Yes. Other countries are already starting to increase their gold reserves over US treasuries. Long term bond yields are not coming down. Why continue lending to an unstable country that is 38 trillion in debt with no sound fiscal or monetary policy? The government is not going to curtail spending or increase taxes so they will have to print the money to pay the interest on its debt. This is currency debasement 101.
People are too attached to the idea of the US running the world. It’s the world everyone has grown up in. But the reality is that empires and currencies come and go. The world still goes on. The US dollar standard is not some law of nature that can’t be broken.
'But definitively abandoning the dollar would require an alternative reserve currency,'
Why? You can't just assume this or say that it's obvious. Bilateral deals, usually on a barter basis, are increasing by the day, particularly in the BRICS sphere of influence. And one can also foresee trade taking place on the basis of gold. The idea of a reserve currency is a relatively modern one -- first pound sterling, followed by the dollar after WW2.
Holding dollars or dollar-denominated debt is a recipe for losing purchasing power and is fraught with other perils (such as sequestration by an erratic and unreliable US government).
It's not that dollar hegemony is threatened. It has already gone. USA's future is a bleak one. It is crucially dependent on imports (as its de-industrialized wastelands testify to) but the only thing it has to pay with is its increasingly worthless fiat currency. And gold and silver prices over the last couple of years corroborate my claim.
The dollar could be stable if the US had a responsible federal government that wasn’t intentionally trying to devalue the dollar and was not otherwise hamstrung by political brinksmanship and dark money.
Trump, Bessent, etc. will say a weak dollar is necessary for US exports to be competitive. But where are all these US factories? Assuming they can be built, we’re 5-10 years from seeing benefits from re-industrialization. From now until then, life for Americans is fraught with nothing but pain.
It's what we call "cargo cult" thinking -- during WW2, the USAF built airfields on Polynesian islands. The islanders saw these big birds flying in and disgorging goods. So after the war they built their own airfields, thinking these magical birds would fly in with more goods. Magical thinking. Likewise with these bozos Trump and Bessent. They think a weak dollar and high tariffs will magically create factories in the USA. Now it's true that this would encourage re-industrialization -- just as you can't have aircraft flying without airfields. But just these measures alone will not bring factories to the US -- just as merely building airfields will not cause aircraft to magically appear. You need a trained workforce, you need capital investment, and you need long-term strategic management at the top -- the way the Chinese have it. Do you see any of this in the USA? The mercurial and moronic Trump certainly doesn't have it. But it's not just him. The political and financial elites don't have it either. It's all about grab what you can and get the hell out. So MAGA is going to remain a pipe dream by the pied piper Donald Trump, as he leads his horde to the river, where they will drown.
I can’t find fault with your reasoning…..but if (and I admit it’s a big if) Trump’s policies are removed quickly enough AND foreign governments assume there will be a more stable US government post-Trump then the damage to the dollar as the world’s reserve currency MIGHT be minimized.
What’s so frustrating is that MAGA morons have no clue just how bad the damage to their way of life will be when the dollar is sidelined in world markets.
I agree with you to some extent (and have accordingly upvoted your comment) but -- and I can't emphasize this enough -- it's not just Trump, though he's a one-man wrecking ball masquerading as savior of a failing system. The system has been failing for a long time, for decades, with one administration after another just kicking the can down the road and praying, "Please, not on my shift." The problems with the dollar, with USA's declining geopolitical clout, with its de-industrialized wastelands, with its divide between rich and poor, are structural and systemic, and reflect tectonic changes in the world system. There is no panacea that I can see. The situation strongly resembles that of third century Rome, which presaged worse to come in the centuries ahead.
My understanding is that China is positioning its currency to be that reserve currency. And they have the economy to back it. Regardless if you aggree with their policies, they also have a seemingly stable government.
They have a stable government. They have the manufacturing economy. Very true. But reserve currency comes with other baggage -- geopolitical baggage to be precise. When pound sterling was the reserve, you had "Pax Britannica", where Britain was hegemon and British warships patrolled the oceans and provided the security for global trade. Likewise "Pax America" had the USA as hegemon, with US ships patrolling the major sea lanes to provide security for maritime trade and 750 military bases globally. And this is just the tip of the iceberg with regard to political, military, and financial commitments. It's not clear to me, to put it politely, that the Chinese want a "Pax Sinica." it's not in their history or culture. It's an onerous burden, like Atlas holding up the sky. They seem to be happy to manufacture and to trade. Anyway, this is my take. I could be mistaken.
so long as china maintains capital controls on its currency it will never really be a reserve currency. free flowing capital is one of the most important functions of a reserve currency, people need to be able to move billions of dollars at once with no issue.
They would need extremely high levels of demand for the Ren. That means allowing an immense level of "loss of control" over Ren-denominated bonds, into the the trillions. Loss of control? That is really tall order for this government
it’s really not that easy. the second china does this it will have a ton of capital that will leave the country and will make the yuan unstable as investors seek to diversify. this is a massive shakeup in their economic model, and frankly anyone’s economic model that isn’t already built off of minimal capital controls.
Also China is actively paring back initiatives that would have positioned them for this role; it does not seem like they are interested in bearing this burden.
Because it doesn’t actually have that much benefit in the modern era. Trump and his ilk are geopolitical disasters but they’re right that the US invests a lot abroad with debatable returns.
I agree with you, the Chinese from all that I have read don't seem interested in taking Americas role in the world. They have been happily lending money and building vital infrastructure for their own interest (for manufacturing and needs). They have no interest in getting involved in any countries political policies and issues.
China's Navy is now larger than the US. While it's mostly littoral, they've demonstrated the ability to expand fast.
And the US Navy is currently being led by absolute morons.
I agree with you what you're saying, but I think there's a lot of potential energy right now to push a transition. I can't rule out that part of what is being done to the US economy is intentional to make it a reality. The rich are investing and invested heavily in China. They certainly have the moral characters to rugpull this country.
I am not as certain that being a reserve currency requires a huge navy. In the 'Pax Britannica' the causality seems far more likely to have been the other way around, and your 'Pax America' (not Pax Americana?) I think both are from the same cause at best.
Can you advance your thinking about why dominating trade isn't enough?
'Can you advance your thinking about why dominating trade isn't enough?'
You are making me think things through more carefully. I don't think a powerful military is a necessity for being reserve currency, but rather that it comes as a package. In the case of the USA, countries that attempted to get out of using dollars came to a sticky end -- Iraq, Libya. The military card keeps the dollar card up (military coercion forces use of the dollar), and the dollar card keeps the military card up (in the sense that foreigners have to use their trade surpluses with the USA to finance USA's persistent fiscal deficits brought about by military spending). An extortion racket in the purest sense. In the old days, India's trade surplus with the rest of the world was siphoned off by the British (as an "administrative tax"), and, oh, don't forget the gunships just off the horizon to maintain colonial rule. In both cases imperial overreach caused (in the British case) or is causing (in the US case) rapid decline both internationally and domestically.
Now, this question of what constitutes a reserve currency. If it is just a currency being used for global trade, then the Chinese yuan could take that role (if the Chinese so wish). On the other hand if it is part of a package where the world's central banks have to hold more and more yuan -- at the point of a gun -- to finance China's fiscal and current account deficit, I'm not so sure about that.
China believes investment is then path to peace. Let today’s problems play themselves out and invest in the winner regardless of government or ideology to create stable future conditions. Wouldn’t having the reserve currency help them here?
I don’t understand why it needs to be one or the other. How about china decreasing its reliance on the dollar without being the world’s reserve currency? It could establish a currency for Asia and Africa and not have to rely so much on the dollar.
But they have an authoritarian regime which can't be dealt with checks and balances unlike the US in which you will consider everything and everyone before making a move.
China has no want to be a reserve currency. They are well positioned with the current order. They don’t have free flow of capital and that would require the Chinese government to push manufacturing away and move to service economy which they have been reluctant to do so.
No one in the west would dare agree to China the exact opposite of the west to be the reserve currency.
They have a demographic crisis. You can talk of the American decline and it’s been speculated since the 1980s
Japan etc. America is still clearly number 1 and we have a nut case in power but for the most part we have been stable. Most importantly, until there is a western power who can lead it will be America.
India is interesting could they get corruption under control they could take off next and surpass China. China still need to project power outside of SE Asia.
China doesn't want that. They want the freedom to control their currency to meet their own economic goals, in ways that would make the yuan unsuitable to be reserve. They don't want the US to have reserve currency status, but they don't want to be the reserve currency either, hence their membership in BRICS.
The rest of BRICS wants their currency to be the dominant reserve currency. What's going to end up happening is the formation of a nation agnostic currency on a BRICS payment system, so everyone can avoid the SWIFT payment system and western sanctions will lose their effectiveness.
The US sells billions of dollars of services across the world. What the fuck are you talking about? Why do people (like the current admin and you) pretend the economics only works for goods when there’s a reason they’re attached at the hip as goods and services.
Reddit loves American doomerism and I don’t disagree with the premise, but it’s not black and white “oh the sky is falling.”
Why? Simple. China has 1.2T trade surplus last year. And the idea of reserve currency is way older than the pound, just more regional the further back you go.
You neglect to mention that they have the firepower and CIA to help keep most nations “in line”. Any leader that’s gotten too vocal about getting off the dollar have not had pleasant outcomes.
This stuff changes fast. Technically the reserve dollar as we know it has only existed since 1971, and that monetary system only originated in 1945, and there were a series of short-lived monetary standards before that, going back to the 1870s. The system that we live under is actually quite long-lived for an international monetary standard. It could be due for a shake-up.
As with all such things, it happens slowly, and then all at once. The danger signs persist far longer than you'd think they would, and then the penny drops.
As the saying goes, the market can stay irrational longer than you can stay solvent. The corollary is, predictions can stay accurate long after people have grown impatient with them.
Not like I have the kind of money that would really benefit from this kind of high level analysis, but it doesn't make sense to be the first out of the door, yet. But neither does it make sense to not hedge against the dollar.
You are correct, anything can change fast. Have you heard the phrase, “in a kingdom of blind men, the one-eyed man is the king”? The one-eyed man in this case is the US. All other countries are fundamentally in worse shape fiscally and economically. Hence, while foreign investors can fret about being arm twisted via tariffs etc., there aren’t many safe, income-producing investment options outside US Treasuries and US GSE-backed mortgages. Gold ain’t giving you income to pay out pensions for example.
Just tune out all the commentary you hear (it is pure noise) and observe what the dollar does and doesn’t.
All other countries are going to find out (if they already haven’t) that their inherent protectionism means there can’t be sustainable free trade between themselves. Even with 20% tariffs, US is the most reliable destination for their exports and US won’t dump their goods in their home markets.
Hasn't that shop already sailed? In what way is the hegemony still intact?
It was supported by foreign aid and defense agreements, both of which are now void in practice if not on paper.
A big part of being a hegemony is being predictable, others have to be able to predict and trust that we will honor our commitments. We don't have that anymore either.
The hegemony is long gone. If you can, take a glance at Wallerstein's ten-year-old essay, "The Increasingly Unstable United States". This came out before the era of Trump and things have only got much worse since.
