4 ms·
Basic question: why is it bad for the US if the dollar stops being the reserve currency?
by OscarCunningham 6y ago
Basic question: why is it bad for the US if the dollar stops being the reserve currency?
- mrep 6y agoFor americans at least: "The world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, giving the United States an advantage in excess of $100 billion per year" [0]. [0]: https://en.wikipedia.org/wiki/Reserve_currency https://en.wikipedia.org/wiki/Reserve_currency
- starbugs 6y agoThe US couldn't consume goods from other countries based on cheap debt anymore, but would have to increase their own exports to match up their deficit. That's because if other countries aren't forced to purchase USD, there's a much smaller market for the US currency. This means the US's ability to print money without causing domestic inflation would be much more limited. It would have to consume less and produce more.
- mrep 6y agoHow so? The yen isn't even close to USD as a reserve currency and yet their central bank has about a 95% asset balance to gdp ratio compared to the US that has about a 33% asset balance to gdp ratio [0, 1]. [0]: https://www.swfinstitute.org/fund-rankings/central-bank https://www.swfinstitute.org/fund-rankings/central-bank [1]: https://graphics.reuters.com/GLOBAL-CENTRALBANKS/010041ZQ4B7/index.html https://graphics.reuters.com/GLOBAL-CENTRALBANKS/010041ZQ4B7...
- starbugs 6y agoWell, Japan actually has potent production assets and exports a lot?