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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

#281

Post by thoughtstheseus »

seanieb wrote: post #219

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 The US no longer represents the smart deal, it represents risk, risk that countries can’t afford.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 righ…

That’s entirely the point. Leave the USA financial system or contribute more. If you pick an single alternative currency I’ll run through the reasons why most would choose the US Dollar.

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

#282

Post by thoughtstheseus »

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…

Agree it will land more stable for most parties but it will be turbulent getting there. Global free trade under the USD has created many structural fragilities. Principally that we have global overproduction outside the USA.

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

#283

Post by maxglute »

JumpCrisscross wrote: post #225
maxglute wrote: post #199

Earlier quoted context omitted.

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…

> attack is not on dollar circulation / liquidity but cost of treasury No real way this can work between similarly-sized trading economies. Worst case, a couple central bankers' weekends would be ruined. > PRC recycle surplus USD into BRI finance, said USD doesn't return to US treasury to buy bonds How? PRC sends dollars into BRICS. What do they do with the dollars? If they aren't sitting on them, they're contributin…

>Worst case

Or you know, a few basis points increase in interest rate that adds up to 100s of billions of new debt obligations a year (now more than defense), but it's America, no one loses sleep over that.

>they do with the dollars

Sign PRC development contracts, which = PRC products. Not US treasury. Dollars circulating =/= dollars going into treasury to finance US solvency.

>meaningful way...

>aren't that many indiscriminate...

>single desk's intraday exposure

Churn =/= net absorption, liquidity =/= funding, which is 2T new issuance per year to cover deficit right now (speed =/= volume of plumbing). The exact vulnerability is not many indiscriminate buyers... and losing a whale like PBOC that was one of them, and their 100s of billions has outsized effect as marginal buyer that closed auction regardless of price. Now they've been replaced by price sensitive buyers which means FEDS raise rates to attract non indiscriminate buyers who buy for yield/valuation not storage to close auctions. Meanwhile PRC lending out their USD which further decrease demand for treasury. Instead of exorbitant privilege of cheap debt, treasury payouts closer and closer to market rate because indiscriminate price takers like PRC out. Structural cost of capital increases when debt velocity and refinancing reach fiscal trap levels.

>using dollars would be nuts

>national security

I mean it's happening, lots of PRC loans / shadow lending / swaplines backed up by their dollars, because it's better for PRC use them to further PRC interests than subsidize US debt. What's national security crisis? PRC not using dollars to buy treasury? AKA US going to announce to world surplus USD now must be mandatory recycled/loaned to US gov or be sanctioned? Are they going to sanction countries for buying PRC tractors and end up increasing USD risk premium even more? The virtue of mechanism is PRC is sustaining US dollar system (which Trumps seems to like, i.e. threaten to sanction countries who goes off), but incrementally stripping dollar strength into liability. There's shit all US can do about it without looking even more delulu and making system worse (granted for everyone). US/Trump still gets to see the privilege of dollar liquidity/churn/circulation, but now they have to pay through the nose for it because PRC marginal buyer not there to keep interest floor down.

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

#284

Post by zrn900 »

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…

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

No. Its the result of the US, UK and the EU stealing Venezuelan and Russian state and private dollar funds and every country on the planet realizing that they could get the same treatment if they are at odds with any of them at any point.

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

#285

Post by maxglute »

artirdx wrote: post #245
maxglute wrote: post #199

Earlier quoted context omitted.

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?

It's not limited to BRICs but many emerging economies or distressed countries PRC wants to gain influence. Dollars attached to specific PRC projects, i.e. BRI, so they buy PRC industrial inputs, goods, equipment, contracts PRC SEOs to build XYZ. It goes from a Chinese bank to a Chinese contractor who buys other shit. But the shit they are not buying is US treasuries, and even if they did, not at PBoC/central bank for storage low yield rates that subsidizes US debt. Sometimes there's more generalized debt servicing swaplines, but regardless When dollars come due, PRC can take rmb/commodities/assets (rarely aka debt trap). If borrowing countries payback in USD, then cycle repeats. PRC is basically exploiting UDS network / liquidity effects without paying exorbitant privilege. Well they do pay, as in they take on lending risks, but their USD reserve is inherently not safe anymore post RU sanctions, so might as well as use it now.

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

#286

Post by JumpCrisscross »

detourdog wrote: post #246
JumpCrisscross wrote: post #213

Earlier quoted context omitted.

> 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.

> we reacted with a financial tool

Oil embargo was about America not having oil. We didn’t react with a financial tool to that, but with security guarantees via our military. Putting the financial piece first reverses causation on the order of a decade.

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

#287

Post by JumpCrisscross »

detourdog wrote: post #277
JumpCrisscross wrote: post #224

Earlier quoted context omitted.

> forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing If you give me one source, I'll break down why this is wrong. (In case there isn't one, the U.S. dollar was never pegged to oil demand [whatever that means]. And nothing about petrodollar recycling thought about developing nations for one second.)

Hasn’t all recent oil purchases been settled using USD. My understanding is that most countries buy US treasuries to maintain US credit ratings and to settle global trade debts.

> Hasn’t all recent oil purchases been settled using USD

No. I’ve traded and settled oil in British pounds from a desk at a bank in New York.

> most countries buy US treasuries to maintain US credit ratings and to settle global trade debts

No to the first, partly to the second. Holding Treasuries doesn’t affect creditworthiness. That said, Treasuries are a universal collateral, so some lenders may require Treasuries be held in reserve for their safety (usually in a third-country bank).

The main reason countries buy Treasuries is for reserves. These are maintained so they can defend their currency. They need dollars to do this if their country trades in and/or finances with dollars. (If they trade in or finance with yuan, they should hold yuan bonds, which they can quickly turn into yuan to sell into the market to buy back their currency, thereby stabilizing it.)

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

#288

Post by bdangubic »

grugagag wrote: post #255
hshdhdhj4444 wrote: post #231

Earlier quoted context omitted.

Right, because you were predicting chstgpt in 2018… Amazing how you are quite literally proving you got lucky and yet you seem to believe that you’re hot shit.

Remember that before chatgpt there was a crypto craze which created demand for nvidia

and gaming too before and after and now... damn this nvidia is the luckiest company on the planet ;)

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

#289

Post by detourdog »

JumpCrisscross wrote: post #286
detourdog wrote: post #246

Earlier quoted context omitted.

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

> we reacted with a financial tool Oil embargo was about America not having oil. We didn’t react with a financial tool to that, but with security guarantees via our military. Putting the financial piece first reverses causation on the order of a decade.

I don't think so I think the US had many levers one might have been security guarantees. To try to separate the US influence into specific categories is the same as trying to dissect a joke or a frog.

https://quoteinvestigator.com/2014/10/14/frog/

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

#290

Post by immibis »

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.

If you think 3% inflation is bad, wait until you see what happens when you don't have it. The value of money has to decrease or it won't circulate - see Bitcoin.
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