The same thing was said about the dollar when the sterling was reserve currency in the 1930s. The USD wasn't considered a currency that could become a reserve currency then. Eventually a currency is reserve currency because it helps make trade frictionless. Once it becomes a barrier trade works around it just like it did with the sterling. If the dollar continues to become a hinderance to trade the same will happen to it. You don't need a reserve you just need a stable currency or currencies for trade. That currency becomes reserve.
I'm not forgetting .. owning most of the world didn't stop the sterling being loaded up with gov debt to a massive extent in 1931 causing that crises. They tried the same tricks the US are trying now to try and stop the devaluation of the sterling. Tariffs, forcing trade in sterling within the dominion. The parallels with the USd are very similar .. whether you 'own' the world with guns or finance i guess is a bit of a moot point.
Meanwhile the US removed trade barriers once FDR came in 1933 and grew its exports creating real volume demand for usd as a trading currency. By 1937 the USD was as much a reserve as the sterling and still growing. That volume allowed for the financial sector to grow and compete with London. I bet FDR is rolling over in his grave with the current US take on economic policy.
It just is glaringly obvious the demand for a currency starts with wanting their stuff then you start 'reserving' it because you need it to buy their stuff and for that you need their currency. Then it becomes easier to finance in it because there is so much of it traded across the globe that its a reliable reference. If another currency/s offer that without sovereign risk(yuan doesn't offer this) they will overtake a USD trying to prevent trade like the sterling was overtaken by the usd.
Or you have the 'unit' and the Euro. There is no 'can't' only 'is the incentive large enough'. And in today's environment the incentive is there but it will take another 10 years before it becomes obvious that the USD is no longer the sole trade settlement currency.
Vastly, vastly more sovereign indebtedness, to which the Eurozone is staunchly opposed, both culturally and legally. There have to be lots and lots of Euro-denominated assets out there for such a scheme to work, and that means lots of Euro debt.
The other issue is currency strength. The eurozone thrives on exports and tourism, and as demand for the Euro skyrockets due to international reserve demand, those industries will suffer terribly.
The problem with any one currency taking on the role of the USD is that they have to adopt a lot of the USA’s economic approach as well. Lots of debt, the death of manufacturing, and so on.
If everyone is going to hold your money, that means they’re going to hold your bonds. If they’re going to hold your bonds, that means you owe them money. Everyone can hold USD because there is a LOT of USD debt out there. The Eurozone generally restricts deficits to very low levels, meaning production of those euro-denominated assets is very slow. There is much controversy over the European rearmament and pension crises right now because both threaten to raise deficits to levels Europeans won’t tolerate.
In general the Eurozone is much more fiscally conservative than the USA.
Are you suggesting that the Eurozone doesn't issue enough debt to satisfy central bank demands, and that would be the obstacle? As a zone they are over 80% before increased spending planned for defense.
I would think the increased demand if anything would decrease their borrowing costs not force higher levels.
That is what I’m suggesting. Your concern with ratio is an example of the European attitude towards sovereign debt that makes the Euro as a solitary reserve currency so problematic. Outstanding Euro area debt is just €13.26T, while US outstanding debt is $38.5T. Euro-users need to pack on a lot more debt to meet demand for Euro-denominated assets.
And remember: if those levels of borrowing don’t rise, what happens to the Euro as demand for assets denominated in it rise? Its value rises as well. Imagine trying to export a bottle of olive oil or a wheel of cheese if the Eurozone doesn’t borrow more while assuming the role of primary reserve currency! They would be too costly, and the eurozone’s trade balance would reverse, shifting to imports over exports.
This makes no sense to me. The EU's biggest problem might be the lack of investment capital within the zone.
Getting more Euros available in the market doesn't require greater debt from the EU's public sector, if anything the reverse is true. If the Euro was getting too expensive that's actually a problem whose solution would help them. Lower interest rates to allow private banks to borrow more, lowering servicing costs for existing debt while enhancing the business environment without raising funds in New York or London.
The US dollar is essentially the best of all the worse alternatives.
Now, I guess we will have to wait and see if Jerome Powell’s replacement will strengthen or further weaken the global economy’s confidence in the dollar or not
It’s ultimately about the treasury and the budget. Almost every road leads to trying to print our way out of debt. The fed can’t really control inflation when those higher rates would blow out the budget
This is also true, but if Kevin Warsh does as Trump commands and he pushes the Fed board to lower interest rates substantially it will only further weaken the independence of the US financial system.
Scott Bessent isn’t doing the US treasury any favors either
Calling the dollar ‘the best’ implies evaluative choice. In practice it functions as the lowest-friction coordination tool, which is a different claim.
There isn’t a meaningful choice here. The dollar remains dominant because global trade, debt, liquidity, and contracts are already dollar-denominated, which makes exit costly and risky. That structure penalizes non-use.
Dollar dominance is self-reinforcing: it persists because the system is already built around it, not because it is evaluated as “best.”
A replacement wouldn’t be “chosen over the dollar” in advance. The shift would only occur after the underlying infrastructure changes enough that a different unit is already functioning as the coordination standard.
Can you provide an example of what you are describing? It seems that if China and Canada enter into an agreement to trade timber for cars, any monetary exchange could be done in Canadian dollars and RMB, or even Euros. Why the necessity of using dollars?
I am just asking and curious. I don’t doubt that you are right. Just want to understand why.
Bilateral trade doesn’t require dollars, and countries do settle transactions in other currencies. The constraint I’m describing isn’t legal or technical, it’s systemic. At scale, pricing, financing, insurance, debt, hedging, and liquidity are still overwhelmingly dollar-denominated, which makes non-dollar settlement costly and risky once you move beyond isolated trades.
The dollar isn’t “necessary” for any single transaction; it’s embedded in the coordination layer that sits above them. That’s why dominance persists without being continually chosen.
The disagreement (if there even is one) isn’t about ranking alternatives, it’s about whether “best” reflects choice or constraint. I’m arguing the latter; dominance persists because exit is costly, not because agents are continually selecting it.
Until there is a eurobond, the euro will not really take over. This would essentially mean joint debt among the eurozone and would require the EU to have a revenue raising tax in these countries to pay it back. There is opposition to this.
When people say that the dollar is the reserve, they really mean buying US debt is the reserve. There is no real "euro debt" to buy.
Too many tensions in the Euro. And does Germany still have the ability and willingness to bail everyone out the next time a southern country goes bust?
Germany benefited from the Greek credit crisis. They got to lower their own borrowing costs and got to buy assets on the cheap and garner further power within the bloc
Edit: I know in terms of domestic politics that isn’t really how people see it though. And there’s something to be said about a government willing to bail out entire national currencies when they can’t even provide security/investment for their citizens who are worse off. The USA and Argentina comes to mind…
You can also just have a diversified portfolio of other currencies and precious metals. It’s not required to have so much in dollars, it just lowers friction and there are a lot of dollars due to the USA’s indebtedness.
The RMB has the problem of a major lack of transparency. For a country whose major negative stereotype is "being good at math", they are absolutely terrible at accounting and auditing. If they ever want to be the world reserve currency, they need to fix that very major issue. I'm not hating or anything, the laptop I'm typing this on was made in Shenzhen, my last daily driver car was made in Henan, and I'm likely to buy an electric motorcycle made in Chongqing in the next two months.
"It has long been reasonable to assume that central banks’ incremental diversification of their reserve holdings would erode the US dollar’s hegemonic position only over the long run. But with the addition of heightened market skepticism about the greenback, we could find ourselves in uncharted waters."
Have you seen the state of the dollar? It is falling and forecasted to fall even further. I can’t in good conscience continue on investing in America and have to start looking at foreign trades. This is lose-lose all around. Preparing for the dive this week also bc of jobs data.
Unlikely. The reason it’s the world currency is due to oil and the fact that you can only buy oil with USD.
And since Saudi is getting a brand new datacenter with the most advanced cards nVidia has, and they don’t have to wait their turn for delivery, chances are you will still need USD to buy oil.
Very interesting. is there somewhere I can find a chart of the volume of oil sales in these currencies over time? so i can compared the increase side by side
i tried googling but it's just bringing up the value of crude oil
Meaningless. China wants to end US dominance. Saudi has more oil than they know what to do with. Of course China will force them to trade in Yuan and of course they will take it.
For limited cases only, if this is true. If China can do it, it’s because there are many things that oil countries can buy with the Yuan, like food and goods.
Frankly if I was Saudi I’d do that too.
Funny that Trump did not try to derail that with the datacenter promise. He has a blind spot when it comes to his friends in Saudi.
The world can support two global currencies, but I don’t think Saudi will accept to sell oil to a non-Chinese Gov in Yuan. They still have a defensive contract with the US, The US is still 4x the military might of the planet, and China has links to Iraq. Iraq and Saudi are.. well mortal enemies it seems.
The exchange in Yuan may also be beneficial to Saudi, they’re likely getting a better exchange using the Yuan with China than they are with the USD.
So I’d do it if I was Saudi, but I guess there’s a limit to how far I’d go. It’s unlikely that China would come to the aid of Saudi under the situation that the US decides to abandon that defensive deal if Saudi breaks their end.. which they are technically doing by accepting Yuan.
Mind you Iraq is not the force that it used to be either. But maybe it’s all an act.
There is nothing special about the USD. It is a means to an end and if the price of using the USD exceeds it value the market will shift - even if it means higher transaction costs in the short term.
You are completely naive about how Trump has destroyed faith the USD. Every major trading country in the world now wants alternatives to USD and will pay to get it. The change will start slow but accelerate over the next 10 years.
The entire point of Carney's speech in Davos was a call for middle powers to structure their economies to resist US and Chinese pressure. This implicitly means settling trades in networks that are not controlled by either would be hegmon.
The USD has been used because it does a few things that other currencies don't (or were not doing at the time of its widespread adoption).
There are enough of them around to use -- any reserve currency needs a large economy that uses it.
The nation controlling the currency does not manipulate it much at all. This I think is where the yuan will have the most doubt. China has manipulated it in the past and there are no internal guardrails if Xi decides to mess with it. At least the USD needs the Fed's board members to agree on such things.
Th Euro is large enough. What it lacks is a large pool of Euro bonds but that can be fixed.
The BRIC 'Unit' is a collection of currencies + gold that is large enough and sufficiently detached from the Yuan that currency manipulation will not be a factor.
There is always a choice. Countries used the USD because they trusted the US and alternatives were more expensive/risky. The risk calculus is shifting and expect to see multiple independent trade settlement systems within 10 years.
>if they want to buy oil to drive their economy.
This is such a bizarre argument. Oil is exchanged in many currencies and there is zero requirement for USD as a settlement. At some point in near the future Canada will start selling oil to Chinese in Yuan because it will be part of their diversification strategy that Trump is imposing on them. Canada - China trade is large enough to ensure the Yuan can be used to buy stuff from China.
And no, you’re ignorant about oil and created the conditions in the first place.
Your entire point of view is nonsensical.
Did you ever stop to ask yourself why a struggling country in Africa that can’t afford food is still buying USD, and still buying oil? Of course you didn’t because you have no economic education. You’re literally spouting propaganda driven by ideology with no basis in fact.
