[HN Gopher] USD share as global reserve currency drops to lowest...
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USD share as global reserve currency drops to lowest since 1994
Author : stevenjgarner
Score : 128 points
Date : 2025-12-27 17:14 UTC (5 hours ago)
(HTM) web link (wolfstreet.com)
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| gigatexal wrote:
| Insane this administration wants pimp the US out to the highest
| bidder and let the crypto weirdos run the world. If we ever lost
| the reserve currency peg treasury bills will spike and it'll be
| impossible to fund the government. We spend 7T every year and
| take in 5T in taxes. This admin is gutting the IRS and banking on
| tarrifs which are just taxes. So ... without the ability to keep
| interest rates very low because everyone wants our debt ...
| detourdog wrote:
| My understanding is that it has happened. The oil market was
| tied to the USD. The BRICS have now implemented a payment
| system as robust as SWIFT system. Oil is now being paid for
| using that system.
| jeffbee wrote:
| Panics about how oil is being traded in non-USD terms are as
| old as the internet and, in all likelihood, even older than
| that. You can find usenet slop from 20-30 years ago about the
| petro-euro and the "tehran oil bourse". Here's an old site
| that is/was daily panics about the fall of the dollar, from
| 15-25 years ago. http://www.engdahl.oilgeopolitics.net/
| detourdog wrote:
| Nobody is panicking. BRICS has gotten steadily larger and
| is gaining as an alternative banking system. This is
| competition. This just requires more thoughtful strategies.
| gigatexal wrote:
| The steady building up of alternatives will happen until
| one day the reserve currency status will change hands all
| of a sudden.
|
| I think the Fed could stem the whole thing by just
| issuing a stable coin itself pegged to the dollar and re-
| assert itself as the dominant currency/arbiter... but who
| knows. Maybe then it'd have insight into every
| transaction and be able to stem things with even more
| power than it can now.
|
| Nobody stays king forever. Maybe it's time the US is
| forced to balance its books and stop riding on cheap
| credit. Losing the power of the reserve currency and the
| power that that gives to SWIFT and things will take a lot
| of soft power away from the US. Without allies the US
| couldn't stop a united China, Russia, insert-other-would-
| be-ally-of-theirs in a world conflict.
|
| As another commenter said there's no leadership at teh
| top just chaos. People, countries, banks don't invest in
| chaos.
| detourdog wrote:
| I think the Fed is under powered without consistent
| planning from our executive office. Erratic behavior does
| not instill confidence for people trying to rationally
| plan.
|
| I also think the US used the banking system to punish
| enough nations that an alternative became viable.
| JumpCrisscross wrote:
| > _steady building up of alternatives will happen until
| one day the reserve currency status will change hands all
| of a sudden_
|
| This is not how it has ever happened. Instead, we'll see
| a gradual erosion as the world switches to multi-polarity
| and spheres of influence. (And, with decreasing
| international trade, every country's reserve mix will
| vary.)
| detourdog wrote:
| I agree that the next wave may not be dominated by a
| single currency. I also think that is a superior system.
| I think the BRICS system is based on honoring multiple
| currencies rather than using a single currency for
| settlement.
| blibble wrote:
| > This just requires more thoughtful strategies.
|
| US not in a good place then?
| detourdog wrote:
| I would say it's a mystery. The US has corporations that
| are better funded than many nations. These corporations
| are also rationally managed and operate globally. As a
| patriot I hope that the US starts to utilize rational
| thought.
| JumpCrisscross wrote:
| > _Oil is now being paid for using that system_
|
| The petrodollar hypothesis has been a myth since the 1990s.
| With America a net oil _exporter_ , it's an entirely stupid
| model to keep running.
| detourdog wrote:
| I wish you would elaborate how being a net exporter relates
| to it being a myth. I don't see the connection. My point is
| that global trade of which oil is a major component needs
| to settle the books nightly. If the books aren't reconciled
| in an efficient manner trade has to slow down.
| _blk wrote:
| Are you trying to project this unto Trump when the Fed is doing
| everything it can to oppose his measures?
|
| I'm only the crypto weirdo guy asking.
| throwawayqqq11 wrote:
| So gutting public institutions and the tarifs do not work as
| trump intended because the fed opposed it? What did they do
| achieve that? (Sorry if i come across as trump deranged.)
| Jcampuzano2 wrote:
| Have you ever thought it doesn't matter what the fed does to
| try to minimize the damage.
|
| Trust needs to come from the top, and there is none there
| right now.
| bigbadfeline wrote:
| > Are you trying to project this unto Trump when the Fed is
| doing everything it can to oppose his measures?
|
| The Fed isn't opposing Trump's measures, on the contrary, the
| Fed is doing everything to accommodate as much of his
| policies as possible without wider damage to the economy.
|
| It's Trump who doesn't understand the risks of unhinged
| tariffs and low interest rates which he demands because of
| his personal conflicts of interest.
| duttish wrote:
| I'm not an economist so someone please correct me / expand on
| this;
|
| I'm guessing this is kind of a "It's not a problem until it's a
| crisis" situation? So far other central banks haven't begun
| selling treasuries, they've just stopped buying them. But once
| one starts selling it could become self reinforcing?
|
| What could replace it? There doesn't seem to be any new hegemonic
| power on the same level. Could we enter a world where all central
| banks hold a mix of currencies and nobody benefits from being the
| reserve?
| seanmcdirmid wrote:
| US Treasuries have terms, if you aren't refreshing your
| treasury buys, it is the same as selling them. US treasuries
| and by extension USD was useful because it could soak up
| billions of dollars of savings (debt for America) without
| taking a huge inflation hit (treasury rates were often less
| than inflation, so you still take some hit).
|
| As for where that money is going now? Other currencies and
| saving instruments probably..
