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> This is because the US is a heavily import-based country Is it really? It is probably one of the countries that rely less per % of GDP on imports: https://en

• didericis 5y ago
  That part of the argument is wrong, but the gist is roughly correct, as far as I understand it. Most of why we don’t see huge amounts of inflation is the massive amount of currency sitting in reserves collecting interest. If that were to get released very quickly it’d be a monumental disaster.
  • ivalm 5y ago
    But it would be a disaster to foreign holders as well. It’s like saying “if we go into a full scale nuclear war it will be a disaster” — absolutely true but also the whole world is trying to avoid it. Any US dollar unwinding as a reserve currency will be necessarily slow.
    • didericis 5y ago
      It would not be quite as bad for other countries, as their own currencies would improve in relative value. And it would be massively beneficial to whatever currency replaced it. Unlike nuclear war, there is potential for a winner. That is what makes this scenario somewhat plausible. Long term China’s objective is to replace the dollar as a world reserve currency. A rapid shift would I think only occur after an alternative reserve currency were more obvious, and I think you’re right about a slow unwinding at first. However if it passed a tipping point the latter end of an unwinding scenario would I think be very fast.