>And no, you’re ignorant about oil and created the conditions in the first place.
I clearly have a must better understanding of the history and the reasons for US dominance of the trading system today than you do. The USD is where it is today because of the 'benign empire' that US choose to create after WW2 where the US would secure the shipping lanes and promote a rules base trading order in return for everyone using the the US financial system.
Trump has broken the deal. By turning the US into a malevolent force that uses the US position to extort allies and foes alike it is no longer in the interest of any major economy to continue using the US financial system. So the only question is how long the shift away from the USD will take - not if it will happen.
>Did you ever stop to ask yourself why a struggling country in Africa that can’t afford food is still buying USD, and still buying oil?
Holy straw man batman! Small countries can't use their currencies because they cannot possibly maintain a trade balance with every possible trading partner. But if the big players (read: China, EU + other large economies) develop alternative networks then that poor African country will be able to choose the financial network that gives them the most benefit.
The BRICs 'Unit' is one such alternative.
The Euro has the scale to be another and Europeans are motivated to make it happen.
The USD will not go away. It will simply have more competition in the future and that is good thing for the world.
You used to the term malevolent. The US has always been malevolent, nothing has changed with Trump except the terms used… and his level of stupidity.
You’re bringing feelings into mix. Feelings have no bearing on economics or trade.
Your last two or three sentences are correct. However BRICS does not trade in oil, China does not trade in oil, Europe does not trade in oil. So those companies are still going to have to buy USD in order to buy oil, and they need oil as much as they need food.
Just because you say so doesnt make your statement true. The dollar became reserve currency because it enabled trade. FDR devalued it and removed tariffs while the British sterling tried what the US is trying now by putting up tarrifs. The dollar became easier to settle, hedge, and finance trade in than sterling. The world use the currency that enabled trade that is what made the dollar a reserve currency. The oil and military reenforce it but are not the source of it. The frictionless trade is and by putting that at jeopardy the dollar is risking what happened to the sterling.
I doubt it'll be the Yuan as the poster above says as it is also not a frictionless currency. But there are many choices just like the USD was back when the sterling was facing issues. If you read up on it you'll realise that no one in the 1930s thought of the dollar as reserve status. It was FDR that enabled it to happen not ww2 or petrol or the military. Those enhanced it. FDR and his free trade policies created it.
The BRICs "Unit" is an interesting concept that could work. The bottom line is necessity is the mother of invention and it is no longer in the self interest of any country to be solely dependent on the US financial system. So there will be alternatives. It will take about 10 years to see which alternatives emerge.
Yes a bit of healthy competition. The unit is interesting but I cant see Europe, Australia Canada, Japan, Tiawan, Korea trusting it. And trust is everything in a free trade/reserve. I guess time will tell if the Unit is independent of trade influences from China or Russia. Currently its seen as heavily controlled by China/Russia but perhaps that will change.
It may also be that 'reserve currency' is an old idea from when we didn't have instant ability to exchange currency directly. You used to have to go through a central person you both trusted which was the sterling then the usd. I'm not sure that is the case any longer. It may emerge that you have a set of currencies that provide that same function instead of one.
Do some research into the oil agreement before you come back and write anything more.
What you’re talking about is not the driver. What makes the USD a reserve currency, why every Gov on the planet must buy USD (China gets it through trade) is to buy oil. This is the single largest driver of USD, it has enabled USD acceptance in EVERY country on the planet because the gov must collect it in order to buy Oil to drive their economy.
If they do not collect enough from trade or tourism, they have to go onto the market and buy it at a worse exchange than what they can get from a tourist. This is why developing countries struggle when USD goes up in value, and why their markets do better when USD falls in value. USD is cheaper for the country to buy.
What you’re describing has absolutely no driver as to why USD is accepted on every single island and in every single country on this planet, including Cuba, Russia, even North Korea wants USD.
So a big fat no. Enough of the free education for you. Time to do your own research.
I think you're vastly underestimating the importance of geopolitics in the economy by hand waving away the most significant realignment of our lifetimes as "angry at Trump" my friend.
I think you’re over emphasizing the effect of an idiot on a process that is driven by logic and commanded by people who are elected to power based on their degree of sociopathy. You know that right? Leaders are sociopaths that do not relate to the population, they do not experience most feelings and they most certainly do not understand feelings. Leaders who do, do not accept those positions because it will kill them.
So you’re arguing a concept centred on feelings of which the leaders that are elected the world around do not share.
Logically, western leaders are doing precisely what is logical under the situation for a leader like Trump who is not a sociopath but who is instead an idiot (tested IQ of 92) and a puppet. He doesn’t understand policy, he does not understand cause and effect and he will adopt the position of whatever his handlers give him. But like an idiot he’ll shoot his mouth off every now and then and FLIP FLOPS when he’s corrected.
Western leaders and China, are hedging Trump, and undermining his leadership so that come midterms he becomes a lame duck, because THEY ALL BENEFIT. And what ensues will be the largest “I didn’t know him or agree with him” abandonment event that has ever been witnessed in US politics and Republicans jump ship in an attempt to preserve their position.
What you're missing is loss of faith in US institutions and the US in general, with respect to stability. It's really that simple, man. No 5 paragraph manifesto can change that.
Edit: And to clarify a little and take this a bit more seriously. It's not loss of faith because "orange man bad" its legitimate loss of faith because the institutions have failed or didn't perform as the market assumed they would.
The President was not supposed to be able to impose tariffs arbitrarily. Remember he had to justify it with fentanyl initially? We're talking about broad based tariffs used as leverage, man, you must understand how impactful that is. Investments are made with planning horizons of decades. The fact that the presidency can, and has, operated this way is game changing. And not just until the midterms.
I edited my post to explain, maybe after you sent this? Regardless, it's like you've never heard of political risk. Let's circle back in 5 years or 10 I guess. US will represent a smaller proportion of global trade in both directions that's my prediction, and the USD will be used in a smaller proportion of transactions. Are you not predicting that?
> They still have a defensive contract with the US, The US is still 4x the military might of the planet, and China has links to Iraq. Iraq and Saudi are.. well mortal enemies it seems.
Are you talking about Iraq or Iran?
But anyway the Saudis are with the US. Only the US can check the Iranian nuclear program. The Saudis know this
This commenter knows their stuff. I also think the oil angle is the right take. And you can see what America is doing internationally agree with it or not trying to take a stranglehold on oil.
They stop 1 party, by providing safety guarantees using their massive military which is 4x the might of the planet, and they sell every conceivable good produced on the planet.
This is the right take. And agree with it or not there are examples of the consequences through recent history see Saddam Hussein, Momar Gaddafi, Hudson Austin, Manuel Noriega, Nicholas Maduro, and my guess is Khamenei next if he does not come to a deal that include oil for USD.
The US military is no joke.
Name one economy that has left the US hegemony and been wildly successful. It's an entry into uncertainty and the consequences for those who have legitimately tried has been deadly.
Not saying I support it. But it is what it is. BRICS may be the biggest threat to it but with control of much of the world's oil I don't think it happens without serious headwind. Petroleum is needed in every industry. And alternatives are far less efficient so for any economy to stay in a growth environment it must go through the USA.
The 80/20 Split: As of 2025, market analysts (such as those from S&P Global and CurrencyTransfer) report that approximately 80% of global oil sales remain priced and settled in US dollars. The remaining 20% is settled in "non-traditional" currencies, a significant increase from near-zero a decade ago.
The "Petroyuan" Growth: China's Shanghai International Energy Exchange (INE) handles yuan-denominated futures. While still a fraction of the total market, it now represents a meaningful portion of China’s own imports—specifically from Russia, Iran, and increasingly, Saudi Arabia.
Yeah, it can never change... until it does. I find these cheerleader comments that assume that the way things are today is the way they'll always be pretty shallow.
The point isn't that it's easy to replace the dollar, of course it isn't. The point is that the costs are starting to approach the benefits, and people are looking to see if there's a viable exit. If the situation doesn't change course, the reign of the dollar will end, it's just a question of when, and what replaces it.
Ah you know there were a load of Dutch lads back in the day sitting round a table drinking wine and eating fancy food saying the same shite after one of their buddies even suggested that they would lose economic hold over Europe.
Times and people don't change only the stuff we have to do it with does.
The US deal with the Saudi’s is the US supplies military defense and oil in traded in dollars. If it becomes a less reliable defense partner this deal will not last. At the moment both countries are all buddy buddy but with the current regimes that could quickly change.
Yeh lots of changes.
With energy consumption driven by datacenters though, and the lag to build nuclear, plus the need to mine minerals to support an advanced economy. It’s unlikely that oil will not continue to play a major role in every economy on the planet.
Look at coal. It’s been eliminated in many advanced economies except for the construction of steel. But China continues to build coal plants for electricity and they have the largest EV adoption and solar panel adoption in the world.
Yeah this isn't a thing anymore. The US was able to enforce the Petro dollar for some 50 years but with Russia and China completely decoupled from the Petro Dollar the dam has broken and now Saudi Arabia isn't insisting on dollars either.
Oil doesn’t have to sell using the USD. everyone who thinks that the rest of the world won’t get sick of our shit and abandon us has an inflated sense of self importance. If the US falls as a modern superpower, it won’t be the first time in history something like that has happened. You can only be a global bully/dick for so long before our relatively small global population isn’t as important as the relatively larger global population.
Military might is dependent upon economic strength. If our trading partners partially replace or totally abandon us along with the rest of the world how long can we maintain our military strength?
If you disrespect your trading partners and allies today on the premise of being military strong, you’ll find yourself globally irrelevant after the globe abandons you.
Look at the history, would you say Russia is still strong after once being a superpower after the USSR fell apart?
Not true, oil has started to trade in yuan. China is already buying oil from OPEC in yuan. China is then brokering the oil to net importers in their sphere of influence for yuan as well.
Oil is traded in Yuan only with China. Everyone else is USD, and Saudi will only do Yuan up to a point and only because there’s a discount in goods and because they are charging more in Yuan. So it’s a double win for Saudi.
It’s an exception, not the norm and it’s only an exemption with China and for a limited amount that will not anger the US.
I don't think you're realizing how many nations are in their sphere of influence across Africa and Asia. Many countries exporting directly to China are paid in yuan and use that same yuan to import product/services such as energy.
China has slowly been building an economic ecosystem that operates primarily in the yuan... outside of BRICS which is a whole other issue on reserve currencies for the USD.
I don't think China gives a fuck what the US thinks at this point. No one does.
China does not export oil. They need oil to operate period.
There you go your feelings, nobody cares about what you feel or your emotions. Feelings are removed from economics. As soon as you add it, you’re making stupid assumptions. It’s why investors try to trade stocks without emotion, emotion leads to bankruptcy.
There is not a country on this planet that considering emotions when dealing with economics.
You can try, to buy it in Canadian but you’ll discover that the amount of oil available in Canadian is a drop in the bucket. And you’ll still need to refine it, so unless you have a refinery, all of which are controlled by the US or China. And China does not export oil.
Venezuela was doing it.. or what happened to them?
Iraq was doing it… oh what happened to them?
