Article and comments on USD as Reserve Currency

[aja8888]

Recent article and some easy to understand graphs. Good comment discussion. For informational purposes only.

https://wolfstreet.com/2022/04/02/u...rency-drops-to-26-year-low-slowly-but-surely/

With inflation raging in the US following the Fed’s $5-trillion money-printing orgy and interest-rate repression, the question constantly arises: When will the rest of the world throw in the towel on the dollar as the dominant global reserve currency? If this were to happen all of a sudden, it would spell chaos. But it is happening little by little.

The global share of US-dollar-denominated foreign exchange reserves fell by 40 basis points from Q3 to 58.8% in Q4, setting a new 26-year low, edging out the low in Q4 2020, according to the IMF’s COFER data released at the end of March. Dollar-denominated foreign exchange reserves consist of Treasury securities, US corporate bonds, US mortgage-backed securities, and other USD-denominated assets that are held by foreign central banks and other foreign official institutions.

 

[JDARNELL]

One could make the case that other countries could conspire to replace the dollar. Well at least til we started seeing T-80 tanks with their turrets blown off. It’s a great gig to have as you have the world currency a printing press and a huge enforcement arm that it appears no other country can match. Deficits and trillions in debt. Who cares? It’s good to be the best of the worst.

 

[aja8888]

One could make the case that other countries could conspire to replace the dollar. Well at least til we started seeing T-80 tanks with their turrets blown off. It’s a great gig to have as you have the world currency a printing press and a huge enforcement arm that it appears no other country can match. Deficits and trillions in debt. Who cares? It’s good to be the best of the worst.

The other countries won't hardly talk to each other, let alone conspire to overthrow the U.S. dollar.

Hey, it took us financing WWII and then lending the war torn countries the money to rebuild again to have us gain reserve currency status via debt payback. Then, of course, we had to put our military in all the countries for protection to support their lifestyles. And we had to support the oil rich Arabs to get the Petrodollar working in our favor.

A lot of thought, time and money went into the effort to gain the reserve status from the British Empire!

An interesting book on this whole subject is "The Gods of Money" by F. William Engdahl. Read this and your whole outlook on the U.S. monetary system and history will be changed.

 

[OldShooter]

... An interesting book on this whole subject is "The Gods of Money" by F. William Engdahl. Read this and your whole outlook on the U.S. monetary system and history will be changed.

I have enjoyed many books that were recommended on this forum, so I went to Amazon to check this one out. What I found:

"Gods of Money is a book about power and about an extraordinarily wealthy elite that has wielded unprecedented power, not for the good, but rather for the enhancement of their own private position. The book tracks the evolution of the power amassed by a tiny group of men who have regarded themselves, quite literally, as gods-the Gods of Money. Their agenda has included assassinations of two of America's most popular presidents; involvement of the United States against the public will in two world wars; and detonation of the world's most destructive weapon, the atomic bomb, on Japanese civilians. It has included scores of regional wars, political assassinations, coups, and systematic corruption of the body politic. The book reveals in an unusual and surprising manner how this powerful elite has systematically set out to literally control the entire world, backed by the most powerful military force the world has ever seen."
​

Pass.

 

[aja8888]

I have enjoyed many books that were recommended on this forum, so I went to Amazon to check this one out. What I found:

"Gods of Money is a book about power and about an extraordinarily wealthy elite that has wielded unprecedented power, not for the good, but rather for the enhancement of their own private position. The book tracks the evolution of the power amassed by a tiny group of men who have regarded themselves, quite literally, as gods-the Gods of Money. Their agenda has included assassinations of two of America's most popular presidents; involvement of the United States against the public will in two world wars; and detonation of the world's most destructive weapon, the atomic bomb, on Japanese civilians. It has included scores of regional wars, political assassinations, coups, and systematic corruption of the body politic. The book reveals in an unusual and surprising manner how this powerful elite has systematically set out to literally control the entire world, backed by the most powerful military force the world has ever seen."
​

Pass.

Funny thing, it's all true, and the history of our country and how it got to be a world power.

 

[JDARNELL]

The other countries won't hardly talk to each other, let alone conspire to overthrow the U.S. dollar.



Hey, it took us financing WWII and then lending the war torn countries the money to rebuild again to have us gain reserve currency status via debt payback. Then, of course, we had to put our military in all the countries for protection to support their lifestyles. And we had to support the oil rich Arabs to get the Petrodollar working in our favor.



A lot of thought, time and money went into the effort to gain the reserve status from the British Empire!



An interesting book on this whole subject is "The Gods of Money" by F. William Engdahl. Read this and your whole outlook on the U.S. monetary system and history will be changed.

