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 trade, debt, and crisis funding remains dominant, and unless a true full-stack alternative (liquidity, safety, yield, and crisis response) emerges, history will repeat.
Makes me wonder: is this just an artifact of the world being relatively "stable" right now?
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 order to preserve their wealth, and then convert to dollars to transact. The days of savings accounts are over, and 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.
Meanwhile, the big players in the current financial system are trying to figure out how to continue playing the current game without resetting everyone's progress. They don't want to lose their hard won position to pay for bad decisions by American voters. It's a coordination problem, and the shelling point looks like it is still gold, same as it has been for thousands of years.
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.
Talk to Mr. Buffet and see what he thinks about this with his mountain of cash… Cash being just transacting might be the most insane thing I’ve read here this year, well done
[1] Look around: Bubbles are everywhere. - https://news.ycombinator.com/item?id=46303596 - December 2025
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, crashes are coming… genuinely am sitting here scared and shook about Buffet hoarding cash, that never happened before…
I love pretend bubbles cause while everyone is waiting for them to burst one can make shitton of money
Amazing how you are quite literally proving you got lucky and yet you seem to believe that you’re hot shit.
Unfortunately your grand kids have run out of money and descendants to steal money from.
Try going back 1 year and look at those headlines. What you’ll find seem silly looking back.
When finance types say "cash," we mean cash and cash equivalents. Berkshire Hatahway doesn't literally hold cash, they hold yield-generating cash equivalents.
> Cash being just transacting might be the most insane thing I’ve read here this year, well done
I strongly recommend a home economics course if this is the case. If you want to go deeper, anything about monetary theory
No. Berkshire Hathaway isn't a squirrel.
> people colloquially refer to it as "cash"?
Cash and cash equivlants are referred to in finance as cash, since they are–for all practical purposes–equal to it. Except yield generating. Which, if you're not an idiot, is how you hold cash.
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.
Great time to own gold, unfortunately. I wish mine had been a bad purchase but with all the "real growth" it has been experiencing I'm probably going to need a bigger vault box.
[0] https://ticdata.treasury.gov/resource-center/data-chart-cent...
I once ran into Tom Keene of Bloomberg news around 2014. In discussing this his view of Washington's view was we can print whatever we want. I was surprised he didn't criticize that ... but it's stuck we me ever since.
Your other comment mentions the AI bubble, and also makes me think you don't understand what I'm saying, since we seem to agree about what happens to dollars and debt in a bubble. Companies are glad to take dollars now in exchange for owing dollars in the future (something they would be less willing to do if the dollar was strong). They then turn around and spend those dollars on GPUs and electricity. They think they can get more done with a dollar this quarter by trading it to NVIDIA or a power company than by holding T bills.
Fed rates do not track the real demand to be a dollar creditor. That's kind of the point, the Fed is the lender of last resort. If no one wants to give dollars now for more later, then the Fed becomes a creditor to the treasury at an arbitrary rate.
Like, we’re in a potential AI investment bubble. Bubbles don’t happen when you can’t sell your paper, they’re an indication of the opposite problem.
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].
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.
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.
You’re saying there should be deflation?
As an example, you could give a loan for $1 to someone for 5% interest. In a year they pay you back, so now you have $1.05. That dollar could get you exactly the same amount (of real goods or services that you personally want) as last year, or it could get you more, or it could get you less. Inflation and deflation typically refer to the price of a basket of intrinsically valuable goods and services. That is separate from the interest rate which is just what you, the creditor, and the debtor shake hands over. If the dollar gets you the same basket as last year, then you are net better off because now you can buy the basket and you have $0.05 for lending to someone who was able to pay you back.
The missing variable here is the productivity of the rest of the economy, if the economy is growing, then you can see a decrease in dollars per basket (deflation), but that's not necessarily a bad thing. The interest rate is sort of like a best guess for the productivity of the debtor.
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.
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, imports for a fixed good are relatively unchanged in constant-currency terms.
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. This would greatly impair the economy of Germany and other large eurozone economies pretty substantially(see this article for why [2]).
And finally, remember: the US actually exports inflation [3]. Most economies cannot simply say no to this effect.
[1]https://www.bls.gov/mxp/ [2]https://www.bloomberg.com/opinion/articles/2025-10-06/europe... [3] https://www.bloomberg.com/news/articles/2022-07-18/strong-us...