Lybia was doing it.. oh what happened to them?
Persia was doing it.. oh what happened to them?
Are you seeing a trend yet?
The US has ruled oil with a metal fist for well over 100 years and the world has looked the other way.
That is not why USD is the chosen reserve currency. The reasons why are complicated, but basically come down to the USA’s huge debt making dollars plentiful, plus the USA’s relatively open capital markets.
It's a false assumption that there needs to be a reserve currency at all, anymore.
Each other currency will sell off their USD, hold more of their own currency, and diversify their risk across all the other stable currencies. Demand for USD will fall and reserve currency status will dissolve - and nothing specific will replace it.
Take Japan's trillion in USD, it will convert into like 400B (USD) into JPY, 200B into WAN, 200B into EUR, 100B into RMB, 100B into CAD, etc. Every country will do that.
La deuda de EEUU no es asumible y con un dolar en declive es muy peligrosa tenerla a largo plazo. Trump usa a las stablecoin para frenar un poco la caída de la demanda así que cuando caiga la bola se van a ir deuda y criptomemes de la mano
Military might has been the only real thing shoring up the dollar for a couple of decades now.
The decline will take 6-8 years, but once it gets up speed, hoo boy!
Bash All Day, Buy All Night - https://giftarticle.ft.com/giftarticle/actions/redeem/908414c0-7239-4460-a5e9-bbb53f45529e via @FT
> Then I got back to New York, looked at the numbers and saw that, even as opinions of the US plunge, the money is flowing in like never before. Last year foreigners poured around $1.6tn into US financial assets, including nearly $700bn into stocks, both new records and significantly higher than the levels of recent years. The story is much the same for US corporate bonds, with foreign purchases up sharply.
...
> So why would people buy so heavily in a country they profess to increasingly despise? One reason is inertia. Until recently, the US had steadily outperformed the rest of the world since the global financial crisis of 2008, so many investors are still chasing past performance. They have come to assume that “there is no alternative” to investing in the US markets, given their vast scale and liquidity.
Sell America is way overblown these days. Foreign holdings of treasuries are near all time highs, and there are real obstacles to foreign holders selling a significant amount of treasuries. When you sell treasuries you get dollars, which are largely useless if not downright unattractive to foreign sovereigns. If China sold all their treasuries they'd have to covert a bunch of dollars to Yuan which would bid up the Yuan and make their exports too expensive. If Europe sold all their treasuries they'd have to dump all those dollars into EU govt bonds, suppressing already low yields that their pension funds rely on. People focus too much on the "sell" and don't realize there is a buy on the other side of every sell. US treasuries remain the most pristine collateral available and most will be happy to hold on and earn their 4% yield.
Stop with this bull. I’m not defending the dollar but there is NEVER a viable alternative suggested. Until that happens, stop with this virtue signaling stuff. Show some real macro economic muscle and tell me what the alternative is. Until then, it’ll be the dollar.
Who knows - the point is that it'll be something. It's not that there's anything that matches the strength of the dollar today, it's that the costs are starting to catch up to the benefits, when Trump is using the dollar's status to undermine the sovereignty of other nations just to sooth his own ego (literally he said exactly that about Greenland).
When it becomes too costly to remain on the dollar, the world will move to something else, not because it's better than the dollar has been over the last 80 years, but because the dollar has now been made toxic.
From another Economist article, "Just How Debased is the Dollar?" January 28th:
"Why are American assets so strong despite the dollar’s ostensible weakness? One explanation is that the dollar is not actually all that weak. Despite its decline over the past 12 months, the real exchange rate (which accounts for differences in inflation between countries) was 13% above its average of the past 30 years. Using The Economist’s Big Mac index, based on the prices of the McDonald’s delicacy around the world, the dollar is overvalued against 49 of 70 currencies."
In an article from the January 21st edition they reported on European retail investors rushing into American assets as European defined benefit funds close out.
Asset inflation. When much of the wealth generated is to the benefit of the very wealthy, they don't spend it on essentials, they buy equities. The lower quintiles spend all their money on food, shelter, clothing, etc. The wealthy do buy luxury goods but the scale of their wealth is such that much of it has to go into investments.
Maleficent_While2653 | 8 hours ago
Yes. Other countries are already starting to increase their gold reserves over US treasuries. Long term bond yields are not coming down. Why continue lending to an unstable country that is 38 trillion in debt with no sound fiscal or monetary policy? The government is not going to curtail spending or increase taxes so they will have to print the money to pay the interest on its debt. This is currency debasement 101.
People are too attached to the idea of the US running the world. It’s the world everyone has grown up in. But the reality is that empires and currencies come and go. The world still goes on. The US dollar standard is not some law of nature that can’t be broken.
Marmaduke_Mallard | 9 hours ago
'But definitively abandoning the dollar would require an alternative reserve currency,'
Why? You can't just assume this or say that it's obvious. Bilateral deals, usually on a barter basis, are increasing by the day, particularly in the BRICS sphere of influence. And one can also foresee trade taking place on the basis of gold. The idea of a reserve currency is a relatively modern one -- first pound sterling, followed by the dollar after WW2.
Holding dollars or dollar-denominated debt is a recipe for losing purchasing power and is fraught with other perils (such as sequestration by an erratic and unreliable US government).
It's not that dollar hegemony is threatened. It has already gone. USA's future is a bleak one. It is crucially dependent on imports (as its de-industrialized wastelands testify to) but the only thing it has to pay with is its increasingly worthless fiat currency. And gold and silver prices over the last couple of years corroborate my claim.
JaStrCoGa | 7 hours ago
The dollar could be stable if the US had a responsible federal government that wasn’t intentionally trying to devalue the dollar and was not otherwise hamstrung by political brinksmanship and dark money.
TheCamerlengo | 7 hours ago
Yes. The dollar is not going away, just used less and less as regional trade picks up and other currencies are used within those trading zones.
128-NotePolyVA | 4 hours ago
Trump, Bessent, etc. will say a weak dollar is necessary for US exports to be competitive. But where are all these US factories? Assuming they can be built, we’re 5-10 years from seeing benefits from re-industrialization. From now until then, life for Americans is fraught with nothing but pain.
Marmaduke_Mallard | 4 hours ago
It's what we call "cargo cult" thinking -- during WW2, the USAF built airfields on Polynesian islands. The islanders saw these big birds flying in and disgorging goods. So after the war they built their own airfields, thinking these magical birds would fly in with more goods. Magical thinking. Likewise with these bozos Trump and Bessent. They think a weak dollar and high tariffs will magically create factories in the USA. Now it's true that this would encourage re-industrialization -- just as you can't have aircraft flying without airfields. But just these measures alone will not bring factories to the US -- just as merely building airfields will not cause aircraft to magically appear. You need a trained workforce, you need capital investment, and you need long-term strategic management at the top -- the way the Chinese have it. Do you see any of this in the USA? The mercurial and moronic Trump certainly doesn't have it. But it's not just him. The political and financial elites don't have it either. It's all about grab what you can and get the hell out. So MAGA is going to remain a pipe dream by the pied piper Donald Trump, as he leads his horde to the river, where they will drown.
Gamer_Grease | 8 hours ago
Exactly this.
BareNakedSole | 4 hours ago
I can’t find fault with your reasoning…..but if (and I admit it’s a big if) Trump’s policies are removed quickly enough AND foreign governments assume there will be a more stable US government post-Trump then the damage to the dollar as the world’s reserve currency MIGHT be minimized.
What’s so frustrating is that MAGA morons have no clue just how bad the damage to their way of life will be when the dollar is sidelined in world markets.
Marmaduke_Mallard | 3 hours ago
I agree with you to some extent (and have accordingly upvoted your comment) but -- and I can't emphasize this enough -- it's not just Trump, though he's a one-man wrecking ball masquerading as savior of a failing system. The system has been failing for a long time, for decades, with one administration after another just kicking the can down the road and praying, "Please, not on my shift." The problems with the dollar, with USA's declining geopolitical clout, with its de-industrialized wastelands, with its divide between rich and poor, are structural and systemic, and reflect tectonic changes in the world system. There is no panacea that I can see. The situation strongly resembles that of third century Rome, which presaged worse to come in the centuries ahead.
So_HauserAspen | 8 hours ago
My understanding is that China is positioning its currency to be that reserve currency. And they have the economy to back it. Regardless if you aggree with their policies, they also have a seemingly stable government.
Marmaduke_Mallard | 8 hours ago
They have a stable government. They have the manufacturing economy. Very true. But reserve currency comes with other baggage -- geopolitical baggage to be precise. When pound sterling was the reserve, you had "Pax Britannica", where Britain was hegemon and British warships patrolled the oceans and provided the security for global trade. Likewise "Pax America" had the USA as hegemon, with US ships patrolling the major sea lanes to provide security for maritime trade and 750 military bases globally. And this is just the tip of the iceberg with regard to political, military, and financial commitments. It's not clear to me, to put it politely, that the Chinese want a "Pax Sinica." it's not in their history or culture. It's an onerous burden, like Atlas holding up the sky. They seem to be happy to manufacture and to trade. Anyway, this is my take. I could be mistaken.
darkwingduckman | 7 hours ago
so long as china maintains capital controls on its currency it will never really be a reserve currency. free flowing capital is one of the most important functions of a reserve currency, people need to be able to move billions of dollars at once with no issue.
Kolbur | 7 hours ago
Not only that, China would have to completely change their economic model. Can't have an export economy AND the reserve currency at the same time.
absat41 | 6 hours ago
They would need extremely high levels of demand for the Ren. That means allowing an immense level of "loss of control" over Ren-denominated bonds, into the the trillions. Loss of control? That is really tall order for this government
Optimal-Archer3973 | 2 hours ago
It appears they will actually push something other than their currency long term. It will not be anything trump can capitalize on though.
Fair-Search-2324 | 7 hours ago
Easy change as a policy statement once Yuan is positioned.
darkwingduckman | 6 hours ago
it’s really not that easy. the second china does this it will have a ton of capital that will leave the country and will make the yuan unstable as investors seek to diversify. this is a massive shakeup in their economic model, and frankly anyone’s economic model that isn’t already built off of minimal capital controls.
menictagrib | 4 hours ago
Also China is actively paring back initiatives that would have positioned them for this role; it does not seem like they are interested in bearing this burden.
panna__cotta | 2 hours ago
Because it doesn’t actually have that much benefit in the modern era. Trump and his ilk are geopolitical disasters but they’re right that the US invests a lot abroad with debatable returns.
Pizza_Mod | 7 hours ago
I agree with you, the Chinese from all that I have read don't seem interested in taking Americas role in the world. They have been happily lending money and building vital infrastructure for their own interest (for manufacturing and needs). They have no interest in getting involved in any countries political policies and issues.
So_HauserAspen | 7 hours ago
China's Navy is now larger than the US. While it's mostly littoral, they've demonstrated the ability to expand fast.
And the US Navy is currently being led by absolute morons.
I agree with you what you're saying, but I think there's a lot of potential energy right now to push a transition. I can't rule out that part of what is being done to the US economy is intentional to make it a reality. The rich are investing and invested heavily in China. They certainly have the moral characters to rugpull this country.