| somenameforme wrote:
| This is more of a go out with a whimper rather than a bang type
| thing. Being the world reserve currency (as well as the largest
| consumer market in the world) previously enabled the US to do
| things like relatively easily export inflation in spite of
| relatively reckless monetary policy. Now that inflation is
| sticking around far more persistently, even long term bonds
| have gone from 1-2% to 4%+, and so on. Stagflation is a
| conceivable longer term outcome.
|
| The replacement will probably be a multinational currency with
| strictly controlled quantity tied to some sort of physical
| asset(s). Basically Bretton Woods 2.0, except with the learned
| experience of not just granting a single country immense power
| and having them pinky swear not to default on their obligations
| and then abuse that granted power. China's probably betting
| that that asset will be gold.
| HPsquared wrote:
| With highly liquid capital markets, why wouldn't the dynamics
| be more like a bank run?
| selectodude wrote:
| Because dumping all of your US treasuries is a political
| statement. You can only sell to a willing buyer and
| announcing that you're going to do that is tantamount to
| lighting wealth on fire. Treasuries are assets so there's
| no counterparty that will "run out".
| GenerocUsername wrote:
| Imagine how red 100 years of economists faces will be when
| the world ends up back on a gold backed currency.
|
| Probably only takes 2 years before they start inventing
| abstractions on top of it and this kicking off the eventually
| next economic disaster.
| vkou wrote:
| There were, of course, no economic disasters back when the
| world operated on gold-backed currencies.
|
| The goldbugs won't be red in the face, though, because they
| are never wrong and are constitutionally incapable of
| feeling any shame.
| cjbgkagh wrote:
| I'm pretty sure no-one has argued that a gold standard
| would prevent economic disasters. That sounds like a
| straw man. My understanding is that there would be more
| of them but the individual and cumulative impact would be
| far less. You can still have fractional reserve banking
| with the gold standard so the gold standard alone is not
| sufficient to prevent that.
| delfinom wrote:
| Works until we have someone mining asteroids for gold. Then
| the gold backed currency collapses overnight.
| symbogra wrote:
| No that's a good thing actually, because then we get
| asteroid mining spaceships
| throw0101c wrote:
| Beltalowda unite!
| RealityVoid wrote:
| I'd rather go back to crypto than be chained to a piece of
| stupid metal.
| carlosjobim wrote:
| You take that back now. Gold is the best thing which has
| ever existed. Name one thing in the world which can even
| compete.
| rcarr wrote:
| We almost got that with Bretton Woods 1.0:
|
| https://en.wikipedia.org/wiki/Bancor
| daedrdev wrote:
| No, physically backed currencies will not return because
| physical goods do not correlate with the size of an economy,
| especially the amount of gold
| 827a wrote:
| Gold-backed currencies, and even Bitcoin, are really good
| if you want your economy to be only this big, and never
| grow bigger. Eventually, a crisis will happen, and you'll
| say "actually, its now 1.3 yuan to the gram, because we
| need to build tanks", or "actually, did we say we had 8,000
| tons of gold in reserve? we meant 9,000. Yeah we just
| counted, no you can't look at it, we have 9,000, here take
| the yuan and go build vaccines", or "its now illegal for
| citizens to own gold, turn it in at your nearest party
| headquarters" (even the US participated in that one!)
| chhxdjsj wrote:
| "actually, did we say we had 8,000 tons of gold in
| reserve? we meant 9,000. Yeah we just counted, no you
| can't look at it, we have 9,000, here take the yuan and
| go build vaccines"
|
| You cant do that with bitcoin
| llmslave2 wrote:
| I know you mean it as in governments won't return to a
| system that doesn't let them inflate the money supply, but
| that doesn't mean it's a bad thing...
| laterium wrote:
| Being able to conduct monetary policy is valuable, even
| if it can be misused. Otherwise all other countries would
| just be using USD.
| carlosjobim wrote:
| They correlate with the size of production, which is a much
| better measurement than the amount of trading back-and-
| forth.
| ajross wrote:
| > The replacement will probably be a multinational currency
| with strictly controlled quantity tied to [...] probably
| [...] gold.
|
| This is econolibertarian fan fiction. Literally no one wants
| that except people already involved in speculating[1] on
| gold. Are there bad externalities to relying on a
| unlitaterally controlled reserve currency? Yes. Are they made
| better by handing financial control over to a bunch of
| fucking _mine and vault operators_? Let 's be real, here.
|
| Basically this idea appeals to people who've convinced
| themselves they can get rich betting on financial policy and
| stay rich by burying their loot in their metaphorical
| backyard.
|
| [1] The very fact that such speculation even exists should be
| a triple exclamation point red flag on any argument about
| hard currency, but alas no.
| RealityVoid wrote:
| Yes, thank you. My puny mind can't even understand how
| people come to be convinced that gold should be the end all
| be all of international trade.
| scythe wrote:
| The British pound was displaced by the US dollar. Currently,
| the US dollar just doesn't have a proper rival. The euro, yuan
| and rupee are considered politically suspect (each for its own
| unique reasons); the pound and yen have too small a base.
| Without further transformation of the global financial system,
| the only alternative is for banks to hold a basket of
| currencies, and in such a basket the dollar would likely still
| play a significant, if reduced, role. This is a slow process
| because it means changing the nature of currency reserves from
| a single safe haven to a "nest". What this means for USG
| spending power is not immediately clear.
| quicklime wrote:
| Who considers them politically suspect? I'm guessing the
| people who live in the countries that use them don't, and on
| the contrary would increasingly be seeing the USD as
| politically suspect.
| AnimalMuppet wrote:
| The people who live in the countries that use them aren't
| relevant, _because we are talking about them as reserve
| currencies._ What matters is whether other _countries_ see
| them as politically suspect.
| foxrider wrote:
| Ok, let's see - yuan isn't a freely traded currency, it's
| heavily regulated by China. From that alone it can not be
| used a reserve currency by anyone - unless they want to hand
| over all control over their assets to CCP.
