22 ms·

De-dollarization is happening at a ‘stunning’ pace

289 points by andreygrehov 3y ago

monero-xmr 3y ago
It is quite plausible that bitcoin becomes the global reserve asset, just as gold was in the past. Bitcoin is superior to gold in every single aspect except for the number of years it has existed. To learn more: https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861 https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern...
- arcticbull 3y ago
  Gold was a terrible reserve asset which is why we stopped using it. Recreating all the same things that made it bad, and also removing industrial applications, doesn't a good reserve make. And any book with a [edit](foreword) by Michael Saylor, the man whose fraud basically popped the 2001 tech bubble isn't worth the paper it's printed on. The man should have at the time been banned from running any publicly traded company. [1] [edit] What's next, a medical ethics book by Elizabeth Holmes with a [edit](foreword) by Martin Shkrelli? [1] https://www.computerworld.com/article/2589923/update--microstrategy-executives-to-pay--11-million-to-settle-sec-fraud-ch.html https://www.computerworld.com/article/2589923/update--micros...
  - monero-xmr 3y ago
    Gold was great, except the difficulty storing, transporting, and conducting commerce in it meant centralized institutions (the Bank of England) monopolized its storage out of convenience for international trade. Seizures, debasement, and so on until the gold standard ended. Biggest mistake ever made, but luckily bitcoin exists now.
    - awb 3y ago
      It was amazing for countries rich with it. But not great for countries without it, or for undeveloped countries with it that couldn’t defend it.
      - robocat 3y ago
        Oil would make a far better base than gold, for a bunch of good reasons. Not that it would be good, because it has a bunch of obvious problems, many of which would occur with gold too. Of course many commodities are used instead of currency by blocked countries. As are cryptocurrencies.
  - hackernewds 3y ago
    TIL. I did not know this about M Saylor. Thank you for sharing it. Also I think you meant to write "foreword"
    - arcticbull 3y ago
      Yeah, haha, I did. macOS autocorrect keeps changing one for the other out from under me. Thanks for catching it.
- Gustomaximus 3y ago
  Would not gold have the superior aspect it has actual use behind its value? Obviously the store of value part pushes up price, but there is also a big need for gold in electronics and jewellery etc. Bitcoin at the moment is largely speculation and has little use beyond that currently, though has potential to become an active currency of significance, we are yet to see that.
  - gotorazor 3y ago
    There is very little use for gold in electronics. In jewellry, yes. But that's only because people in developing world see their jewellry as a form of savings. Those are the same contries where the people don't buy jewellry lower than 18k. Nobody in North America or Europe knows how to get the fair value of gold in the crappy 14k necklaces. USD is useful because it is a meaning unit of exchange.
  - roenxi 3y ago
    Not really; because the price of gold tends to the marginal cost to produce. If a marginal producer can generate a kilo of gold for $60k, then gold is worth around $60k/kilo. Its uses or lack thereof are not that important. If all the uses of gold went away magically, it'd be worth less for various reasons but still a similar order of magnitude.
- postalrat 3y ago
  We will probably have the math in a few years to defeat the crypto in Bitcoin. Then it's RIP Bitcoin.
markdown 3y ago
Great news. It's really unhealthy for the global economy to be so dependant on one currency. Hopefully we see the Euro and Indian Rupee grow in prominence.
- smitty1e 3y ago
  I submit that the single currency is less an issue than the DranO-snorting antics of the U.S. Congress.
  - markdown 3y ago
    Over a long enough time period, every government pulls "drano-snorting antics". Ergo if you want stability, you have to diversify.
- rank0 3y ago
  Why would you want the euro to grow in prominence? The euro is an extremely young currency which lost almost 1/3 of its value against the USD over the past two years. …at a time when the dollar saw the worst inflation in 40 years!
  - olddustytrail 3y ago
    When the Euro was introduced, it was set to be about the same value as $1. It's currently at $1.10 so it's actually stronger vs USD than it was initially.