ScottyBoneman | 7 hours ago
I am not as certain that being a reserve currency requires a huge navy. In the 'Pax Britannica' the causality seems far more likely to have been the other way around, and your 'Pax America' (not Pax Americana?) I think both are from the same cause at best.
Can you advance your thinking about why dominating trade isn't enough?
Marmaduke_Mallard | 7 hours ago
'Can you advance your thinking about why dominating trade isn't enough?'
You are making me think things through more carefully. I don't think a powerful military is a necessity for being reserve currency, but rather that it comes as a package. In the case of the USA, countries that attempted to get out of using dollars came to a sticky end -- Iraq, Libya. The military card keeps the dollar card up (military coercion forces use of the dollar), and the dollar card keeps the military card up (in the sense that foreigners have to use their trade surpluses with the USA to finance USA's persistent fiscal deficits brought about by military spending). An extortion racket in the purest sense. In the old days, India's trade surplus with the rest of the world was siphoned off by the British (as an "administrative tax"), and, oh, don't forget the gunships just off the horizon to maintain colonial rule. In both cases imperial overreach caused (in the British case) or is causing (in the US case) rapid decline both internationally and domestically.
Now, this question of what constitutes a reserve currency. If it is just a currency being used for global trade, then the Chinese yuan could take that role (if the Chinese so wish). On the other hand if it is part of a package where the world's central banks have to hold more and more yuan -- at the point of a gun -- to finance China's fiscal and current account deficit, I'm not so sure about that.
ReverendBread2 | 7 hours ago
China believes investment is then path to peace. Let today’s problems play themselves out and invest in the winner regardless of government or ideology to create stable future conditions. Wouldn’t having the reserve currency help them here?
griswaldwaldwald | 6 hours ago
China does not want that burden. Nobody does.
bigGoatCoin | 4 hours ago
lolololololo no
They have to first get rid of capital controls, free float their currency and do a bunch of other stuff.
They wont because politically they can't as that would create a wealthy middle class.
DonnieBallsack | 6 hours ago
I don’t understand why it needs to be one or the other. How about china decreasing its reliance on the dollar without being the world’s reserve currency? It could establish a currency for Asia and Africa and not have to rely so much on the dollar.
yevelnad | 5 hours ago
But they have an authoritarian regime which can't be dealt with checks and balances unlike the US in which you will consider everything and everyone before making a move.
samhhead2044 | 4 hours ago
China has no want to be a reserve currency. They are well positioned with the current order. They don’t have free flow of capital and that would require the Chinese government to push manufacturing away and move to service economy which they have been reluctant to do so.
No one in the west would dare agree to China the exact opposite of the west to be the reserve currency.
They have a demographic crisis. You can talk of the American decline and it’s been speculated since the 1980s
Japan etc. America is still clearly number 1 and we have a nut case in power but for the most part we have been stable. Most importantly, until there is a western power who can lead it will be America.
India is interesting could they get corruption under control they could take off next and surpass China. China still need to project power outside of SE Asia.
shamblingman | 3 hours ago
No country that is suspected of currency manipulation will ever become the world's reserve currency. PERIOD.
DogblackMichigan | 3 hours ago
China has no chance of becoming the trusted world reserve currency. They do so much unfair manipulation that no one would dare hold renminbi.
Pseudoboss11 | 56 minutes ago
China doesn't want that. They want the freedom to control their currency to meet their own economic goals, in ways that would make the yuan unsuitable to be reserve. They don't want the US to have reserve currency status, but they don't want to be the reserve currency either, hence their membership in BRICS.
Freud-Network | 6 hours ago
The rest of BRICS wants their currency to be the dominant reserve currency. What's going to end up happening is the formation of a nation agnostic currency on a BRICS payment system, so everyone can avoid the SWIFT payment system and western sanctions will lose their effectiveness.
throwaway00119 | 5 hours ago
The US sells billions of dollars of services across the world. What the fuck are you talking about? Why do people (like the current admin and you) pretend the economics only works for goods when there’s a reason they’re attached at the hip as goods and services.
Reddit loves American doomerism and I don’t disagree with the premise, but it’s not black and white “oh the sky is falling.”
marenamoo | 5 hours ago
You have to look at geopatriation - many countries want digital sovereignty over data and will work on developing their own cloud based web servers.
canuck_in_wa | 5 hours ago
How does the rise of AI affect the value of services sold by the top American companies by market cap?
petepro | 6 hours ago
Why? Simple. China has 1.2T trade surplus last year. And the idea of reserve currency is way older than the pound, just more regional the further back you go.
Ninevehenian | 8 hours ago
Would change not be more likely to happen if the new looked like the old and new thinking weren't required?
imnotlebowskiman | 6 hours ago
You neglect to mention that they have the firepower and CIA to help keep most nations “in line”. Any leader that’s gotten too vocal about getting off the dollar have not had pleasant outcomes.
morbie5 | 3 hours ago
> It's not that dollar hegemony is threatened. It has already gone. USA's future is a bleak one.
Joke is on you then. Cuz if the US goes down it'll pull everyone down with it
ThemeBig6731 | 10 hours ago
After testing the 95 level, the dollar index has rallied back above 97.5. Clearly shows that demand for dollar and dollar based assets is solid.
ringobob | 9 hours ago
The dollar has been the world reserve currency for 80 years. You expect it to end in a week?
Gamer_Grease | 8 hours ago
This stuff changes fast. Technically the reserve dollar as we know it has only existed since 1971, and that monetary system only originated in 1945, and there were a series of short-lived monetary standards before that, going back to the 1870s. The system that we live under is actually quite long-lived for an international monetary standard. It could be due for a shake-up.
ringobob | 7 hours ago
As with all such things, it happens slowly, and then all at once. The danger signs persist far longer than you'd think they would, and then the penny drops.
As the saying goes, the market can stay irrational longer than you can stay solvent. The corollary is, predictions can stay accurate long after people have grown impatient with them.
Not like I have the kind of money that would really benefit from this kind of high level analysis, but it doesn't make sense to be the first out of the door, yet. But neither does it make sense to not hedge against the dollar.
CapitalElk1169 | an hour ago
There are decades where nothing happens. And there are weeks where decades happen.
ThemeBig6731 | 8 hours ago
You are correct, anything can change fast. Have you heard the phrase, “in a kingdom of blind men, the one-eyed man is the king”? The one-eyed man in this case is the US. All other countries are fundamentally in worse shape fiscally and economically. Hence, while foreign investors can fret about being arm twisted via tariffs etc., there aren’t many safe, income-producing investment options outside US Treasuries and US GSE-backed mortgages. Gold ain’t giving you income to pay out pensions for example.
Distinct-Policy-6411 | 9 hours ago
umm its called intervention my friend or threat of intervention lol. This does not mean demand for dollar is getting strong at all.
ThemeBig6731 | 8 hours ago
Just tune out all the commentary you hear (it is pure noise) and observe what the dollar does and doesn’t.
All other countries are going to find out (if they already haven’t) that their inherent protectionism means there can’t be sustainable free trade between themselves. Even with 20% tariffs, US is the most reliable destination for their exports and US won’t dump their goods in their home markets.
BlahBlahBlackCheap | an hour ago
WOT!?!!! This ship cant SINK!!!
OddlyFactual1512 | 8 hours ago
The last time it was at 95 or lower was 2021. It's down 10% in the last year.
jcooli09 | 4 hours ago
Hasn't that shop already sailed? In what way is the hegemony still intact?
It was supported by foreign aid and defense agreements, both of which are now void in practice if not on paper.
A big part of being a hegemony is being predictable, others have to be able to predict and trust that we will honor our commitments. We don't have that anymore either.
popejohnsmith | 3 hours ago
Exactly. Each country is now faced with establishing nuclear deterrents as the next logical steps to repel US intimidation.
Marmaduke_Mallard | 2 hours ago
The hegemony is long gone. If you can, take a glance at Wallerstein's ten-year-old essay, "The Increasingly Unstable United States". This came out before the era of Trump and things have only got much worse since.
expert_views | 10 hours ago
The RMB cannot replace the dollar. (Capital controls). Gold cannot replace the dollar. Bitcoin cannot replace the dollar. So you have the dollar.
QFGTrialByFire | 9 hours ago
The same thing was said about the dollar when the sterling was reserve currency in the 1930s. The USD wasn't considered a currency that could become a reserve currency then. Eventually a currency is reserve currency because it helps make trade frictionless. Once it becomes a barrier trade works around it just like it did with the sterling. If the dollar continues to become a hinderance to trade the same will happen to it. You don't need a reserve you just need a stable currency or currencies for trade. That currency becomes reserve.
CrackRocksCokeRules | 3 hours ago
You’re forgetting the British owned most of the world in the 1930’s
QFGTrialByFire | 3 hours ago
I'm not forgetting .. owning most of the world didn't stop the sterling being loaded up with gov debt to a massive extent in 1931 causing that crises. They tried the same tricks the US are trying now to try and stop the devaluation of the sterling. Tariffs, forcing trade in sterling within the dominion. The parallels with the USd are very similar .. whether you 'own' the world with guns or finance i guess is a bit of a moot point.
Meanwhile the US removed trade barriers once FDR came in 1933 and grew its exports creating real volume demand for usd as a trading currency. By 1937 the USD was as much a reserve as the sterling and still growing. That volume allowed for the financial sector to grow and compete with London. I bet FDR is rolling over in his grave with the current US take on economic policy.
It just is glaringly obvious the demand for a currency starts with wanting their stuff then you start 'reserving' it because you need it to buy their stuff and for that you need their currency. Then it becomes easier to finance in it because there is so much of it traded across the globe that its a reliable reference. If another currency/s offer that without sovereign risk(yuan doesn't offer this) they will overtake a USD trying to prevent trade like the sterling was overtaken by the usd.
Sea_Hold_2881 | 10 hours ago
Or you have the 'unit' and the Euro. There is no 'can't' only 'is the incentive large enough'. And in today's environment the incentive is there but it will take another 10 years before it becomes obvious that the USD is no longer the sole trade settlement currency.
Gamer_Grease | 8 hours ago
The Eurozone cannot survive the Euro outright replacing the dollar, but it can definitely become a bigger partial reserve currency.
ScottyBoneman | 7 hours ago
In what way 'survive', what harm do you think the Eurozone would take for international deals being demarked in their currency?
Gamer_Grease | 7 hours ago
Vastly, vastly more sovereign indebtedness, to which the Eurozone is staunchly opposed, both culturally and legally. There have to be lots and lots of Euro-denominated assets out there for such a scheme to work, and that means lots of Euro debt.
The other issue is currency strength. The eurozone thrives on exports and tourism, and as demand for the Euro skyrockets due to international reserve demand, those industries will suffer terribly.
The problem with any one currency taking on the role of the USD is that they have to adopt a lot of the USA’s economic approach as well. Lots of debt, the death of manufacturing, and so on.
