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There's no risk of the USD not remaining the world reserve currency as long as oil is being purchased. The US spends more than 144 countries combined[1] on the

• sirmoveon 6y ago
  What do you think of China and Rusia in talks to trade oil in other currencies? How significant is their share of the market?
  • nickff 6y ago
    China and Russia are both known to manipulate their currencies much more than the USA. USD's most credible rival as a global currency is the Euro, because no individual government is able to devalue it.
    • selectodude 6y ago
      USD also has bond yield and access to the largest economy in the world built into it. It's more difficult to spend your Euros.
    • effie 6y ago
      > "China and Russia are both known to manipulate their currencies much more than the USA." What do they do to "manipulate their currency"? Does quantitative easing qualify?
      • icelancer 6y ago
        "How easy is it to buy and sell other currencies in China compared to the United States?" is a good start to answering this question.
  • jb775 6y ago
    Russia's oil reserves are a drop in the bucket compared to middle east, and more expensive to extract. Saudi Arabia could simply ramp up production to drive prices down globally and make it not worth the effort. Also, US has leverage over China bc they buy all China's cheap crap. The headaches and downsides aren't worth it, and any "talks" are likely just game-theory pokes at the US.
    • blaser-waffle 6y ago
      "Perception is reality", and it's super true in investing. It's in Russia's and China's (and India's, and others) to weaken the dollar and the US' role in global hegemony. To that end you keep stoking the fire, keep raising the question.
• rubyn00bie 6y ago
  +1 I'd also like to note the, not obvious fact, that the "wealthy" have no other meaningful choice but to put their money in dollars. No other country, or group of countries, even comes close to providing the liquidity, safety, and flexibility of the US dollar. The US has never halted trading, has continuously paid its debts, and has shown zero meaningful (congressional shenanigans aside) intention of stopping. That's not to say one day, another country won't have the burden of being the world's reserve currency, but for at least the next 20-30 years it's very likely going to be the US.
  • effie 6y ago
    Wealthy people have other people who manage their money. Only part of that money is in U.S. dollars/bonds at any given time, because it is less risky to have money in various different assets such as land, buildings, stocks.
    • rubyn00bie 6y ago
      Yes, wealthy people do pay others to manage their funds... I'm failing to see how that's a revelation here. The people who manage that money, assuming they are responsible, or remotely-qualified, have only one option; which, is going to be investing primarily in securities/assets backed by US dollars. Land, buildings, and stock are all assets because you can get money back for them. That money is only good if its spendable and can be extracted from the asset... which is my point. /shrug I'm just a bit lost at what you're trying to say...
      • exdsq 6y ago
        People rarely hold that much in cash, it goes into assets like buildings. And those assets tend to be diversified around the world - cash will probably be held in banks offshore with good tax rules.
      • effie 6y ago
        > The people who manage that money, assuming they are responsible, or remotely-qualified, have only one option; which, is going to be investing primarily in securities/assets backed by US dollars. That may be a strategy of single person with a little money trying to not lose it long term. But it would be foolish for the really big investors. They don't do that. Wealthy people diversify in different asset classes, not just in US stocks/bonds. Real world assets such as gold, stocks, art, land, buildings, private companies etc. are not in general "backed by US dollars". They can have value largely decoupled from the value of US dollar or its status as top world currency. Which is why those clever managers invest also in those assets.
• airza 6y ago
  It seems easy to imagine a world where oil is not being aggressively purchased in the way that it was until this year, and also easy to imagine one where US military spending is curtailed by a combination of flagging support for US empire as well as the harsh reality of american fiscal policy. Not that either of these are a guarantee, but current oil consumption is incompatible with human civilization in its current form, so...
• frank2 6y ago
  >The US protects the middle-east oil supply Now that the US is basically self-sufficient in petroleum and seems to have entered an isolationist mood, I wouldn't count on its risking the loss of one of its aircraft carriers to re-open Gulf shipping lanes if Iran or some other actor decides to close them.
  • MR4D 6y ago
    You got downvoted, but that's basically the view that Peter Zeihan takes in his book "Accidental Superpower". It's reasonable to assume that if the US becomes insular enough, and self-sufficient enough in energy, that such a thing could become true. Not a popular thought, but definitely a possibility.
• MR4D 6y ago
  Quick way to think about it: If you believe that Russia or China's currencies will be a safe place to hold your wealth for 10+ years, then it will be a threat. Safe means "keep its value & is accessible". If you do not believe that they will be safe, then there is no threat to the dollar. The rationale is that people generally want to have their wealth in a safe place (currency, not necessarily a physical location). Right now (and for the foreseeable future) there is no currency that can compete with the Dollar. However, Gold could displace it if people lose confidence in the Dollar's value (ability to safely store wealth).
  • effie 6y ago
    Big wealth is not in general hold in a currency, for reasons of inflation and currently, for reasons of negative interest rates. Currency is used to settle transactions. Any wealth that could move geopolitics/global economics is kept in different, more dependable form.
    • ryanwaggoner 6y ago
      This doesn’t make sense to me. The reason interest rates are negative is that the demand for USD is so high that you have to pay for the privilege of storing your wealth in USD.
      • effie 6y ago
        Any source for such a wild claim? Interest rates are so low because people controlling the FED decided the rates to be low. They did so, as the story goes, to stimulate the economy growth, to make banks more likely to lend and companies more likely to borrow money and use the money they have to buy things, hire people, increase production. Of course, the reality is more complicated and lot of that newly created money just pumps the stock market with little benefit to economy. One indeed has to pay banks for storing money, whether in USD or EUR, that's why big wealth managers don't keep big wealth as money but invest in diverse assets. Storing some USD is no privilege, it is a necessary liability. USD is needed for transactions, not for storing wealth.
  • 6y ago
• nly 6y ago
  And what are all the oil barons doing with their USD? If I buy US dollars so I can go buy oil, and then the oil producers go and exchange those dollars in to other currencies, then the whole process is neutral for the greenback.
  • selectodude 6y ago
    They buy US treasuries and/or foreign exports. USD is helpful because 1. most of the world will accept USD directly or 2. conversion into another currency is extremely cheap and simple, even at large values, due to the unwavering worldwide demand for USD.
  • fmajid 6y ago
    Nixon cut a deal with King Faisal of Saudi Arabia in the 70s (after the oil embargo). The US would protect the Al-Saud kleptocracy, and in exchange the Saudis would invest their money in America.
    • blaser-waffle 6y ago
      Apropos of Saudi, one of the big BTC spikes was correlated to be when MBS took over and started cracking down on rivals and dissidents. Whole lotta folks turned to BTC to get cash out of the country and then GTFO. Similar trends with Xi's anti-corruption campaign in China.
• LatteLazy 6y ago
  The key isn't oil purchases, it's what the middle East do with the dollars. They give them back to the US, buying government bonds and other US domestic securities. Only that process has stopped on its own because prices are so low, most countries in the region are spending more than they make. I don't think the usd is going anywhere as the world reserve currency, but oil trade currency isn't the reason. This is an interesting time because the US does NOT have the support of excess oil revenue to keep it in demand.
• sifar 6y ago
  Prior to this year, shutting down the world economy for months was an anathema. Even saving the planet stuff could not achieve that. Leverage points and priorities. Prior to this year, the US society devolving into a third-world developing one was unthinkable. When I ask my kid to do something he doesn't want, he pouts and jokingly says "Never ever". What this pandemic has taught me is to never say never ever. The US become isolationist, losing it's military supremacy in the next decade ? The rest of the world going it's own way and not caring enough about what the US thinks ? A world war with US against the RoW ?