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?
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.
Talk is cheap. Show me the stats.
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.
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.
Ofcourse this does not work with PRC they are perfectly capable and willing to sink carrier groups if it comes down to it.
1994 was wild
This is the problem though. In 1994 central banks were trimming USD to test alternatives. Not because something was wrong with the USD itself.
Today, central banks are trimming USD To test alternatives because the USD itself has lost value.
Any flight to stability will necessarily not use as much USD given that it’s far less stable than it was 3 decades ago or even 3 quarters ago.
> 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".
It could play out nicely for USD, if the US stays out of direct conflicts but keeps selling weapons.
Is that fair interpretation.
The US government didn't create that debit. It's not the government's debit. They can influence people, but they don't control that one.
Pfizer decided to NOT commercialize its GLP-1 drug (https://www.statnews.com/2024/09/09/glp-1-history-pfizer-joh...) in 1992.
What if it had commercialized GLP1s?
The law that prevented Medicare from paying for weight loss drugs like GLP1s, the MMA, was passed in 2003. So Medicare would have to pay.
YEAR NOM. ADJ 23 NET NET ($B) ($B) 10% 100%
1998 69.2 129.4 102.6 -138.6
1999 125.6 229.7 202.9 -38.3
2000 236.2 417.9 391.1 149.9
2001 128.2 220.6 193.8 -47.4
Any number of things could have happened. This was just one thing that definitely was completely in control of people - it was in the control of Pfizer's commercialization team - it wasn't some unforeseeable crisis.
My point is, the little HN takes here and there like yours, better to not make them, because frankly you don't know anything about the budgeting process or governance, so why say anything at all?
I think the saying is Luck rewards the prepared.
Finally the US's current healthcare system is truly broken. Our elected officials choose to ignore the issue and act as if we are fortunate to have this system. Which must be the least efficent way to deliver healthcare.
That's just wrong. Social Security, Medicare, debt interest, and the military eclipse everything else. Discretionary spending outside the military is only like 15% of the budget.
Also, why are you even connecting GLP1 drugs and the 90s federal budget surplus? The drugs didn't exist back then, and the government isn't paying for everyone to take them now, so I have no idea why you'd even draw a connection there.
The drugs could have existed back then. You’d have to read the link. And today they do, and under Clinton, would he pay? All great things to talk about.
I am trying to have an interesting conversation and instead it’s just, downvote this downvote that.
Your connection between the two is that new drugs are a primary driver of the federal deficit, which just isn't supported by the the reality of where the US government spends money.
I don't know what interesting conversation you expect from any of that. If you can show why you think drugs are driving the deficit, that'd be interesting.
It was written contemporaneous to Clinton. You are welcome to read about the budgetary process of the Clinton years, healthcare was THE primary issue. Like why am I talking about this stuff, and why was everyone talking about it under Clinton? Because we’re all stupid? Military spending is PERCEIVED to be something about the budget, but it is ALL ABOUT HEALTHCARE, it has been since 1965 in this country, and it is all about healthcare everyone else in the developed world, acutely so in Europe and Japan.
BRICS having it own separate currency and a central bank is as far from reality as the samw thing happening to the qualifying countries in Mundial.
There could never be a common currency between them that they can't directly control.
We’re importing a bit less [1]. That means fewer dollars being pushed (versus pulled) abroad.
BRICs is dealing in store credits and raw-materials. Every other empire and kingdom is not to be trusted or only to be trusted as long as the town power-drunk world-police-man does his job. He may be the towns drunk, mumbling "Screw you guys, im going home!" but he is also the only one so far doing a decent job as sheriff.
You can grasp how unreliable the other actors are, by how one of the hostile actors (russia) recently complained about the (world-police) doing what its proxies in yemen and ukraine are constantly doing (piracy) to venezuella. They complained about the break-down of maritime safety- to the us. Yep, its that bad.
The US has this ridiculous belief that Europe has no military ability. The truth is that Europe is far too skilled at war, and collectively disarmed after the Second World War and let the US make the decisions and pay for it all because that was the only way to achieve a lasting peace. European armed forces aren’t ready for war, but they are skeletons on which wartime forces can be reconstituted.