ScottyBoneman | 7 hours ago
>Vastly, vastly more sovereign indebtedness
Sorry, why? (And I'm not sure the Eurozone lacks debt)
Gamer_Grease | 6 hours ago
If everyone is going to hold your money, that means they’re going to hold your bonds. If they’re going to hold your bonds, that means you owe them money. Everyone can hold USD because there is a LOT of USD debt out there. The Eurozone generally restricts deficits to very low levels, meaning production of those euro-denominated assets is very slow. There is much controversy over the European rearmament and pension crises right now because both threaten to raise deficits to levels Europeans won’t tolerate.
In general the Eurozone is much more fiscally conservative than the USA.
ScottyBoneman | 6 hours ago
Are you suggesting that the Eurozone doesn't issue enough debt to satisfy central bank demands, and that would be the obstacle? As a zone they are over 80% before increased spending planned for defense.
I would think the increased demand if anything would decrease their borrowing costs not force higher levels.
Gamer_Grease | 6 hours ago
That is what I’m suggesting. Your concern with ratio is an example of the European attitude towards sovereign debt that makes the Euro as a solitary reserve currency so problematic. Outstanding Euro area debt is just €13.26T, while US outstanding debt is $38.5T. Euro-users need to pack on a lot more debt to meet demand for Euro-denominated assets.
Decreased borrowing costs incentivize higher borrowing levels.
And remember: if those levels of borrowing don’t rise, what happens to the Euro as demand for assets denominated in it rise? Its value rises as well. Imagine trying to export a bottle of olive oil or a wheel of cheese if the Eurozone doesn’t borrow more while assuming the role of primary reserve currency! They would be too costly, and the eurozone’s trade balance would reverse, shifting to imports over exports.
ScottyBoneman | 5 hours ago
This makes no sense to me. The EU's biggest problem might be the lack of investment capital within the zone.
Getting more Euros available in the market doesn't require greater debt from the EU's public sector, if anything the reverse is true. If the Euro was getting too expensive that's actually a problem whose solution would help them. Lower interest rates to allow private banks to borrow more, lowering servicing costs for existing debt while enhancing the business environment without raising funds in New York or London.
morbie5 | 3 hours ago
> and the Euro
They don't want that. They like being a big exporter to the US market
MC_chrome | 9 hours ago
The US dollar is essentially the best of all the worse alternatives.
Now, I guess we will have to wait and see if Jerome Powell’s replacement will strengthen or further weaken the global economy’s confidence in the dollar or not
Limp_Technology2497 | 9 hours ago
It’s ultimately about the treasury and the budget. Almost every road leads to trying to print our way out of debt. The fed can’t really control inflation when those higher rates would blow out the budget
MC_chrome | 9 hours ago
This is also true, but if Kevin Warsh does as Trump commands and he pushes the Fed board to lower interest rates substantially it will only further weaken the independence of the US financial system.
Scott Bessent isn’t doing the US treasury any favors either
Blackout38 | 9 hours ago
That’s why Warsh wants to get rid of the budget deficit.
MC_chrome | 9 hours ago
You can’t get rid of the current budget deficit with Republicans constantly slashing taxes and increasing spending.
Clinton got it right, but Republicans are loathe to replicate any of his policies
Hopeful_Chair_7129 | 9 hours ago
Calling the dollar ‘the best’ implies evaluative choice. In practice it functions as the lowest-friction coordination tool, which is a different claim.
Alib668 | 9 hours ago
I think he means best of a bad bunch
Hopeful_Chair_7129 | 8 hours ago
There isn’t a meaningful choice here. The dollar remains dominant because global trade, debt, liquidity, and contracts are already dollar-denominated, which makes exit costly and risky. That structure penalizes non-use.
Dollar dominance is self-reinforcing: it persists because the system is already built around it, not because it is evaluated as “best.”
A replacement wouldn’t be “chosen over the dollar” in advance. The shift would only occur after the underlying infrastructure changes enough that a different unit is already functioning as the coordination standard.
TheCamerlengo | 7 hours ago
Can you provide an example of what you are describing? It seems that if China and Canada enter into an agreement to trade timber for cars, any monetary exchange could be done in Canadian dollars and RMB, or even Euros. Why the necessity of using dollars?
I am just asking and curious. I don’t doubt that you are right. Just want to understand why.
Hopeful_Chair_7129 | 5 hours ago
Bilateral trade doesn’t require dollars, and countries do settle transactions in other currencies. The constraint I’m describing isn’t legal or technical, it’s systemic. At scale, pricing, financing, insurance, debt, hedging, and liquidity are still overwhelmingly dollar-denominated, which makes non-dollar settlement costly and risky once you move beyond isolated trades.
The dollar isn’t “necessary” for any single transaction; it’s embedded in the coordination layer that sits above them. That’s why dominance persists without being continually chosen.
FlufferTheGreat | 7 hours ago
So it's the "Best in your narrowed description"? That still means the best... This is just a quibble on word choice.
Hopeful_Chair_7129 | 6 hours ago
The disagreement (if there even is one) isn’t about ranking alternatives, it’s about whether “best” reflects choice or constraint. I’m arguing the latter; dominance persists because exit is costly, not because agents are continually selecting it.
Shitty_Paint_Sketch | 10 hours ago
And the euro?
eilif_myrhe | 9 hours ago
The euro has become a small alternative to the dollar for those countries that want to diversify.
shaadyscientist | 8 hours ago
Until there is a eurobond, the euro will not really take over. This would essentially mean joint debt among the eurozone and would require the EU to have a revenue raising tax in these countries to pay it back. There is opposition to this.
When people say that the dollar is the reserve, they really mean buying US debt is the reserve. There is no real "euro debt" to buy.
kananishino | 10 hours ago
is the guy in the corner at a party
Shitty_Paint_Sketch | 10 hours ago
If he's the only sober/stable non-fascist in the room, then that's who I'm talking to.
expert_views | 9 hours ago
Too many tensions in the Euro. And does Germany still have the ability and willingness to bail everyone out the next time a southern country goes bust?
RespectmanNappa | 9 hours ago
Germany benefited from the Greek credit crisis. They got to lower their own borrowing costs and got to buy assets on the cheap and garner further power within the bloc
Edit: I know in terms of domestic politics that isn’t really how people see it though. And there’s something to be said about a government willing to bail out entire national currencies when they can’t even provide security/investment for their citizens who are worse off. The USA and Argentina comes to mind…
reeeeecist | 9 hours ago
And a lot of Greek debt was with German banks, so it was basically a bail out for themselves.
nixfly | 9 hours ago
That situation may have reversed itself at this point. I Think PIGS is doing better than Germany since the Ukraine war.
No_Opening_2425 | 7 hours ago
Isn't that a lie? I'm pretty sure they did joint QE
Gamer_Grease | 8 hours ago
Nothing can replace the dollar by itself, but the Euro could be used more. It is not a viable replacement for the dollar, though.
Tremolat | 10 hours ago
But other than THAT, will it?
Gamer_Grease | 8 hours ago
You can also just have a diversified portfolio of other currencies and precious metals. It’s not required to have so much in dollars, it just lowers friction and there are a lot of dollars due to the USA’s indebtedness.
Ohmybro34 | 7 hours ago
But thet can all take a piece. Bit by bit the "universal" currency is becoming less so.
durrtyurr | 8 hours ago
The RMB has the problem of a major lack of transparency. For a country whose major negative stereotype is "being good at math", they are absolutely terrible at accounting and auditing. If they ever want to be the world reserve currency, they need to fix that very major issue. I'm not hating or anything, the laptop I'm typing this on was made in Shenzhen, my last daily driver car was made in Henan, and I'm likely to buy an electric motorcycle made in Chongqing in the next two months.
CapitalElk1169 | an hour ago
They said that about the pound sterling at one point too...
[OP] Stuart_Whatley | 10 hours ago
"It has long been reasonable to assume that central banks’ incremental diversification of their reserve holdings would erode the US dollar’s hegemonic position only over the long run. But with the addition of heightened market skepticism about the greenback, we could find ourselves in uncharted waters."
Future-Raspberry-780 | 9 hours ago
Have you seen the state of the dollar? It is falling and forecasted to fall even further. I can’t in good conscience continue on investing in America and have to start looking at foreign trades. This is lose-lose all around. Preparing for the dive this week also bc of jobs data.
PlanetCosmoX | 10 hours ago
Unlikely. The reason it’s the world currency is due to oil and the fact that you can only buy oil with USD.
And since Saudi is getting a brand new datacenter with the most advanced cards nVidia has, and they don’t have to wait their turn for delivery, chances are you will still need USD to buy oil.
Economies need oil to run.
Sea_Hold_2881 | 10 hours ago
>Unlikely. The reason it’s the world currency is due to oil and the fact that you can only buy oil with USD.
This is false. 20% of oil trades and now non-USD and rising.
Saudi specifically sells oil to China and receives Yuan.
zzzongdude | 8 hours ago
Very interesting. is there somewhere I can find a chart of the volume of oil sales in these currencies over time? so i can compared the increase side by side
i tried googling but it's just bringing up the value of crude oil
Sea_Hold_2881 | 8 hours ago
See my comment below with references to sources.
throwaway00119 | 5 hours ago
Meaningless. China wants to end US dominance. Saudi has more oil than they know what to do with. Of course China will force them to trade in Yuan and of course they will take it.
PlanetCosmoX | 10 hours ago
For limited cases only, if this is true. If China can do it, it’s because there are many things that oil countries can buy with the Yuan, like food and goods.
Frankly if I was Saudi I’d do that too. Funny that Trump did not try to derail that with the datacenter promise. He has a blind spot when it comes to his friends in Saudi.
The world can support two global currencies, but I don’t think Saudi will accept to sell oil to a non-Chinese Gov in Yuan. They still have a defensive contract with the US, The US is still 4x the military might of the planet, and China has links to Iraq. Iraq and Saudi are.. well mortal enemies it seems.
The exchange in Yuan may also be beneficial to Saudi, they’re likely getting a better exchange using the Yuan with China than they are with the USD.
So I’d do it if I was Saudi, but I guess there’s a limit to how far I’d go. It’s unlikely that China would come to the aid of Saudi under the situation that the US decides to abandon that defensive deal if Saudi breaks their end.. which they are technically doing by accepting Yuan.
Mind you Iraq is not the force that it used to be either. But maybe it’s all an act.
Sea_Hold_2881 | 9 hours ago
There is nothing special about the USD. It is a means to an end and if the price of using the USD exceeds it value the market will shift - even if it means higher transaction costs in the short term.
You are completely naive about how Trump has destroyed faith the USD. Every major trading country in the world now wants alternatives to USD and will pay to get it. The change will start slow but accelerate over the next 10 years.
The entire point of Carney's speech in Davos was a call for middle powers to structure their economies to resist US and Chinese pressure. This implicitly means settling trades in networks that are not controlled by either would be hegmon.
FlufferTheGreat | 7 hours ago
The USD has been used because it does a few things that other currencies don't (or were not doing at the time of its widespread adoption).
There are enough of them around to use -- any reserve currency needs a large economy that uses it.
The nation controlling the currency does not manipulate it much at all. This I think is where the yuan will have the most doubt. China has manipulated it in the past and there are no internal guardrails if Xi decides to mess with it. At least the USD needs the Fed's board members to agree on such things.
