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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

#91

Post by messe »

brianwawok wrote: post #87
messe wrote: post #80

Earlier quoted context omitted.

> For without the us [sic] guarding europe Those words hit harder when you've an executive that isn't beholden to Russia or threatening to fucking annex part of an ally, and a Europe that isn't investing heavily into rearmament. But please, continue in your delusion.

That’s great, I’d love a strong European military. Can you help Ukraine enough so it can win? If not you can’t defend your own countries alone.

Ah yes, because the US has been sooooo fucking supportive recently. Give me a fucking break. Your GDP is bigger than ours, and you claim to give more aid to Ukraine, but you haven't even remotely matched it. The sheer fucking arrogance of you.

> Can you help Ukraine enough so it can win?

Can you (the American executive) stop collaborating with Russia[1]?

> If not you can’t defend your own countries alone.

Are we talking about the EU or Europe here? Because only one is relevant to the Euro here. It's important to get this right, because it does tend to get confused by bystanders from the far side of the Atlantic.

[1]: https://www.theguardian.com/us-news/2025/nov/25/trump-envoy-...

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

#92

Post by JumpCrisscross »

messe wrote: post #91
brianwawok wrote: post #87

Earlier quoted context omitted.

That’s great, I’d love a strong European military. Can you help Ukraine enough so it can win? If not you can’t defend your own countries alone.

Ah yes, because the US has been sooooo fucking supportive recently. Give me a fucking break. Your GDP is bigger than ours, and you claim to give more aid to Ukraine, but you haven't even remotely matched it. The sheer fucking arrogance of you. > Can you help Ukraine enough so it can win? Can you (the American executive) stop collaborating with Russia[1]? > If not you can’t defend your own countries alone. Are we talk…

> 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.

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

#93

Post by alphazard »

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].

> 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 dollar valued against itself a year earlier, and a year in the future. That is the interest rate or yield of the asset if held. It should have a positive real yield, but right now it doesn't.

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.

If you stored value in business or a precious metals in the last year and then converted back, you would probably have more dollars, or be able to buy more stuff, that's all there is to it.

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

#94

Post by pandaman »

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…

Treasuries are not some kind of artifacts that can be stored indefinitely, they are bonds with maturity dates. As they mature they turn into cash automatically and that cash used to come from selling new treasuries. As the demand dwindles the US has to sell its bonds cheaper thus borrowing at higher interest and that interest will have to be paid by selling even more treasuries at even higher interest so it's already a feedback loop.

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

#95

Post by JumpCrisscross »

alphazard wrote: post #88
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…

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 able to transact with the rest of the world

One, you shouldn’t be storing wealth in cash-like instruments, that’s literally using currency wrong (and has been across human history). Cash is for transacting.

But in today’s economy, you generally can find checking accounts with pay around inflation. And if it really worries you, you can buy TIPS.

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

#96

Post by alphazard »

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…

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

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

#97

Post by JumpCrisscross »

alphazard wrote: post #96
JumpCrisscross wrote: post #95

Earlier quoted context omitted.

> 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…

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 outside the Fed and Treasury than there was when Russia invaded Ukraine.

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

#98

Post by JumpCrisscross »

pandaman wrote: post #94
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…

Treasuries are not some kind of artifacts that can be stored indefinitely, they are bonds with maturity dates. As they mature they turn into cash automatically and that cash used to come from selling new treasuries. As the demand dwindles the US has to sell its bonds cheaper thus borrowing at higher interest and that interest will have to be paid by selling even more treasuries at even higher interest so it's already…

> As the demand dwindles the US has to sell its bonds cheaper

To be clear, we see no indication of this. (The Fed reduced its balance sheet in the last 3 years on the order of the GDP of Spain or Brazil [1][2].)

[1] https://www.federalreserve.gov/monetarypolicy/policy-normali...

[2] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

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

#99

Post by kibwen »

JumpCrisscross wrote: post #92
messe wrote: post #91

Earlier quoted context omitted.

Ah yes, because the US has been sooooo fucking supportive recently. Give me a fucking break. Your GDP is bigger than ours, and you claim to give more aid to Ukraine, but you haven't even remotely matched it. The sheer fucking arrogance of you. > Can you help Ukraine enough so it can win? Can you (the American executive) stop collaborating with Russia[1]? > If not you can’t defend your own countries alone. Are we talk…

> 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.

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

#100

Post by JumpCrisscross »

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…

> reserve share is falling as countries hedge sanctions and geopolitics

We’re importing a bit less [1]. That means fewer dollars being pushed (versus pulled) abroad.

[1] https://tradingeconomics.com/united-states/imports

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