Now that the US is dropping its responsibilities it’s also losing its privileges, but everyone is moving quietly so that the amateurs in the White House don’t cotton on. The world doesn’t need a sheriff; it’s just going to have a bunch of players looking after their own interests. The historical attitude to war already prevails: ‘it’s fine as long as it doesn’t affect us.’
With the exception of few European countries that did maintain a functional army (Finland, France), other countries' military skeletons suffer from terminally low levels of bone density due to decades of under- and malnutrition. The whole bodies (incl. skeletons) have to quickly be build anew.
Russia is still dangerous and annoying, but not the threat it was before the full scale invasion of Ukraine.
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.
> 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-...
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.
In practice, of course, most countries are willing to accept both risks.
[1]a lot of states that can be reasonably confident that they won't provoke the US in the manner Saddam Hussein or Putin did whether they're friendly or not can be rather less confident the current president won't take extreme measures in response to something completely innocuous like jailing someone for domestic corruption, being a source of emigrants to the United States or maintaining a trade surplus...
This was a major reason the Soviet Union and now Russia never invested in a large navy outside of Submarines.
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.
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 world where all central banks hold a mix of currencies and nobody benefits from being the reserve?
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
Also the markets are not convinced that the fed is in good hands. The whole point of the fed is that they are far enough away from the meddling in Washington so that you can rely on the dollar. The fed is being steadily erroded, with the new chair being selected soon. The problem is that present administration is hell bent on loyalty over competence.
Printing dollars to get out of domestic budgetary problems was never a thing (excluding QE, but thats different, nominally) was never an option in the US. but that doesn't seem so far fetched now.
Over time, it's natural that actors will optimize the above system to capture as many dollars from the printer as they can.
The replacement will probably be a multinational currency with strictly controlled quantity tied to some sort of physical asset(s). Basically Bretton Woods 2.0, except with the learned experience of not just granting a single country immense power and having them pinky swear not to default on their obligations and then abuse that granted power. China's probably betting that that asset will be gold.
That's probably not untrue, but that critique doesn't simply make the alternative better. Money becoming worth less, inflation, creates an arguably worse scenario where now wealthy individuals are motivated to hoard things instead of currency. For instance Bill Gates is currently the largest private landowner of farmland in the US. This issue is where you get the WEF also publishing their 'You will own nothing, and be happy.' goal. I find this more unpleasant, and even dystopic, than Scrooge nosediving into his stash of ever more valuable dollars.
Another major issue here is that lower classes are the most unable to deal with inflation. They can squirrel away some money, but in an inflationary system that's the last thing you want to do. For instance stuff like bank CDs are basically just exploiting economically illiterate individuals. Nobody wants money in an inflationary system, but lower classes need immediate access to their money for the next time e.g. their car breaks down, and they are extremely risk averse. The net result of this is a system that not only perpetuates but directly drives ever greater extremes of wealth inequality.
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...
You cant do that with bitcoin
Probably only takes 2 years before they start inventing abstractions on top of it and this kicking off the eventually next economic disaster.
The goldbugs won't be red in the face, though, because they are never wrong and are constitutionally incapable of feeling any shame.
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":
* http://archive.is/https://www.theatlantic.com/business/archi...
Most of the claimed benefits of gold-backed currencies are myths:
* https://archive.is/https://www.vox.com/2014/7/16/5900297/cas...
Before what we call "The Great Depression" (of the 1930s), that label was applied to another years-long economic malaise, which was in part caused by using gold-backed currency (as was the 1930s Great Depression):
* https://en.wikipedia.org/wiki/Long_Depression
You'll find that US economic downturns became less frequent as the US went off the gold standard, and the Fed gained more and more independence:
* https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg
* https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
But it will not last forever and I do expect to see the end of it within my lifetime. It is this calamity that I'm interested in diminishing and it is on this basis that I think a weaker federal reserve would be less damaging. Since the federal reserve obscures the true state of the economy uncovering the true state will coincide with a weakling of the federal reserve and will appear causal.
I'm not a gold bug, I don't own any of it, I do own some bitcoin but my main asset is my software company.
The enriching of the already-wealthy is happening because of non-progressive policies (taxes, and others). Plenty of countries have fiat currencies and independent central banks, and yet don't have inequality rates like that of US currently has.