Sea_Hold_2881 | 7 hours ago
Th Euro is large enough. What it lacks is a large pool of Euro bonds but that can be fixed.
The BRIC 'Unit' is a collection of currencies + gold that is large enough and sufficiently detached from the Yuan that currency manipulation will not be a factor.
PlanetCosmoX | 9 hours ago
Your post is absurd. Nobody bought the USD on faith, especially at the country level. Countries bought USD because they had no choice.
Your feelings mean squat. The fact that you’re angry at Trump means nothing, nobody cares and it has no effect on economics.
Yes he’s an idiot, but that fact has absolutely no impact on what the world is forced to do if they want to buy oil to drive their economy.
Sea_Hold_2881 | 9 hours ago
>Countries bought USD because they had no choice
There is always a choice. Countries used the USD because they trusted the US and alternatives were more expensive/risky. The risk calculus is shifting and expect to see multiple independent trade settlement systems within 10 years.
>if they want to buy oil to drive their economy.
This is such a bizarre argument. Oil is exchanged in many currencies and there is zero requirement for USD as a settlement. At some point in near the future Canada will start selling oil to Chinese in Yuan because it will be part of their diversification strategy that Trump is imposing on them. Canada - China trade is large enough to ensure the Yuan can be used to buy stuff from China.
PlanetCosmoX | 9 hours ago
No, your comment is absurd.
And no, you’re ignorant about oil and created the conditions in the first place.
Your entire point of view is nonsensical.
Did you ever stop to ask yourself why a struggling country in Africa that can’t afford food is still buying USD, and still buying oil? Of course you didn’t because you have no economic education. You’re literally spouting propaganda driven by ideology with no basis in fact.
Sea_Hold_2881 | 8 hours ago
>And no, you’re ignorant about oil and created the conditions in the first place.
I clearly have a must better understanding of the history and the reasons for US dominance of the trading system today than you do. The USD is where it is today because of the 'benign empire' that US choose to create after WW2 where the US would secure the shipping lanes and promote a rules base trading order in return for everyone using the the US financial system.
Trump has broken the deal. By turning the US into a malevolent force that uses the US position to extort allies and foes alike it is no longer in the interest of any major economy to continue using the US financial system. So the only question is how long the shift away from the USD will take - not if it will happen.
>Did you ever stop to ask yourself why a struggling country in Africa that can’t afford food is still buying USD, and still buying oil?
Holy straw man batman! Small countries can't use their currencies because they cannot possibly maintain a trade balance with every possible trading partner. But if the big players (read: China, EU + other large economies) develop alternative networks then that poor African country will be able to choose the financial network that gives them the most benefit.
The BRICs 'Unit' is one such alternative.
The Euro has the scale to be another and Europeans are motivated to make it happen.
The USD will not go away. It will simply have more competition in the future and that is good thing for the world.
PlanetCosmoX | 7 hours ago
You used to the term malevolent. The US has always been malevolent, nothing has changed with Trump except the terms used… and his level of stupidity.
You’re bringing feelings into mix. Feelings have no bearing on economics or trade.
Your last two or three sentences are correct. However BRICS does not trade in oil, China does not trade in oil, Europe does not trade in oil. So those companies are still going to have to buy USD in order to buy oil, and they need oil as much as they need food.
QFGTrialByFire | 8 hours ago
Just because you say so doesnt make your statement true. The dollar became reserve currency because it enabled trade. FDR devalued it and removed tariffs while the British sterling tried what the US is trying now by putting up tarrifs. The dollar became easier to settle, hedge, and finance trade in than sterling. The world use the currency that enabled trade that is what made the dollar a reserve currency. The oil and military reenforce it but are not the source of it. The frictionless trade is and by putting that at jeopardy the dollar is risking what happened to the sterling.
I doubt it'll be the Yuan as the poster above says as it is also not a frictionless currency. But there are many choices just like the USD was back when the sterling was facing issues. If you read up on it you'll realise that no one in the 1930s thought of the dollar as reserve status. It was FDR that enabled it to happen not ww2 or petrol or the military. Those enhanced it. FDR and his free trade policies created it.
Sea_Hold_2881 | 8 hours ago
The BRICs "Unit" is an interesting concept that could work. The bottom line is necessity is the mother of invention and it is no longer in the self interest of any country to be solely dependent on the US financial system. So there will be alternatives. It will take about 10 years to see which alternatives emerge.
QFGTrialByFire | 8 hours ago
Yes a bit of healthy competition. The unit is interesting but I cant see Europe, Australia Canada, Japan, Tiawan, Korea trusting it. And trust is everything in a free trade/reserve. I guess time will tell if the Unit is independent of trade influences from China or Russia. Currently its seen as heavily controlled by China/Russia but perhaps that will change.
It may also be that 'reserve currency' is an old idea from when we didn't have instant ability to exchange currency directly. You used to have to go through a central person you both trusted which was the sterling then the usd. I'm not sure that is the case any longer. It may emerge that you have a set of currencies that provide that same function instead of one.
PlanetCosmoX | 8 hours ago
Do some research into the oil agreement before you come back and write anything more.
What you’re talking about is not the driver. What makes the USD a reserve currency, why every Gov on the planet must buy USD (China gets it through trade) is to buy oil. This is the single largest driver of USD, it has enabled USD acceptance in EVERY country on the planet because the gov must collect it in order to buy Oil to drive their economy.
If they do not collect enough from trade or tourism, they have to go onto the market and buy it at a worse exchange than what they can get from a tourist. This is why developing countries struggle when USD goes up in value, and why their markets do better when USD falls in value. USD is cheaper for the country to buy.
What you’re describing has absolutely no driver as to why USD is accepted on every single island and in every single country on this planet, including Cuba, Russia, even North Korea wants USD.
So a big fat no. Enough of the free education for you. Time to do your own research.
QFGTrialByFire | 8 hours ago
That oil agreement is decades later. By 1931 the USD was already becoming reserve status. Here is the timeline:
2.1944 - the dollar is already formalised as reserve status.
Talinn_Makaren | 9 hours ago
I think you're vastly underestimating the importance of geopolitics in the economy by hand waving away the most significant realignment of our lifetimes as "angry at Trump" my friend.
PlanetCosmoX | 8 hours ago
I think you’re over emphasizing the effect of an idiot on a process that is driven by logic and commanded by people who are elected to power based on their degree of sociopathy. You know that right? Leaders are sociopaths that do not relate to the population, they do not experience most feelings and they most certainly do not understand feelings. Leaders who do, do not accept those positions because it will kill them.
So you’re arguing a concept centred on feelings of which the leaders that are elected the world around do not share.
Logically, western leaders are doing precisely what is logical under the situation for a leader like Trump who is not a sociopath but who is instead an idiot (tested IQ of 92) and a puppet. He doesn’t understand policy, he does not understand cause and effect and he will adopt the position of whatever his handlers give him. But like an idiot he’ll shoot his mouth off every now and then and FLIP FLOPS when he’s corrected.
Western leaders and China, are hedging Trump, and undermining his leadership so that come midterms he becomes a lame duck, because THEY ALL BENEFIT. And what ensues will be the largest “I didn’t know him or agree with him” abandonment event that has ever been witnessed in US politics and Republicans jump ship in an attempt to preserve their position.
That’s what this year will be remembered for.
Talinn_Makaren | 8 hours ago
What you're missing is loss of faith in US institutions and the US in general, with respect to stability. It's really that simple, man. No 5 paragraph manifesto can change that.
Edit: And to clarify a little and take this a bit more seriously. It's not loss of faith because "orange man bad" its legitimate loss of faith because the institutions have failed or didn't perform as the market assumed they would.
The President was not supposed to be able to impose tariffs arbitrarily. Remember he had to justify it with fentanyl initially? We're talking about broad based tariffs used as leverage, man, you must understand how impactful that is. Investments are made with planning horizons of decades. The fact that the presidency can, and has, operated this way is game changing. And not just until the midterms.
PlanetCosmoX | 8 hours ago
You’re talking about feelings in an economic forum. The two are completely disconnected.
When was the last time you saw a banker care about a person losing their house because they couldn’t pay their debt?
Talinn_Makaren | 8 hours ago
I edited my post to explain, maybe after you sent this? Regardless, it's like you've never heard of political risk. Let's circle back in 5 years or 10 I guess. US will represent a smaller proportion of global trade in both directions that's my prediction, and the USD will be used in a smaller proportion of transactions. Are you not predicting that?
morbie5 | 3 hours ago
> They still have a defensive contract with the US, The US is still 4x the military might of the planet, and China has links to Iraq. Iraq and Saudi are.. well mortal enemies it seems.
Are you talking about Iraq or Iran?
But anyway the Saudis are with the US. Only the US can check the Iranian nuclear program. The Saudis know this
Turbosuit | 9 hours ago
This commenter knows their stuff. I also think the oil angle is the right take. And you can see what America is doing internationally agree with it or not trying to take a stranglehold on oil.
Sea_Hold_2881 | 9 hours ago
America can't stop any two parties from settling in any currency they want to settle in.
Attempt to bully parties into using the USD will simply increase the incentives to use anything other than the USD.
PlanetCosmoX | 9 hours ago
They stop 1 party, by providing safety guarantees using their massive military which is 4x the might of the planet, and they sell every conceivable good produced on the planet.
Turbosuit | 8 hours ago
This is the right take. And agree with it or not there are examples of the consequences through recent history see Saddam Hussein, Momar Gaddafi, Hudson Austin, Manuel Noriega, Nicholas Maduro, and my guess is Khamenei next if he does not come to a deal that include oil for USD.
The US military is no joke.
Name one economy that has left the US hegemony and been wildly successful. It's an entry into uncertainty and the consequences for those who have legitimately tried has been deadly.
Not saying I support it. But it is what it is. BRICS may be the biggest threat to it but with control of much of the world's oil I don't think it happens without serious headwind. Petroleum is needed in every industry. And alternatives are far less efficient so for any economy to stay in a growth environment it must go through the USA.
morbie5 | 3 hours ago
> America can't stop any two parties from settling in any currency they want to settle in.
Tell that to Saddam, Maduro, Gaddafi, etc
moban89 | 10 hours ago
A quick Google search will tell you that the GCC sell oil almost entirely in USD with a few exceptional deals here and there.
Sea_Hold_2881 | 10 hours ago
Your google sources are out of date.
GucciStocks | 9 hours ago
A bunch of people referencing sources, but nobody citing the sources other than “google”… SMH all around here
TozTetsu | 9 hours ago
And they wanted MY upvote! Pathetic
bmc2 | 9 hours ago
Dude above is just asking chatgpt. So, that's not a lot better.
moban89 | 8 hours ago
VEMODMASKINEN | 5 hours ago
While your reply pulled straight from ChatGPT is for sure correct... ?
morbie5 | 3 hours ago
You gonna show links to back this up?