Exactly

 

[Go-NoGo]

Funny thing, it's all true, and the history of our country and how it got to be a world power.

A few more books by the author:

1. A Century of War: Anglo-American Oil Politics and the New World Order Oct 20, 2011

2. Manifest Destiny: Democracy as Cognitive Dissonance Mar 29, 2018

3.Full Spectrum Dominance: Totalitarian Democracy in the New World Order Oct 20, 2011

4. Myths, Lies and Oil Wars Jun 21, 2013

5. The Lost Hegemon: Whom the gods would destroy May 12, 2016


And to provide some perspective, from a wikipedia page about the author:
https://en.wikipedia.org/wiki/F._William_Engdahl

"..Engdahl is a contributor to the Global Research website of the conspiracist Centre for Research on Globalization, the Russian website New Eastern Outlook,[5] and Veterans Today (on whose advisory board he sits).[6][7][8][9] He is a regular contributor to RT (formerly Russia Today) and Voice of Russia.[9][10][11] He is on the scientific committee of the journals Geopolitica, alongside Michel Chossudovsky and others,[12] and Eurasia, alongside Aleksandr Dugin and others.[13][9] He was a keynote speaker at the conference "Geopolitics of Multipolarity", held at Moscow State University in 2011, alongside Dugin.[14]

He has been described by James Kirchick in Time magazine as being a "crank 'historian",[6] by the Genetic Literacy Project as a "conspiracy theorist",[15] and by the Centre for the Analysis of the Radical Right (CARR) as a "LaRouchite fascist" and "Holocuast denier",[16] CARR has documented his close connections to the conspiracy theory organisation GlobalResearch, the far-right Lyndon LaRouche movement and Alexander Dugin's Eurasianist movement.[16]

He has an axe to grind and a very big one. Not a source I would rely on for unbiased information.

 

[Montecfo]

Back to the topic, which would be the new reserve currency?

Alternatives are too illiquid, too weak, or seem.worse bets from a trust perspective.

But as you use currency to punish enemies it does give other countries pause.

 

[dtbach]

"Fed’s $5-trillion money-printing orgy" This says all I need to know about the author. I guess he would rather have a deep recession with deflationary pressure.

 

[OldShooter]

... And to provide some perspective, from a wikipedia page about the author ...

Thanks for the extra research. My crackpot detector went off when I read that Amazon clip, but I didn't follow up.

Back to the topic, which would be the new reserve currency?

Alternatives are too illiquid, too weak, or seem.worse bets from a trust perspective.

But as you use currency to punish enemies it does give other countries pause.

That is the mystery. We are the least awful choice. Even the contenders to be in a reserve basket like Special Drawing Rights keep varying from awful to more awful. At one point Putin saw the rouble as being a candidate. The Chinese are still working on their candidacy, now apparently with the digital yuan. Brazil not much better. Euro maybe in ascendency as the South gets itself sorted out. I dunno.

But being awarded the least worse trophy IMO makes for an uncomfortable feeling about the long-term strength of the dollar.

 

[Markola]

Cranks, gold bugs and much of the cryptoverse cheers on the collapse of the dollar as the world reserve currency, which this Wolf Street article makes clear is not going to happen anytime soon.

As a thought experiment, what would happen if, say, the Euro or a basket of currencies evolved to be the dominant reserve currency? The U.S. would no longer have an incentive to protect brutal countries that produce oil, we’d have an incentive to reduce our public debt, and a weaker dollar might encourage our manufacturing sector again. Is that thinking on the right track?

 

[OldShooter]

... As a thought experiment, what would happen if, say, the Euro or a basket of currencies evolved to be the dominant reserve currency? The U.S. would no longer have an incentive to protect brutal countries that produce oil, we’d have an incentive to reduce our public debt, and a weaker dollar might encourage our manufacturing sector again. Is that thinking on the right track?

Though I'm no expert on international economics, I think your list is good though missing one major effect: high inflation in the US.

To grab a number, lets say the dollar slips by 20%. With that the cost of all imports rises by 25%, most of which will get passed through to the consumer. This kind of a rise will stimulate re-shoring of manufacturing where that is feasible, but the re-shoring won't happen overnight. Google tells me that 70-80% of Walmart's suppliers are in China, so there's consumer impact far beyond consumer electronics. But probably bigger yet would be inflation on products that are traded on international markets. Raw materials like oil, coal, metals, agricultural products like wheat, soy beans, pork, all become significantly more expensive for consumers, though the price increase will be a boon to suppliers. Environmental concern over things like fracking, and domestic copper and precious metals mining will not get as much of a hearing during permitting.

IMO the risk is there and our little stash of TIPS will not be enough to truly mitigate it. Our international investment will help, but a serious devaluation will not be fun for anyone.