In fact, the US used to not have inequality rates that the US currently has. This is a phenomenon that has a fairly definitive starting point, with particular policies that (US) society has "accepted" and can 'simply' choose to start rejecting:
* https://en.wikipedia.org/wiki/Friedman_doctrine
The current US rates are the same as during the Gilded Age, and just like they were reversed post-GA, they could also be reversed now.
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.
This is econolibertarian fan fiction. Literally no one wants that except people already involved in speculating[1] on gold. Are there bad externalities to relying on a unlitaterally controlled reserve currency? Yes. Are they made better by handing financial control over to a bunch of fucking mine and vault operators? Let's be real, here.
Basically this idea appeals to people who've convinced themselves they can get rich betting on financial policy and stay rich by burying their loot in their metaphorical backyard.
[1] The very fact that such speculation even exists should be a triple exclamation point red flag on any argument about hard currency, but alas no.
I guess you never heard of the XDR? it was tied to gold
https://en.wikipedia.org/wiki/Special_drawing_rights#Alterna...
... and could be again, if the US regime continues its incontinence
As for where that money is going now? Other currencies and saving instruments probably..
Many economists take the stance that being the world's reserve currency is something of a two-edged sword; a curse that does come with geopolitical advantages, but bundles those advantages with significantly more difficult global financial responsibilities.
But more broadly your comment doesn't really represent reality, whatever happens in the markets and economy the Fed manages inflation (or deflation) and it's much more complicated than a single relationship like you describe.
More interesting is trade, where the US consumes so much and pays out so many dollars for goods that places like China which run huge surpluses have few choices other than lend it back to the US.
A lot of shit went down over that period.
But you seem upset by QE in general. It seems to upset a lot of people, possibly because the Fed created a lot of money, but that's what central banks do, they create and destroy money. It's really not that much of a big deal. People lose sight of the fact that money is an abstraction and not something concrete.
That is a choice we have made. Historically it hasn’t been that way.
It doesn't necessarily have to be one thing. We've had multi-currency regimes in the past (before one generally took over). See How global currencies work past, present, and future by Barry Eichengreen, Arnaud Mehl, and Livia Chitu:
* https://press.princeton.edu/books/hardcover/9780691177007/ho...
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...
Yes. The Fed set a policy of higher rates. It did that by selling bonds and driving the price up.
Then it set a policy of reducing rates, and was able to do that by just selling fewer bonds. Not buying them. That implies strong demand for these assets. (You can’t use price as a proxy for demand in Treasuries since it’s an explicitly manipulated price by its issuer.)
This is exactly what we'd expect if demand for treasuries wasn't keeping pace with US debt issuance. I mean, if you look at the debt, and the USD's current position, there really is no way out for the US government other than inflating the currency and cashing in that reserve status for a reset. The obviousness of that reality is why precious metals are going nuts.
Could you point to the date range you’re referencing?
> if you look at the debt, and the USD's current position, there really is no way out for the US government other than inflating the currency and cashing in that reserve status for a reset
Of course there is. Loads of options.
Broadly speaking, the talk around rates and commodities tends to involve serious people totally divorced from the talk-show/Zero Hedge circuit.
No, the yield went up and price went down. Prices usually don't go down if demand remains unchanged.
I'm out of my depth, so apologies.
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?
Contrary to popular belief, during history gold has always had limited role in the monetary system, because it was too scarce to really be useful (in most of human history, Silver, not gold was the cornerstone of trade, and trade itself was a tiny part of economic activity in an era where most of it was subsistence farming). It's only when banking and paper money replaced silver that gold took a bigger role in the monetary system. The gold standard is in fact an invention of the late 19th century and it didn't last long before it disappeared progressively (the first world war being the beginning of the end).
Unfortunately for us, it just happened to be the period when a bunch of influential economists grew up (particularly Ludwig Von Mises), and like every human being they assumed that the system they grew up with was special and what came after was decadent, an idea that has unfortunately since then become widespread in the general population.
Most people wrongly assume that the key property for a commodity to become the basis of a monetary system is scarcity, but in reality scarcity is a drawback. Money must be abundant enough (too abundant is bad, but too scarce is even worse).
Why would you let your monetary policy be run by gold miners in China, Russia and Australia? They could cause inflation or deflation simply by increasing or decreasing gold production.