|
| The rupee is better, but there's not a lot of trust in Indian
| institutions globally, so black swan events are more likely.
| I can see it becoming a better proposition as India further
| matures and taps into its population more.
|
| No, euro - that's a solid contender. Not only it's already
| used in a lot of countries, and therefore backed by more than
| one economy, the EU institutions are legit to a fault - they
| continuously refuse to seize Russian assets, because there's
| no solid legal grounds for it, despite all political will
| towards doing so.
|
| That alone makes it far removed from being politically
| suspect in my book, unless there's some blatant case against
| the euro that I'm missing.
| tmn wrote:
| There's nothing fundamentally stopping all currencies from
| floating against gold and gold being the base asset
| littlestymaar wrote:
| Gold is a terrible unit of international money because the
| supply isn't flexible enough to accommodate any growth in
| international trade.
|
| Contrary to popular belief, during history gold has always
| had limited role in the monetary system, because it was too
| scarce to really be useful (in most of human history, Silver,
| not gold was the cornerstone of trade, and trade itself was a
| tiny part of economic activity in an era where most of it was
| subsistence farming). It's only when banking and paper money
| replaced silver that gold took a bigger role in the monetary
| system. The gold standard is in fact an invention of the late
| 19th century and it didn't last long before it disappeared
| progressively (the first world war being the beginning of the
| end).
|
| Unfortunately for us, it just happened to be the period when
| a bunch of influential economists grew up (particularly
| Ludwig Von Mises), and like every human being they assumed
| that the system they grew up with was special and what came
| after was decadent, an idea that has unfortunately since then
| become widespread in the general population.
|
| Most people wrongly assume that the key property for a
| commodity to become the basis of a monetary system is
| scarcity, but in reality scarcity is a drawback. Money must
| be _abundant enough_ (too abundant is bad, but too scarce is
| even worse).
| daedrdev wrote:
| If your economy grows by 100 percent, and the supply of gold
| grows by 10 percent, its a massive problem
| chhxdjsj wrote:
| Imagine if there was a gold which could be transferred across
| borders easily and completely securely within seconds, proof
| of holdings and ownership could be easily proven, and there
| was no future risk of gold supply shocks (eg gold asteroid
| hitting earth or alchemy becomes viable).
| insom wrote:
| This sounds amazing! Is it also protected from being lost
| forever by trivial mistakes that are very common?
| DaSHacka wrote:
| Yes, when managed by someone competent, just like Gold.
| quickthrowman wrote:
| There is a fixed supply of gold that does not correlate with
| economic output. It makes zero sense to tie the value of
| paper money to gold.
| tmn wrote:
| Read 'float'
| nutjob2 wrote:
| Only the fact that it would be an idiotic policy that would
| destroy the economy.
|
| Why would you let your monetary policy be run by gold miners
| in China, Russia and Australia? They could cause inflation or
| deflation simply by increasing or decreasing gold production.
|
| Conversely how is the Fed supposed to manage inflation if it
| runs out of gold?
|
| Gold is an industrial metal, also used in jewelry, not a
| financial panacea.
| OutOfHere wrote:
| All the arguments against gold are completely bogus because
| there is nothing stopping the price of gold from climbing to
| meet the economic need. The price of gold was suppressed for
| a long time by institutions, but this active suppression is
| increasingly difficult to continue.
|
| As for verification and transfer, that's what electronic
| shares are for, distributed across a few key physical asset
| holders.
| fspeech wrote:
| Price of a commodity metal can do whatever they want
| without causing a big problem. It is just a resource
| allocation signal. However if you base your currency value
| on it suddenly you are forcing debtors into bankruptcies if
| the value shoots up. Credit relationships aka investments
| are what make an economy run and grow, not some arbitrary
| commodity price.
| OutOfHere wrote:
| You're just so used to a debt fueled economy that you
| can't think of it being any other way. That is the
| problem though in that 99 times out of 100, debt goes
| rogue in a runaway sense and blows up the system. It is a
| time bom.
|
| In essence, debt doesn't need saving from the system;
| it's the system that needs saving from debt.
| drivebyhooting wrote:
| Debtors who roll their loans also go bankrupt when the
| fed raises interest rates. Rolling loans is par for the
| course for many capital intensive businesses. This is
| because in a low interest rate environment if you act
| prudently you'll get outcompeted.
| 827a wrote:
| In some ways, this effect can have a positive impact on US
| citizens; demand for the US dollar requires _supply_ to satisfy
| the demand. Where does that supply come from? Oftentimes:
| Printing. The US generally does not make a habit of telling US
| dollar buyers "no, we don't have any US dollars to sell you",
| so less demand on the dollar for reserve holdings can have a
| deflationary impact on its value. This can be combined with
| lowering interest rates, which creates more domestic demand for
| dollars, to help balance out the inflationary impacts from
| that.
|
| Many economists take the stance that being the world's reserve
| currency is something of a two-edged sword; a curse that does
| come with geopolitical advantages, but bundles those advantages
| with significantly more difficult global financial
| responsibilities.
| rangestransform wrote:
| It's either printing or increasing taxation for constant
| benefits. We all know what happens when the government tries
| to increase taxes at all, now try doing it for zero increased
| benefits. This is a populace that's had candy for dinner
| since WW2, and forcing them to eat their vegetables will
| result in a never before seen level of civil unrest from
| people of all political inclinations.
| nutjob2 wrote:
| The Fed most commonly uses Open Market Operations to modify
| the money supply, with "money printing" or Quantitative
| Easing used in more emergency situations.
|
| But more broadly your comment doesn't really represent
| reality, whatever happens in the markets and economy the Fed
| manages inflation (or deflation) and it's much more
| complicated than a single relationship like you describe.
|
| More interesting is trade, where the US consumes so much and
| pays out so many dollars for goods that places like China
| which run huge surpluses have few choices other than lend it
| back to the US.