Sea_Hold_2881 | 3 hours ago
Not outside of a paywall:
https://press.spglobal.com/2024-12-11-S-P-Global-Commodity-Insights-Releases-its-2025-Energy-Outlook
resuwreckoning | 9 hours ago
Why tf would anyone trade excessive amounts over the long haul in a non free floating international currency? China doesn’t even peg it to Gold lol.
ringobob | 9 hours ago
Yeah, it can never change... until it does. I find these cheerleader comments that assume that the way things are today is the way they'll always be pretty shallow.
The point isn't that it's easy to replace the dollar, of course it isn't. The point is that the costs are starting to approach the benefits, and people are looking to see if there's a viable exit. If the situation doesn't change course, the reign of the dollar will end, it's just a question of when, and what replaces it.
davesr25 | 9 hours ago
Ah you know there were a load of Dutch lads back in the day sitting round a table drinking wine and eating fancy food saying the same shite after one of their buddies even suggested that they would lose economic hold over Europe.
Times and people don't change only the stuff we have to do it with does.
Wee bit of generalising mind but still it stands.
Edit for spelling.
Emotional_Goal9525 | 8 hours ago
Normalcy bias is strong in humans.
pgtl_10 | 9 hours ago
Didn’t Saudi Arabia agree to sell oil in reminibi?
mytthewstew | 9 hours ago
The US deal with the Saudi’s is the US supplies military defense and oil in traded in dollars. If it becomes a less reliable defense partner this deal will not last. At the moment both countries are all buddy buddy but with the current regimes that could quickly change.
throwaway00119 | 5 hours ago
Who are the Saudis going to instead? Europe doesn’t have the capacity. No one wants Chinese or Russian built.
The current regimes are closer than ever.
aredddit | 10 hours ago
That’s a big support in the short term but with oil as percentage of energy production decreasing will that start to have a less of an impact?
Also not sure of what the data says… but I’d assume countries that import the most oil are the ones trying to move away from it the quickest.
PlanetCosmoX | 10 hours ago
Yeh lots of changes. With energy consumption driven by datacenters though, and the lag to build nuclear, plus the need to mine minerals to support an advanced economy. It’s unlikely that oil will not continue to play a major role in every economy on the planet.
Look at coal. It’s been eliminated in many advanced economies except for the construction of steel. But China continues to build coal plants for electricity and they have the largest EV adoption and solar panel adoption in the world.
illapa13 | 9 hours ago
Yeah this isn't a thing anymore. The US was able to enforce the Petro dollar for some 50 years but with Russia and China completely decoupled from the Petro Dollar the dam has broken and now Saudi Arabia isn't insisting on dollars either.
PlanetCosmoX | 9 hours ago
Ideology not fact.
Beginning_Ad_6616 | 9 hours ago
Oil doesn’t have to sell using the USD. everyone who thinks that the rest of the world won’t get sick of our shit and abandon us has an inflated sense of self importance. If the US falls as a modern superpower, it won’t be the first time in history something like that has happened. You can only be a global bully/dick for so long before our relatively small global population isn’t as important as the relatively larger global population.
PlanetCosmoX | 8 hours ago
The US is a hegemony in economic and military might.
You’re looking at economic might, but the US retains military might who is 4x the strength of the world combined. That’s where the US power lies.
So no, you’re arguing from a viewpoint of feelings which is absurd when combined with economics.
defixiones | 3 hours ago
Military might is a losing argument. You can't rule the world by bombing things.
Oil monopoly is a weak long term proposition too.
The US is in a worse place than I thought.
Beginning_Ad_6616 | 2 hours ago
Military might is dependent upon economic strength. If our trading partners partially replace or totally abandon us along with the rest of the world how long can we maintain our military strength?
If you disrespect your trading partners and allies today on the premise of being military strong, you’ll find yourself globally irrelevant after the globe abandons you.
Look at the history, would you say Russia is still strong after once being a superpower after the USSR fell apart?
fyordian | 9 hours ago
Not true, oil has started to trade in yuan. China is already buying oil from OPEC in yuan. China is then brokering the oil to net importers in their sphere of influence for yuan as well.
Saudi as an example is selling it for yuan
https://www.wsj.com/world/middle-east/saudi-arabia-considers-accepting-yuan-instead-of-dollars-for-chinese-oil-sales-11647351541
PlanetCosmoX | 9 hours ago
Oil is traded in Yuan only with China. Everyone else is USD, and Saudi will only do Yuan up to a point and only because there’s a discount in goods and because they are charging more in Yuan. So it’s a double win for Saudi.
It’s an exception, not the norm and it’s only an exemption with China and for a limited amount that will not anger the US.
fyordian | 8 hours ago
I don't think you're realizing how many nations are in their sphere of influence across Africa and Asia. Many countries exporting directly to China are paid in yuan and use that same yuan to import product/services such as energy.
China has slowly been building an economic ecosystem that operates primarily in the yuan... outside of BRICS which is a whole other issue on reserve currencies for the USD.
I don't think China gives a fuck what the US thinks at this point. No one does.
PlanetCosmoX | 7 hours ago
China does not export oil. They need oil to operate period.
There you go your feelings, nobody cares about what you feel or your emotions. Feelings are removed from economics. As soon as you add it, you’re making stupid assumptions. It’s why investors try to trade stocks without emotion, emotion leads to bankruptcy.
There is not a country on this planet that considering emotions when dealing with economics.
No_Opening_2425 | 7 hours ago
Well that's a huge lie. You can buy oil in many currencies and oil is going to be less and less important in the future.
PlanetCosmoX | 6 hours ago
No, you can’t.
You can try, to buy it in Canadian but you’ll discover that the amount of oil available in Canadian is a drop in the bucket. And you’ll still need to refine it, so unless you have a refinery, all of which are controlled by the US or China. And China does not export oil.
Venezuela was doing it.. or what happened to them? Iraq was doing it… oh what happened to them? Lybia was doing it.. oh what happened to them? Persia was doing it.. oh what happened to them?
Are you seeing a trend yet?
The US has ruled oil with a metal fist for well over 100 years and the world has looked the other way.
No_Opening_2425 | 5 hours ago
You are clueless 😂 There are refineries all over the world. At least Saudi and russia will take other currencies.
PlanetCosmoX | 5 hours ago
Yes Russia with the embargo, and Saudi with the US protection deal, where they allow some trade with China in Yuan and only China.
Google first before you come onto this board posting ignorant garbage.
No_Opening_2425 | an hour ago
Sure buddy. And rich how you forgot about refineries.
Gamer_Grease | 8 hours ago
That is not why USD is the chosen reserve currency. The reasons why are complicated, but basically come down to the USA’s huge debt making dollars plentiful, plus the USA’s relatively open capital markets.
PlanetCosmoX | 8 hours ago
It’s exactly the reason.
Go learn.
Yvaelle | 4 hours ago
It's a false assumption that there needs to be a reserve currency at all, anymore.
Each other currency will sell off their USD, hold more of their own currency, and diversify their risk across all the other stable currencies. Demand for USD will fall and reserve currency status will dissolve - and nothing specific will replace it.
Take Japan's trillion in USD, it will convert into like 400B (USD) into JPY, 200B into WAN, 200B into EUR, 100B into RMB, 100B into CAD, etc. Every country will do that.
ImaginaryHospital306 | 2 hours ago
Foreign sovereigns own US Treasuries not US Dollars
Yvaelle | 2 hours ago
It's a distinction without a difference in this context.
lolexecs | 7 hours ago
FWIW: One of the sharpest people on FX is Setzer and his Follow the Money blog, https://www.cfr.org/series/follow-the-money
e.g., here's a bit on CNY appreciation
https://www.cfr.org/articles/chinas-currency-now-facing-substantial-appreciation-pressure
buffotinve | 6 hours ago
La deuda de EEUU no es asumible y con un dolar en declive es muy peligrosa tenerla a largo plazo. Trump usa a las stablecoin para frenar un poco la caída de la demanda así que cuando caiga la bola se van a ir deuda y criptomemes de la mano
Smart-Drawing-5107 | 4 hours ago
Military might has been the only real thing shoring up the dollar for a couple of decades now. The decline will take 6-8 years, but once it gets up speed, hoo boy!
old-tennis-shoes | 4 hours ago
FT opinion piece (gift article):
Bash All Day, Buy All Night - https://giftarticle.ft.com/giftarticle/actions/redeem/908414c0-7239-4460-a5e9-bbb53f45529e via @FT
> Then I got back to New York, looked at the numbers and saw that, even as opinions of the US plunge, the money is flowing in like never before. Last year foreigners poured around $1.6tn into US financial assets, including nearly $700bn into stocks, both new records and significantly higher than the levels of recent years. The story is much the same for US corporate bonds, with foreign purchases up sharply.
...
> So why would people buy so heavily in a country they profess to increasingly despise? One reason is inertia. Until recently, the US had steadily outperformed the rest of the world since the global financial crisis of 2008, so many investors are still chasing past performance. They have come to assume that “there is no alternative” to investing in the US markets, given their vast scale and liquidity.
ImaginaryHospital306 | 2 hours ago
Sell America is way overblown these days. Foreign holdings of treasuries are near all time highs, and there are real obstacles to foreign holders selling a significant amount of treasuries. When you sell treasuries you get dollars, which are largely useless if not downright unattractive to foreign sovereigns. If China sold all their treasuries they'd have to covert a bunch of dollars to Yuan which would bid up the Yuan and make their exports too expensive. If Europe sold all their treasuries they'd have to dump all those dollars into EU govt bonds, suppressing already low yields that their pension funds rely on. People focus too much on the "sell" and don't realize there is a buy on the other side of every sell. US treasuries remain the most pristine collateral available and most will be happy to hold on and earn their 4% yield.
UmphaLumpha | 10 hours ago
Stop with this bull. I’m not defending the dollar but there is NEVER a viable alternative suggested. Until that happens, stop with this virtue signaling stuff. Show some real macro economic muscle and tell me what the alternative is. Until then, it’ll be the dollar.
ringobob | 9 hours ago
Who knows - the point is that it'll be something. It's not that there's anything that matches the strength of the dollar today, it's that the costs are starting to catch up to the benefits, when Trump is using the dollar's status to undermine the sovereignty of other nations just to sooth his own ego (literally he said exactly that about Greenland).
When it becomes too costly to remain on the dollar, the world will move to something else, not because it's better than the dollar has been over the last 80 years, but because the dollar has now been made toxic.
AdCertain5491 | 8 hours ago
From another Economist article, "Just How Debased is the Dollar?" January 28th:
"Why are American assets so strong despite the dollar’s ostensible weakness? One explanation is that the dollar is not actually all that weak. Despite its decline over the past 12 months, the real exchange rate (which accounts for differences in inflation between countries) was 13% above its average of the past 30 years. Using The Economist’s Big Mac index, based on the prices of the McDonald’s delicacy around the world, the dollar is overvalued against 49 of 70 currencies."
In an article from the January 21st edition they reported on European retail investors rushing into American assets as European defined benefit funds close out.
aurelorba | 7 hours ago
> Why are American assets so strong
Asset inflation. When much of the wealth generated is to the benefit of the very wealthy, they don't spend it on essentials, they buy equities. The lower quintiles spend all their money on food, shelter, clothing, etc. The wealthy do buy luxury goods but the scale of their wealth is such that much of it has to go into investments.