Conversely how is the Fed supposed to manage inflation if it runs out of gold?
Gold is an industrial metal, also used in jewelry, not a financial panacea.
Gold at least places real constraints on the growth of the money supply. Imperfect as it is, it’s better than a financial cabal in one country creating money to suit their needs irrespective of any other objective.
As for verification and transfer, that's what electronic shares are for, distributed across a few key physical asset holders.
In essence, debt doesn't need saving from the system; it's the system that needs saving from debt.
The rupee is better, but there's not a lot of trust in Indian institutions globally, so black swan events are more likely. I can see it becoming a better proposition as India further matures and taps into its population more.
No, euro - that's a solid contender. Not only it's already used in a lot of countries, and therefore backed by more than one economy, the EU institutions are legit to a fault - they continuously refuse to seize Russian assets, because there's no solid legal grounds for it, despite all political will towards doing so.
That alone makes it far removed from being politically suspect in my book, unless there's some blatant case against the euro that I'm missing.
Lack of integration/solidarity. A common currency is a pretty bad idea if economies are allowed to diverge (see previous sovereign debt crisis, there's no reason why eg France can't be the next trigger).
You need a common tax base, and solidarity across member (much more than the current state) to have an effective monetary policy.
The in-between status quo for EU really isn't great (either you need to keep building EU institutions/start having proper eu taxes and budget -- something that is not really popular at the moment--, or euro should be reconsidered). (From what I understand it's not really a controversial opinion in economic circles).
Some countries like South Korea are crazy on US stock trades.
Dollars' depreciation probably helped a bit too.
One interesting attack vector vs USD is PRC recycling it's dollar surplus / shadow lending it's USD reserves at more favorable rates than US gov can, i.e. 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 and drive up US interest -> further increase US debt. PRC basically hijacked and weaponize USD liquidity to make increasingly ineffective dollar system (as geopolitical tool) even more expensive to maintain while PRC can enjoy dollar liquidity without the maintenance costs. And that's probably the ultimately the goal, smart play is not to inherit reserve obligations, but to turn reserve holder's exorbitant privilege to exorbitant curse.
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.
Old: PRC recycle surplus USD into US bonds, increase US treasury demand, subsidizes cheap US debt.
New: PRC recycle surplus USD into BRI finance, said USD doesn't return to US treasury to buy bonds, decrease US treasury demand, treasury increase interest to fill hole, makes exorbitant privilege more exorbitant.
PRC parallel dollar bond lending COMPETES with US treasury bond lending. PRC dollars gets recycled towards PRC goods / BRI projects, not US treasury. PRC leveraging dollar liquidity for PRC geopolitical interests, meanwhile taking demand away from treasury bond sales, so US drive rates up to compete. US treasury had to find other buyers to fill ~600 billions (and raising) of USD bonds that PRC no longer holds. Filling hole that size = finding more price sensitive buyers (vs PRC who previously default recycled into treasury), so raise interest, increase debt servicing. US 10 year going from 0% (countries basically paying to hold USD) to ~0.8% cost US ~300B+ annually. Now that's not all PRC doing, but 100 billion here and there and soon we are talking about real money.
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 contributing to the dollar economy.
The PRC financing using dollars would be nuts because it puts their sovereign financing into American hands.
> PRC parallel dollar bond lending COMPETES with US treasury bond lending
Not in any meaningful way. (There aren't that many indisctiminate buyers of international debt anymore. Put another way, most Treasury buyers have and will never buy any Chinese paper and vice versa.)
> US treasury had to find other buyers to fill ~600 billions (and raising) of USD bonds that PRC no longer holds. Filling hole that size = finding more price sensitive buyers
Not really. You fire up the Fed. If it's China that's doing it, that's national security. Hell, sanction the accounts the dollars are going into.
> but 100 billion here and there and soon we are talking about real money
Have you traded Treasuries in an instituional setting? You're talking about the size of a single desk's intraday exposure.
Between the weaponizing that for sanctions via SWIFT, US becoming unreliable as a partner (militarily, politically and economically) and Trump rambling about replacing pieces of the financial system with crypto [0] that trust was bound to waiver
Think we'll have a parallel system in record time. Question is who/how. Russia wants it but they're well Russia. China's yuan isn't open enough. Euro is a bit to regional and dependent on the US lead system anyway. So there isn't an obvious candidate.