| 827a wrote:
| Sure; and I'm referring directly to those "emergency
| situations", which aren't much of an "emergency" as most
| people would understand the word given that they've engaged
| in QE for ~7 of the past twenty years.
| bryanlarsen wrote:
| 4 of the last 10 were quantitative tightening.
| oblio wrote:
| What about US debt? If nobody buys USD anymore, suddenly
| there will be a lot of excess USD.
| KaiserPro wrote:
| Its only really a crisis for people who are dependent on the US
| for protection. The whole compact is that you use the dollar,
| and the US will look after you (ie House of Saud, Europe,
| taiwan, south korea, etc) But that isn't really certain
| anymore.
|
| You need to make tributes to the suntan king, and he is most
| capricious and likley to tariff the fuck out of you. So
| alternative destination for your goods is a necessity
|
| Also the markets are not convinced that the fed is in good
| hands. The _whole point_ of the fed is that they are far enough
| away from the meddling in Washington so that you can rely on
| the dollar. The fed is being steadily erroded, with the new
| chair being selected soon. The problem is that present
| administration is hell bent on loyalty over competence.
|
| Printing dollars to get out of domestic budgetary problems was
| never a thing (excluding QE, but thats different, nominally)
| was never an option in the US. but that doesn't seem so far
| fetched now.
| lumost wrote:
| The printing of dollars by the Fed comes with a secondary
| effect - the dollars are not evenly distributed amongst the
| population. They are printed via market action, and the ones
| who are closest to the market action are free to capture as
| large of a share as markets allow.
|
| Over time, it's natural that actors will optimize the above
| system to capture as many dollars from the printer as they
| can.
| AnimalMuppet wrote:
| If they stop buying treasuries, that's still a big problem,
| because the US continues to run a deficit, and therefore
| continues to need to sell treasuries.
| throw0101c wrote:
| > _What could replace it?_
|
| It doesn't necessarily have to be one thing. We've had multi-
| currency regimes in the past (before one generally took over).
| See _How global currencies work past, present, and future_ by
| Barry Eichengreen, Arnaud Mehl, and Livia Chitu:
|
| *
| https://press.princeton.edu/books/hardcover/9780691177007/ho...
| Ekaros wrote:
| Not buying is same as selling with debt. On long enough time
| horizon. If the debt is not rolled over anymore eventually you
| run out of lenders.
| pandaman wrote:
| Treasuries are not some kind of artifacts that can be stored
| indefinitely, they are bonds with maturity dates. As they
| mature they turn into cash automatically and that cash used to
| come from selling new treasuries. As the demand dwindles the US
| has to sell its bonds cheaper thus borrowing at higher interest
| and that interest will have to be paid by selling even more
| treasuries at even higher interest so it's already a feedback
| loop.
| JumpCrisscross wrote:
| > _As the demand dwindles the US has to sell its bonds
| cheaper_
|
| To be clear, we see no indication of this. (The Fed reduced
| its balance sheet in the last 3 years on the order of the GDP
| of Spain or Brazil [1][2].)
|
| [1] https://www.federalreserve.gov/monetarypolicy/policy-
| normali...
|
| [2] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(n
| omi...
| pandaman wrote:
| Not sure what your links are supposed to prove but here is
| the link[1] to the actual yield on the 10 year bond, higher
| yield means the bond is sold at higher discount i.e.
| cheaper.
|
| 1. https://fred.stlouisfed.org/series/DGS10/
| JumpCrisscross wrote:
| > _higher yield means the bond is sold at higher discount
| i.e. cheaper_
|
| Yes. The Fed set a policy of higher rates. It did that by
| selling bonds and driving the price up.
|
| Then it set a policy of reducing rates, and was able to
| do that by just selling fewer bonds. _Not_ buying them.
| That implies strong demand for these assets. (You can't
| use price as a proxy for demand in Treasuries since it's
| an explicitly manipulated price by its issuer.)
| BobbyJo wrote:
| Long bond rates have somewhat decoupled from short term
| rates set by the fed. For instance, they just slashed
| short term rates 25bps, but long bond rates (10+ years)
| have actually gone up a few basis points since the cut.
|
| This is exactly what we'd expect if demand for treasuries
| wasn't keeping pace with US debt issuance. I mean, if you
| look at the debt, and the USD's current position, there
| really is no way out for the US government other than
| inflating the currency and cashing in that reserve status
| for a reset. The obviousness of that reality is why
| precious metals are going nuts.
| pandaman wrote:
| >It did that by selling bonds and driving the price up.
|
| No, the yield went up and price went down. Prices usually
| don't go down if demand remains unchanged.
| samsk wrote:
| Who would tell. Economy runs on 'trust' - not on 'by tomorrow we
| apply this random tax rate to this pinguin island and everone
| else'.
| bhewes wrote:
| We do have a trojan horse with social security. Overnight we can
| become the largest single owner of global corporate stocks and
| bonds.
| ur-whale wrote:
| Highly unpopular opinion here and I'm going to get downvoted into
| the ground (who cares), but ... this has been a very long time
| coming and has very much been a self-inflicted change.
|
| My bet is that it will end up being a very good thing for the
| world at large.
|
| China has recently started to buy Arabian oil and paying with
| yuan.
|
| Major countries (India, China) are starting to buy Russian raw
| materials and paying directly using rubles.
|
| In both cases, trade is happening and completely bypassing the
| once unavoidable USD.
|
| The US choosing to weaponize the USD for geopolitical purposes
| has _finally_ made the world realize the immense loss of
| sovereignty they had allowed themselves to be subjected to by
| making the USD the global trading currency.
|
| This change will also force the US to finally get fiscally
| responsible and get the bloody USD printing machine under
| control, something they never had to do because of the USD
| reserve currency status.