  - The_Colonel 3y ago
    > which lost almost 1/3 of its value against the USD over the past two years Two years ago on this day the exchange rate was ~1.2 USD per 1 EUR, today it is ~1.1, so the loss is ~9%. The current exchange rate is nothing extraordinary, and has been hit many times in the past years/decades.
    - rank0 3y ago
      I stand corrected. I had my dates wrong. And had not realized the recent gains the euro has made after reaching 1:1 parity. My main point still stands though. Take a look at the historic volatility: https://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart https://www.macrotrends.net/2548/euro-dollar-exchange-rate-h... The exchange rate ~2010 hovered around 1.5 and recent dipped as low as 1:1 party. Compare that to something like the Swiss franc which has actually appreciated against the dollar over the same period and has a much longer history: https://www.macrotrends.net/2558/us-dollar-swiss-franc-exchange-rate-historical-chart https://www.macrotrends.net/2558/us-dollar-swiss-franc-excha...
neximo64 3y ago
I sometimes feel startup founders would understand the issue with 'De dollarizing' the most. American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)). Looking at it from a strategy or top level point of view of course it looks like dollars are dominant, but from a customer point of view - and the US trade deficit its easy to see why: You have a customer base that is profitable, and a large amount of them. Far more than any other country. It is just very hard to get an alternative to an American consumer. The poor rate of savings, the spending of more than you have, etc results in a pretty good deal for the person on the other side and the manifestation of it is in the accumulated dollar capital
- ElectricalUnion 3y ago
  > American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)). It depends on where you are established or what markets are you serving. Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible. So if you plan on going real big and disruptive, possibly like Huawei was, going for the US market domination doesn't seem like the best idea.
  - 908B64B197 3y ago
    > Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible. All you have to do is not be a foreign state-controlled company and not try to circumvent sanctions to known bad actors. Case point: Ericsson and Siemens have no issue selling in America.
- maroonblazer 3y ago
mariojv 3y ago
I was a little curious how this compares to the use of USD during the Cold War, before USSR collapse, but it's hard to compare since so much of that period was under the Bretton Woods system. A long term historical perspective to the potential consequences of de-dollarization would be an interesting read.
- than3 3y ago
  There's a lot of garbage out there about de-dollarization. MMT for example, magical monetary thinking is more appropriate since it lacks any rationality or understanding of the fundamentals of who sets prices for produced goods.
  - jjtheblunt 3y ago
    Is that what Paul Krugman in the NYT opinions section touts (and got a Nobel prize in economics for)?
    - Afforess 3y ago
      No... What led you to believe that was the case? You're way, way off. https://www.nobelprize.org/prizes/economic-sciences/2008/krugman/facts/ https://www.nobelprize.org/prizes/economic-sciences/2008/kru...
      - bediger4000 3y ago
        Krugman was a lightning rod from 2000 on, like Fauci is today. The Denver Post ran Krugman in the business section, and offered a special on line place for businessmen to sound off against him. Quite hilarious.
      - jjtheblunt 3y ago
        I didn't believe it was the case: i was asking because I didn't know. (And, thanks for the link. interesting stuff.)
erulabs 3y ago
Curious if others are familiar with the “dollar milkshake theory” - this seems to be the first sign of it being a miscalculation. Alternatively, this rate of dedollarization may have been calculated by the fed ahead of time. I’d love to know how far off prediction this 10x acceleration is.