Something is going to have to give though given US shenanigans.
[0] https://www.reddit.com/r/economy/comments/1otdio8/trump_says...
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.
Petrodollar a U.S. policy comes from the 1970s, when the U.S. guaranteed the House of Saud’s security in exchange for them selling their oil in dollars. The reason wasn’t to do some currency scheme, but to ensure the U.S. could always buy Saudi oil in a currency we controlled. Saudi Arabia then invested its profits in Treasuries, which closed the loop on Wall Street [1].
When America imported oil, keeping oil exporters close was strategically vital. Petrodollar recycling helped with that. Now that we don’t, it doesn’t.
> global trade of which oil is a major component
Like 4% [2][3].
[1] https://en.wikipedia.org/wiki/Petrodollar_recycling
[2] https://oilprice.com/Energy/Crude-Oil/Oil-Dominates-the-5-Tr... ~$1.5tn in 2021
[3] https://unctad.org/publication/global-trade-update-december-... 35tn in 2025
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.)
Oil embargo was about embargoing oil. It wasn’t monetary. It was about denying essential commodities.
Also SWIFT being a means of control of movement of funds.
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.)
US not in a good place then?
I think the Fed could stem the whole thing by just issuing a stable coin itself pegged to the dollar and re-assert itself as the dominant currency/arbiter... but who knows. Maybe then it'd have insight into every transaction and be able to stem things with even more power than it can now.
Nobody stays king forever. Maybe it's time the US is forced to balance its books and stop riding on cheap credit. Losing the power of the reserve currency and the power that that gives to SWIFT and things will take a lot of soft power away from the US. Without allies the US couldn't stop a united China, Russia, insert-other-would-be-ally-of-theirs in a world conflict.
As another commenter said there's no leadership at teh top just chaos. People, countries, banks don't invest in chaos.
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.)
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.
China is in a border dispute with another founding member of the BRICS. Another is in the Western Hemisphere and will become a proxy-financial frontline.
There will be yuan, Euro and dollar payment rails. (If the EU had failed to unify, they’d be getting divided up between Washington and Moscow again.)
I also think the US used the banking system to punish enough nations that an alternative became viable.
I'm only the crypto weirdo guy asking.
Trust needs to come from the top, and there is none there right now.
The Fed isn't opposing Trump's measures, on the contrary, the Fed is doing everything to accommodate as much of his policies as possible without wider damage to the economy.
It's Trump who doesn't understand the risks of unhinged tariffs and low interest rates which he demands because of his personal conflicts of interest.
US interest rates have been declining lately, so perhaps other investments are more attractive.
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 directly using rubles.
In both cases, trade is happening and completely bypassing the once unavoidable USD.
The US choosing to weaponize the USD for geopolitical purposes has finally made the world realize the immense loss of sovereignty they had allowed themselves to be subjected to by making the USD the global trading currency.
This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status.
The golden triangle of Russia (raw materials), India (highly educated workforce, strong demography), China (industrial powerhouse, stole the bulk of Western IP, is now producing more cutting-edge research than the west) finally free of the shackles of the USD and establishing direct overland trade routes that 100% avoid the seas (thereby 100% avoiding potential US embargoes, both financially and militarily enforced) ... the world is going to change in a rather profound way, finally relegating the US to being a simple country instead of the has-been empire it currently is.
Edit: I also want to add, that while having the international trade entirely in dollar sounds very appealing, it can actually destroy US exports and damage the trade balance. This can have massive impact on domestic as well as global economies. What you want is a strong enough dollar.
https://www.federalreserve.gov/econres/notes/feds-notes/the-...
Share as a payment/trade currency is not going away though it will be greatly reduced especially with CIPS that bypasses SWIFT.Andmost data showing no change is usually from SWIFT - with zero visibility to the volumes in CIPS.
Share as reserve is more visibly viz central banks stacking gold and hedging on treasuries , with most tresurie bids coming in from offshore financial hubs likethe Caymans.So could be a whole shellgame there to inflate the volumes.
So yeah the $ isnt going away anytime soon (cross border trade still requires it in many places),the exorbitant privilege it enjoyed is.
also, it ends in 2024.