|
| The golden triangle of Russia (raw materials), India (highly
| educated workforce, strong demography), China (industrial
| powerhouse, stole the bulk of Western IP, is now producing more
| cutting-edge research than the west) finally free of the shackles
| of the USD and establishing direct overland trade routes that
| 100% avoid the seas (thereby 100% avoiding potential US
| embargoes, both financially and militarily enforced) ... the
| world is going to change in a rather profound way, finally
| relegating the US to being a simple country instead of the has-
| been empire it currently is.
| darth_avocado wrote:
| Every time I hear people claiming India and China now not using
| dollar and the end of dollar's dominance, I feel it's coming
| from mostly clickbait headlines, not data. From a global
| payments share, dollar is still the single largest currency
| from a percentage standpoint, and is at historically highest
| share of global trade. Any changes to currency share are coming
| from lower volume from the Euro. On top of that, if you look at
| foreign reserves, yes there has been a recent selloff from the
| peak, but we are still at 60% of global reserves and its still
| kind of around the same historical average for the last 30+
| years.
|
| Edit: I also want to add, that while having the international
| trade entirely in dollar sounds very appealing, it can actually
| destroy US exports and damage the trade balance. This can have
| massive impact on domestic as well as global economies. What
| you want is a strong enough dollar.
|
| https://www.federalreserve.gov/econres/notes/feds-notes/the-...
| rzerowan wrote:
| I think youre conflating 2 different things, share as a
| payment currency and share as reserve.
|
| Share as a payment/trade currency is not going away though it
| will be greatly reduced especially with CIPS that bypasses
| SWIFT.Andmost data showing no change is usually from SWIFT -
| with zero visibility to the volumes in CIPS.
|
| Share as reserve is more visibly viz central banks stacking
| gold and hedging on treasuries , with most tresurie bids
| coming in from offshore financial hubs likethe Caymans.So
| could be a whole shellgame there to inflate the volumes.
|
| So yeah the $ isnt going away anytime soon (cross border
| trade still requires it in many places),the exorbitant
| privilege it enjoyed is.
| ur-whale wrote:
| > Every time I hear people claiming India and China now not
| using dollar and the end of dollar's dominance, I feel it's
| coming from mostly clickbait headlines
|
| I would encourage you to actually take a gander at the
| history of reserve currencies, how long they last, how they
| lose their reserve status, and what the current state of
| thinking around where the dollar is headed.
|
| Unless you would classify the IMF as a clickbait farm, of
| course.
|
| Start with the brit. pound and what led its downfall to the
| niche financial instrument it is today.
|
| But the pound is just the latest, and by no mean the only
| one.
|
| Here are a few links to get you started:
|
| https://marketcap.com.au/history-world-reserve-currencies/
|
| https://www.economicprinciples.org/DalioChangingWorldOrderCh.
| ..
|
| Barry Eichengreen - "Exorbitant Privilege"
|
| https://www.imf.org/en/publications/departmental-papers-
| poli...
| AnthonyMouse wrote:
| > get the bloody USD printing machine under control
|
| The amount the US government spends on debt service is already
| unreasonable. If the US dollar lost reserve status, the first
| thing that would happen is that the Fed would have to buy the
| debt with newly created money to prevent bond rates from
| causing interest payments to explode. Meanwhile the act of
| other countries unloading US dollar reserves would cause
| significant inflation in itself.
|
| Basically, loss of reserve status = hyperinflation. At least at
| the outset.
|
| On the plus side, that would pretty much wipe out the excessive
| amount of US consumer debt as long as wages stay consistent
| with the value of the dollar.
| llmslave2 wrote:
| > as long as wages stay consistent with the value of the
| dollar.
|
| Which the won't, so it will end in disaster for the average
| American.
| 827a wrote:
| Lot of emotion in this comment; not a lot of substance. I think
| you're misunderstanding how some of these systems work.
|
| > This change will also force the US to finally get fiscally
| responsible and get the bloody USD printing machine under
| control, something they never had to do because of the USD
| reserve currency status.
|
| It is _not_ the case that the US didn 't "need" to get the USD
| printing machine under control because of the reserve status;
| it is the case that the US _" could not"_ get the USD printing
| machine under control, because of the reserve status. When
| there is demand for US dollars, domestic or foreign, US dollars
| sometimes needed to be printed to satisfy that demand. If the
| US decides to _not_ print those dollars; this is literally
| "defaulting on the debt", and would be bad-bad.
|
| This gets at where you're misunderstanding how these systems
| work, because I think you're imagining that US debt is, like,
| an account in your Chase app that goes up, then you pay it
| down. US debt are, obviously, bonds. The USG says "we've got
| bonds to sell, they're at N year M% interest". Buyers say "we
| want those bonds we'll buy them". The USG is now in debt, and
| is obligated to repay those bonds; and sometimes has to print
| money to do so. This gets at the previous paragraph; money,
| broadly, is printed to satisfy debt obligations, not directly
| to service the deficit (proceeds from the initial bond sale are
| what could be said to directly service the deficit, but that's
| pennies compared to the size of the overall market).
|
| Extending the Chase app analogy, you have it internalized that
| if we just get the deficit under control, then we could start
| "paying down the debt". In fact, probably, even our President
| understands it like this. But this isn't how it works. To "pay
| down the debt" would require two things to happen: We stop
| issuing new treasury bonds, and we pay off the already issued
| ones over 20/30/etc years as they mature.
|
| The general professional sentiment on what would happen if the
| US even _communicated_ it wanted to, in totally good faith,
| begin doing this at some point in the future, is basically
| armageddon. You have it in your head that, because Dave Ramsey
| says debt bad, the US should have no debt; but the world
| _wants_ our debt; it has an insatiable (though, decreasing)
| appetite for it. Depriving the world of this debt would leave
| trillions of dollar-equivalents without anywhere to park safe
| from inflation, which would descend global financial markets
| into chaos. Tens of millions of people would starve in the
| first three months, among other undesirable outcomes. Some
| actively make the argument that the USG refusing to take on new
| debt would be net-worse for the world than the US defaulting on
| their existing debt, though its an interesting space to game
| out; a little game of global-cataclysm worst-thing-to-ever-
| happen-to-humanity olympics you can play.
