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> is the global reserve currency That s euphemism for "the US has the military power to get the world to buy its currency"
by buboard 6y ago
> is the global reserve currency
That s euphemism for "the US has the military power to get the world to buy its currency"
- AnimalMuppet 6y agoNot at all. It's a euphemism for "The US dollar is the currency that the rest of the world trusts more than any other." Whether they are rational in trusting it is perhaps a different question...
- lotsofpulp 6y agoPart of that trust is based on military power, but much of it is trust in the people and government and judiciary of the US to do the consistent (and perhaps “right”) thing most of the time (compared to other governments around the world).
- nojito 6y agoIt's based on economic might. To participate in the US growth story you have to contribute in USD.
- buboard 6y ago> trusts more than any other. do you think it would be possible without the military might? any historic precedents?
- lubujackson 6y agoMilitary might and reserve currency may go hand in hand, but it is more about economic stability. USD is used for loans in countries where the currency moves a lot, so the issue right now is there are trillions of loans in USD, outside of U.S. control.
- kasey_junk 6y agoThat’s not explicitly true. The rest of the world trusts the Swiss franc more than the USD so much that they had to take explicit steps to prevent their money from becoming too strong. Monetary policy is all about balance.
- AnimalMuppet 6y agoWell, that's true, but the Swiss Franc is not available in enough volume to be a reserve currency.
- _nalply 6y agoAnd that's the problem for the Swiss Franc. After all, if something is scarce it is expensive. The Swiss National Bank has foreign exchange reserves worth of about $800 billion today. Not even included is something like a sovereign wealth fund. I read that the Swiss bought a lot of Apple shares, for example. I don't know whether this is good or bad for the Swiss. I imagine they could play this game: if everybody wants the Swiss Franc, sell them out of thin air for a price they can set themselves by just selling as long as there is demand. If demand plummets, buy the Francs back for a lower price. Nothing is lost? It's almost a scam the Swiss are playing to the world. But what can the Swiss do? If they don't do anything, the Swiss franc will rise like a rocket and wreck the export-oriented economy. If they play this game the reserves of the Swiss National Bank are ballooning like crazy. The Swiss National Bank director is saying that it is dangerous to have these large balances because of the other side of the balance sheet: the obligations. They could be due suddenly and brutally. I really don't know.