I would encourage you to actually take a gander at the history of reserve currencies, how long they last, how they lose their reserve status, and what the current state of thinking around where the dollar is headed.
Unless you would classify the IMF as a clickbait farm, of course.
Start with the brit. pound and what led its downfall to the niche financial instrument it is today.
But the pound is just the latest, and by no mean the only one.
Here are a few links to get you started:
https://marketcap.com.au/history-world-reserve-currencies/
https://www.economicprinciples.org/DalioChangingWorldOrderCh...
Barry Eichengreen – “Exorbitant Privilege”
https://www.imf.org/en/publications/departmental-papers-poli...
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 significant inflation in itself.
Basically, loss of reserve status = hyperinflation. At least at the outset.
On the plus side, that would pretty much wipe out the excessive amount of US consumer debt as long as wages stay consistent with the value of the dollar.
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.
Which the won't, so it will end in disaster for the average American.
I generally agree with pretty much all your points other than this one.
While it will be good for other countries to regain sovereignty - and the weaponization of the US dollar for trivial reasons will be the biggest self-own perhaps in history - I do not think the world is going to be a better more peaceful place in 50 years.
It might be more free in a certain sense though, which may or may not end up long-term (over multiple generations) being better overall for humanity. Time will tell.
Certainly though, the average quality of life in the US is about to plummet.
And Putin and Xi are 73 & 72, and I doubt they will give up power as long as they're living which may result in significant turnmoil for both countries.
> US to being a simple country instead of the has-been empire it currently is.
The US isn't going anywhere for now, although it is trending in the wrong direction, but it's not yet a lost cause, not to mention that its still basically a fortress with endless natural resources and relatively good climate.
And then you also have the AI race which might be a dud or might be a winner takes all scenario. So gonna be an interesting next decade.
> This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status.
It is not the case that the US didn't "need" to get the USD printing machine under control because of the reserve status; it is the case that the US "could not" get the USD printing machine under control, because of the reserve status. When there is demand for US dollars, domestic or foreign, US dollars sometimes needed to be printed to satisfy that demand. If the US decides to not print those dollars; this is literally "defaulting on the debt", and would be bad-bad.
This gets at where you're misunderstanding how these systems work, because I think you're imagining that US debt is, like, an account in your Chase app that goes up, then you pay it down. US debt are, obviously, bonds. The USG says "we've got bonds to sell, they're at N year M% interest". Buyers say "we want those bonds we'll buy them". The USG is now in debt, and is obligated to repay those bonds; and sometimes has to print money to do so. This gets at the previous paragraph; money, broadly, is printed to satisfy debt obligations, not directly to service the deficit (proceeds from the initial bond sale are what could be said to directly service the deficit, but that's pennies compared to the size of the overall market).
Extending the Chase app analogy, you have it internalized that if we just get the deficit under control, then we could start "paying down the debt". In fact, probably, even our President understands it like this. But this isn't how it works. To "pay down the debt" would require two things to happen: We stop issuing new treasury bonds, and we pay off the already issued ones over 20/30/etc years as they mature.
The general professional sentiment on what would happen if the US even communicated it wanted to, in totally good faith, begin doing this at some point in the future, is basically armageddon. You have it in your head that, because Dave Ramsey says debt bad, the US should have no debt; but the world wants our debt; it has an insatiable (though, decreasing) appetite for it. Depriving the world of this debt would leave trillions of dollar-equivalents without anywhere to park safe from inflation, which would descend global financial markets into chaos. Tens of millions of people would starve in the first three months, among other undesirable outcomes. Some actively make the argument that the USG refusing to take on new debt would be net-worse for the world than the US defaulting on their existing debt, though its an interesting space to game out; a little game of global-cataclysm worst-thing-to-ever-happen-to-humanity olympics you can play.
But, debt servicing is becoming unmanageable for the US budget; so the best case for the United States is that USG debt demand from the rest of the world drops slowly and naturally, so we can naturally slow the issuance of new debt; and over 100 or so more years let managed inflation catch us up to recover from the utter shitshows that was 2001, 2008, and 2020. Everything I've seen, and I do mean everything, suggests that this is what is happening; but we'll know for sure in 90 more years.
No other nation except the U.S. can sustain this without running into hyperinflation and consequent national rioting.