|
| But, debt servicing is becoming unmanageable for the US budget;
| so the best case for the United States is that USG debt demand
| from the rest of the world drops slowly and naturally, so we
| can naturally slow the issuance of new debt; and over 100 or so
| more years let managed inflation catch us up to recover from
| the utter shitshows that was 2001, 2008, and 2020. Everything
| I've seen, and I do mean _everything_ , suggests that this is
| what is happening; but we'll know for sure in 90 more years.
| llmslave2 wrote:
| This might be the most unhinged defense of money printing and
| inflation I've ever read haha. "We can't stop the printers,
| or millions will die!!!"
| phil21 wrote:
| > My bet is that it will end up being a very good thing for the
| world at large.
|
| I generally agree with pretty much all your points other than
| this one.
|
| While it will be good for other countries to regain sovereignty
| - and the weaponization of the US dollar for trivial reasons
| will be the biggest self-own perhaps in history - I do not
| think the world is going to be a better more peaceful place in
| 50 years.
|
| It might be more free in a certain sense though, which may or
| may not end up long-term (over multiple generations) being
| better overall for humanity. Time will tell.
|
| Certainly though, the average quality of life in the US is
| about to plummet.
| thekingshorses wrote:
| Just so you know India buys USD equivalent middle eastern
| currency to pay for Russian oil.
| dyauspitr wrote:
| Which one?
| mupuff1234 wrote:
| Russia is a joke, India is somewhat irrelevant and doesn't seem
| like that will change soon, China is a different story,
| although they also have their share of demographic and economic
| issues.
|
| And Putin and Xi are 73 & 72, and I doubt they will give up
| power as long as they're living which may result in significant
| turnmoil for both countries.
|
| > US to being a simple country instead of the has-been empire
| it currently is.
|
| The US isn't going anywhere for now, although it is trending in
| the wrong direction, but it's not yet a lost cause.
|
| And then you also have the AI race which might be a dud or
| might be a winner takes all scenario. So gonna be an
| interesting next decade.
| dredmorbius wrote:
| <https://news.ycombinator.com/item?id=9160121>
| mvkel wrote:
| Whenever I see headlines like this, I ask: what happened in 1994?
|
| It was post-Cold War and central banks were trimming USD reserves
| to test alternatives.
|
| Then, crises hit (tequila, Asian, Russian, dot com) and the world
| reconsolidated around USD, thanks to the immense strength of the
| Federal Reserve and IMF.
|
| Similarly now, reserve share is falling as countries hedge
| sanctions and geopolitics, yet dollar usage in trade, debt, and
| crisis funding remains dominant, and unless a true full-stack
| alternative (liquidity, safety, yield, and crisis response)
| emerges, history will repeat.
|
| Makes me wonder: is this just an artifact of the world being
| relatively "stable" right now?
| MagnumOpus wrote:
| No, this is an artifact of Russian reserves getting frozen in
| 2022 and autocracies the world round getting more careful about
| having all their eggs in that basket.
|
| The PRC's SAFE is selling dollars and buying gold in a very
| covert but absolutely massive fashion, and most likely, so are
| many other countries in a smaller way.
| brianwawok wrote:
| Gold price is double, not sure it's that quiet.
| indubioprorubik wrote:
| No, each pushed alternative is just worser. The euro could take
| over, but europe just revealed itself as a "lawful" player with
| no plan and no pants (security-wise) - so the euro is just
| defacto tied to the dollar value wise. For without the us
| guarding europe, the euro is just loaded with invisible
| gigantic security and pension debts.
|
| BRICs is dealing in store credits and raw-materials. Every
| other empire and kingdom is not to be trusted or only to be
| trusted as long as the town power-drunk world-police-man does
| his job. He may be the towns drunk, mumbling "Screw you guys,
| im going home!" but he is also the only one so far doing a
| decent job as sheriff.
|
| You can grasp how unreliable the other actors are, by how one
| of the hostile actors (russia) recently complained about the
| (world-police) doing what its proxies in yemen and ukraine are
| constantly doing (piracy) to venezuella. They complained about
| the break-down of maritime safety- to the us. Yep, its that
| bad.
| messe wrote:
| > For without the us [sic] guarding europe
|
| Those words hit harder when you've an executive that isn't
| beholden to Russia or threatening to fucking annex part of an
| ally, and a Europe that isn't investing heavily into
| rearmament.
|
| But please, continue in your delusion.
| brianwawok wrote:
| That's great, I'd love a strong European military. Can you
| help Ukraine enough so it can win? If not you can't defend
| your own countries alone.
| messe wrote:
| Ah yes, because the US has been sooooo fucking supportive
| recently. Give me a fucking break. Your GDP is bigger
| than ours, and you claim to give more aid to Ukraine, but
| you haven't even remotely matched it. The sheer fucking
| arrogance of you.
|
| > Can you help Ukraine enough so it can win?
|
| Can you (the American executive) stop collaborating with
| Russia[1]?
|
| > If not you can't defend your own countries alone.
|
| Are we talking about the EU or Europe here? Because only
| one is relevant to the Euro here. It's important to get
| this right, because it does tend to get confused by
| bystanders from the far side of the Atlantic.
|
| [1]: https://www.theguardian.com/us-
| news/2025/nov/25/trump-envoy-...
| JumpCrisscross wrote:
| > _only one is relevant to the Euro_
|
| The Baltics are in the Eurozone. If Russia invaded the
| Baltics tomorrow, Europe would be dependent on America to
| stay intact. That isn't really a risk one wants to take
| with a reserve asset.
