purchases (of mostly illegal items) and has a much more stable value, which is one of the key attributes of a good curre…

The USD was metal based, in one way or another, from 1792-1971, with two brief interludes after the Civil War and Great Depression. That's a really good pedigree.

So our current inflationary system only really kicked off in 1971 and is already looking somewhat clearly unsustainable. But what makes this particularly relevant is that 1971 was also right when major breakthroughs in computing were about to unlock a huge economic leap. That helped briefly enable the infinite exponential growth that this inflationary system requires. Without that, I doubt this system would have seen its 50th birthday.

On the topic of stability, the Fed worked to calculate inflation levels from 1800 onward here. [1] You'll notice that from 1800 to 1950 prices never shifted by more than 50% relative to the initial baseline of 51. That's pretty wild if you think about it because it includes the Civil War, both world wars, Great Depression, Spanish Flu, and all of these sort of things. Then in just the relatively calm ~50 years from 1971 to to today, prices increased around 800%.

[1] - https://www.minneapolisfed.org/about-us/monetary-policy/infl...

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