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Folks like to talk about what really keeps the world at peace (relatively speaking compared to pre-ww2), and while I think nukes are a large part of it, another
by xxpor 6y ago
Folks like to talk about what really keeps the world at peace (relatively speaking compared to pre-ww2), and while I think nukes are a large part of it, another huge part is dollar based settlement and the absolute devestating sanctoning power the US derives from it. That isn't to say sanctions are morally pure: they exact a huge cost on the regular people who live in the countries subject to them. However, they're still probably better than being bombed.
The more things that are not settled in dollars means the reduced effectiveness of sanctions and the higher likelyhood conflicts will escalate into hot wars.
On the other hand, the US not being able to dictate to everyone else is probably a good thing itself, so I'm not sure on net what the best outcome is.
- cercatrova 6y agoPax Americana is the term you're looking for.
- dharma1 6y agoAbsolutely, the result of de-dollarisation of world trade will be a shift in the world’s power dynamics. I think it’s pretty inevitable by now. I hope we have learned enough about history to be able to have economic competition/conflict without military conflict. As a silver lining for some parts of America - a weaker dollar together with onshoring of some industries probably means some jobs will return to the US.
- xxpor 6y agoI do wonder what will really end up as the alternative though. The yuan and euro both have major structural issues of their own.
- toomuchtodo 6y agoA synthetic basket of the top currencies. Such a product exists (SDR aka Special Drawing Rights), but it’s niche. When you consider securities indices (SPY, for example), it’s not that outlandish. https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-SDR https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14...
- skissane 6y ago> Such a product exists (SDR aka Special Drawing Rights), but it’s niche The primary reason that SDRs are niche is that only governments are allowed to hold them. If the IMF allowed them to be bought and sold by private investors they might see more use.
- toomuchtodo 6y agoAgreed, but I'm unaware if there is any regulatory constraint preventing commercial financial entities from offering a similar product. The IMF doesn't need to provide approval if there is no regulation preventing financial institutions from providing the same currency mix to retail and institutional as a product (with the provider managing the abstraction between individual currencies and the basket).
- skissane 6y agoOne problem is that the IMF adjusts the currencies in the SDR basket over time. It would be feasible for a private issuer to offer something based on the current SDR basket. But next time the IMF reweighs the basket, they will have a problem. The reweighing operation is designed to not the change the value, but a private issuer that wanted to follow the SDR basket as it changes would have to move quickly in the market to reweigh its assets, and there would be a risk they would lose out in the process. (Maybe they could hedge against that risk, but that would incur an added cost.) I think the biggest reason why this product isn't offered, is there is no great demand for it. Anyone can do the same thing themselves just by buying the underlying currencies. But, investors probably would take more interest in genuine SDRs issued by the IMF than in some private company's simulation of them. Real SDRs would have far less counterparty risk and operating expenses than such a simulated SDR would have.
- autoditype 6y agoThe world's power dynamics will certainly shift. I wonder if there's any fictional thriller novel written about such a future shift and how nation states deal