| kibwen wrote:
| It's worth emphasizing this: without the US Navy, the
| remaining European powers don't have the naval force to
| stop Russia from blockading the Baltics. And without the
| ability to break such a blockade, there's little hope in
| aiding the Baltics against a land invasion from Russia
| and Belarus. Russia wants a land route to Kaliningrad,
| and they'll take it at this rate.
| lumost wrote:
| My understanding is that European Air and Ground forces
| have been able to deter or destroy Soviet/Russian Naval
| operations in the North and Baltic Seas since the start
| of the cold war. Land based anti-ship missiles have more
| than enough range to cover the entire water way on their
| own.
|
| This was a major reason the Soviet Union and now Russia
| never invested in a large navy outside of Submarines.
| Epa095 wrote:
| Where would this blockade be? In the NATO sea (baltic
| sea)? Covered by European Nato countries at every
| direction, and then whole entry passes through Denmark.
| notahacker wrote:
| Do central banks really asses the risk of total collapse
| of the Euro (only) in response to Russia's currently
| frazzled military launching an invasion against NATO
| borderlands which NATO fails to mount any effective
| defence as higher than than the risk the current US
| administration freezes assets for arbitrary and
| capricious[1] reasons?
|
| In practice, of course, most countries are willing to
| accept both risks.
|
| [1]a lot of states that can be reasonably confident that
| they won't provoke the US in the manner Saddam Hussein or
| Putin did whether they're friendly or not can be rather
| less confident the current president won't take extreme
| measures in response to something completely innocuous
| like jailing someone for domestic corruption, being a
| source of emigrants to the United States or maintaining a
| trade surplus...
| detourdog wrote:
| Early 90's during the Clinton administration (and the dot com
| boom) appeared to be the best run US budgeting process I have
| ever seen.
| doctorpangloss wrote:
| another POV is he was extremely lucky
|
| Pfizer decided to NOT commercialize its GLP-1 drug
| (https://www.statnews.com/2024/09/09/glp-1-history-pfizer-
| joh...) in 1992.
|
| What if it had commercialized GLP1s?
|
| The law that prevented Medicare from paying for weight loss
| drugs like GLP1s, the MMA, was passed in 2003. So Medicare
| would have to pay.
|
| YEAR NOM. ADJ 23 NET NET ($B) ($B) 10% 100%
| 1998 69.2 129.4 102.6 -138.6 1999 125.6
| 229.7 202.9 -38.3 2000 236.2 417.9 391.1
| 149.9 2001 128.2 220.6 193.8 -47.4
|
| Okay, only 4 surplus years. 10% uptake of GLP1s, okay, they'd
| be in surplus. 100% uptake, it would be a deficit.
|
| Any number of things could have happened. This was just one
| thing that _definitely_ was completely in control of people -
| it was in the control of Pfizer 's commercialization team -
| it wasn't some unforeseeable crisis.
|
| My point is, the little HN takes here and there like yours,
| better to not make them, because frankly you don't know
| anything about the budgeting process or governance, so why
| say anything at all?
| detourdog wrote:
| I don't doubt he was lucky which is why I parenthetical
| referred to the dot com boom. I don't quite understand the
| relevancy of GLP1s to his luck. I think obesity wasn't what
| it is today back in the 90's.
| BobbyJo wrote:
| I mean, luck is always a part of it, but you need
| responsible policy too. The US was lucky from 2010 to 2020,
| with the the economy growing basically that whole stretch,
| and we still ran a massively growing deficit the entire
| time because we decided to try and reform the middle east
| while lowering taxes.
| doctorpangloss wrote:
| would his policy have been to pay for GLP1s? Yes. And is
| that a little more than a hypothetical? yes. People who
| don't know US budgets don't know what drives faster-than-
| GDP growth in expenses (it's real estate, biotech and
| college).
| detourdog wrote:
| I'm unable to follow the point of the significance of
| GLP1s. I also wouldn't describe the expense as biotech I
| think healthcare is a better description.
|
| Finally the US's current healthcare system is truly
| broken. Our elected officials choose to ignore the issue
| and act as if we are fortunate to have this system. Which
| must be the least efficent way to deliver healthcare.
| detourdog wrote:
| A really important detail that I don't think gets enough
| mention is that the second gulf war was paid for off the
| books. The war was not part of the federal budget.
| alphazard wrote:
| Dollars are currently only in demand for short-term use in
| transactions. Most of the world still relies on dollars for
| transactions, because that is what all the banking and payment
| infrastructure uses.
|
| But no one wants to hold them because they devalue and will
| continue to do so at an accelerating rate. It's a game of hot
| potato where everyone is forced to hold equities, commodities
| or other assets by default in order to preserve their wealth,
| and then convert to dollars to transact. The days of savings
| accounts are over, and everyone should think of their checking
| account as something that they pay negative real interest on
| for the privilege of being able to transact with the rest of
| the world.
|
| Meanwhile, the big players in the current financial system are
| trying to figure out how to continue playing the current game
| without resetting everyone's progress. They don't want to lose
| their hard won position to pay for bad decisions by American
| voters. It's a coordination problem, and the shelling point
| looks like it is still gold, same as it has been for thousands
| of years.
| mgh95 wrote:
| > But no one wants to hold them because they devalue and will
| continue to do so at an accelerating rate.
|
| Devalue against what is the main question though, isn't it?
| The real longer term issue is that the USD is devaluing
| against the Euro, but even that has serious issues for
| Europe's export oriented economies [1].
| alphazard wrote:
| > Devalue against what is the main question though, isn't
| it? The real longer term issue is that the USD is devaluing
| against the Euro...
|
| I don't think that FOREX rates are the best way to think
| about this, but if you work in that world or otherwise have
| an intuition for it, then go ahead. Most of us only handle
| 1 currency, and reasoning in terms of 2 isn't exactly an
| intuition pump.
|
| Instead think about:
|
| 1. The dollar valued against itself a year earlier, and a
| year in the future. That is the interest rate or yield of
| the asset if held. It _should_ go up, but right now it goes
| down.
|
| 2. How much your personal basket of monthly expenses costs
| in terms of dollars. Ignore a basket that someone on the
| news told you to care about, like CPI. I mean _your_
| personal basket, all the stuff you personally buy, how much
| is it in dollars, now, a year in the future, a year
| earlier.
|
| If you stored value in business or a precious metals in the
| last year and then converted back, you would probably have
| more dollars, or be able to buy more stuff, that's all
| there is to it.
| thfuran wrote:
| >The dollar valued against itself a year earlier, and a
| year in the future. That is the interest rate or yield of
| the asset if held. It should go up, but right now it goes
| down.
|
| You're saying there should be deflation?
| JumpCrisscross wrote:
| > _Dollars are currently only in demand for short-term use in
| transactions_
|
| This is all currencies. You store value in debt. You spend in
| the hot currency.
|
| > _no one wants to hold them because they devalue and will
| continue to do so at an accelerating rate_
|
| Literally what Treasuries are for.
|
| > _everyone should think of their checking account as
| something that they pay negative real interest on for the
| privilege of being able to transact with the rest of the
| world_
|
| One, you shouldn't be storing wealth in cash-like
| instruments, that's literally using currency wrong (and has
| been across human history). Cash is for transacting.
|
| But in today's economy, you generally _can_ find checking
| accounts with pay around inflation. And if it really worries
| you, you can buy TIPS.
| alphazard wrote:
| This seems a little pedantic, but sure, no one wants debt
| _denominated_ in dollars.
| JumpCrisscross wrote:
| > _no one wants debt denominated in dollars_
|
| Source? Every indication is that dollar-denominated
| financial assets are _tremendously_ in demand. (What
| metric are you looking at?)
|
| The Fed has been reducing rates while selling assets, all
| while U.S. public debt explodes. The Treasury is selling
| more debt. The Fed is selling debt. Rates went up, and
| then they went down. That means there is, _ceteris
| paribus_ , more demand outside the Fed and Treasury than
| there was when Russia invaded Ukraine.
| deadbabe wrote:
| I think you've destroyed his whole argument.
| JumpCrisscross wrote:
| It's ridiculous enough that I'm curious for the source.
|
| Like, we're in a potential AI investment bubble. Bubbles
| don't happen when you can't sell your paper, they're an
| indication of the _opposite_ problem.
| JumpCrisscross wrote:
| > _reserve share is falling as countries hedge sanctions and
| geopolitics_
|
| We're importing a bit less [1]. That means fewer dollars being
| pushed (versus pulled) abroad.
|
| [1] https://tradingeconomics.com/united-states/imports
| nipponese wrote:
| So is "non-traditional reserve currencies" cryptocurrency or not?
| filloooo wrote:
| A 2% change, more likely this has something to do with the global
| rush for US tech stocks.
|
| Some countries like South Korea are crazy on US stock trades.
|
| Dollars' depreciation probably helped a bit too.
| skybrian wrote:
| There's more to international trade than what central banks do.
| The US is still a good place to invest overall, which is why we
| can run trade deficits. The money earned by foreigners, whether
| it's from selling oil, cars, or anything else, goes into US
| investment of all kinds. Foreigners can buy the S&P 500 just as
| easily as bonds.
|
| US interest rates have been declining lately, so perhaps other
| investments are more attractive.
| maxglute wrote:
| Dollar dominance erosion shifting towards dollar inertia. Post RU
| sanctions dollar lost much of it's leverage (as geopolitical
| weapon), i.e. actual useful dominance function (transaction
| panopticon, sanctions)while still retaining most of the liability
| (Triffin etc). Dollar going to remain popular by volume because
| plumbing in place, but parallel payment systems last few years =
| systematic blindspots where US treasury can't monitor what others
| buy outside of dollar system, and generally weaker ability coerce
| countries. What's left of dollar system is US enjoying exorbitant
| privilege of going into ~35T and rapidly increasing debt to serve
| as asset for everyone else, while dragging down export via
| uncompetitive FX.
|
| One interesting attack vector vs USD is PRC recycling it's dollar
| surplus / shadow lending it's USD reserves at more favorable
| rates than US gov can, i.e. countries (emerging markets / BRI
| recipients) who would have borrowed USD from FED (or US
| influenced IMF/WB) now borrow from USD from PRC -> reduce US
| treasuries demand and drive up US interest -> further increase US
| debt. PRC basically hijacked and weaponize USD liquidity to make
| increasingly ineffective dollar system (as geopolitical tool)
| even more expensive to maintain while PRC can enjoy dollar
| liquidity without the maintenance costs. And that's probably the
| ultimately the goal, smart play is not to inherit reserve
| obligations, but to turn reserve holder's exorbitant privilege to
| exorbitant curse.
| JumpCrisscross wrote:
| > _countries (emerging markets / BRI recipients) who would have
| borrowed USD from FED (or US influenced IMF/WB) now borrow from
| USD from PRC -> reduce US treasuries demand_
|
| This makes no sense. If the PRC is lending U.S. dollars, that
| doesn't reduce Treasury demand. It _increases_ demand for
| dollar-denominated assets, goods and service providers. The
| borrowing country has to spend those lent dollars after all.
| Havoc wrote:
| USD position as global reserve is very much based on trust.
|
| Between the weaponizing that for sanctions via SWIFT, US becoming
| unreliable as a partner (militarily, politically and
| economically) and Trump rambling about replacing pieces of the
| financial system with crypto [0] that trust was bound to waiver
|
| Think we'll have a parallel system in record time. Question is
| who/how. Russia wants it but they're well Russia. China's yuan
| isn't open enough. Euro is a bit to regional and dependent on the
| US lead system anyway. So there isn't an obvious candidate.
|
| Something is going to have to give though given US shenanigans.
|
| [0]
| https://www.reddit.com/r/economy/comments/1otdio8/trump_says...
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