- awaythrow483 3y ago
  I'm not supporting or attacking the dollar milkshake theory but I don't think this contradicts it. I think the theory would say that this will counterintuitively result in an eventual huge dollar spike as new dollar demand but also liquidity dry up while existing demand from existing USD loans stay constant. I think it's too early to tell. I don't believe in his USD superspike but I do think the underlying dynamic is real and this will not result in the dollar being substantially lower in the let's say 1-3 year time frame (ie DXY < 90)
paulpauper 3y ago
Meh. It looks like De-Dollarization is yet another 'current thing' or meme. It begins by smaller social media accounts and outlets coining a neologism, which goes viral and picked up by big media even if there is no evidence to back it. It then keeps spreading until public loses interest or replaced. There is no evidence to suggest this is happening. Look how much the Turkish Lira has fallen for example. The US dollar index is still close to 10-year highs. Look how poorly 'dollar alternatives' such as Bitcoin have performed recently. Or the Yen. For perspective, not much has changed: https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/chart%201_4.png https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/... or here https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-dominance-blog.jpg https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d... A small uptick of dollar alternatives
- user_named 3y ago
  Read the article. It is happening.
- sneak 3y ago
  https://www.epsilontheory.com/dedollarization-is-not-a-thing/ https://www.epsilontheory.com/dedollarization-is-not-a-thing...
matthewaveryusa 3y ago
How do you hedge against this if you think the Yuan will be the dominant currency? Investing in chinese stocks is obviously very risky as you can only hold VIEs and ADRs which either the SEC or the PRC could end at a moments notice. edit: My current viewpoint is the s&p500 is enough of a hedge given that these companies are multinationals trading in many currencies already -- I'm often wrong though :)
- marlor 3y ago
  I’m sure the Yuan will increase somewhat as a reserve currency, but I’m skeptical it will become dominant. China has systemic issues at the moment, with a working-age population that peaked some time ago and a property market that is perpetually on the verge of implosion. There are mounting pressures in domestic consumers, and an increasing move towards “dual circulation” (with a focus on the domestic part of that duality). Then there’s the risk of a miscalculation in the East China or South China seas. Given that CNY trades in a tight, centrally-managed range against the USD (it’s almost always between 6-7 CNY to the dollar, and only briefly traded outside that during the pandemic), I’m not sure there’s a big incentive to use CNY as a hedge against USD.
- Gustomaximus 3y ago
  I think the hedge is more about not being too USD centric. I wouldn't bet on any one currency too heavily. China has its own set of problems. My guess is more likely we'll see more diverse currency in trade relevant to the trading countries. Broader, IMO I think the USD is walking dead. I don't know when, but fundamentally you have a government debt no-one expects to be paid back, and growing quite rapidly. I respect most people would say otherwise and I'm often wrong, but I don't see how this ends with anything other than default, which will be preceeded by money printing most likely. The US is a huge and dynamic economy, so maybe they will prove this view wrong, or more likely drag things out for a long time, but humans being humans, at the first sign people start feeling they might not get their monies worth from USD, the response will be rapid as people try to protect their worth. This de-dollarisation seems part of the process and given Ukraine/Taiwan tensions no doubt is a strong drive from other nations. But off tangent but generally I would go with diversified vs focus on one alternative. Personally I went 15% cash and gold each from my shares a couple months back... Time will tell if I'm right or miss the next bull moment.
wins32767 3y ago
Alternate explanation: there is a massive dollar shortage globally due to US based and Eurodollar banks being unable/unwilling to lend and dollars are preferentially being spent to import important goods because what else are people going to take?
- xuki 3y ago
  DXY is at the bottom of 52 week range does not support this.
  - IAmGraydon 3y ago
    A hilarious take given the DXY is up almost 50% in the last 10 years. By all means, keep picking those cherries, though.
  - rybosworld 3y ago
    There is no way to to use DXY as a barometer for/against de-dollarization. This is equivalent to "there was abnormal amount of snow last week so global warming must not be real"
- Proven 3y ago
  [dead]
sheeshkebab 3y ago
DX short funds spreading fud?
- paulpauper 3y ago
  agree. for perspective, not much has changed: https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/chart%201_4.png https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/... or here https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-dominance-blog.jpg https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d... The headline is technically correct just exaggerated https://upload.wikimedia.org/wikipedia/commons/a/a7/Global_Reserve_Currencies.png https://upload.wikimedia.org/wikipedia/commons/a/a7/Global_R...
tiahura 3y ago
https://www.macrotrends.net/1329/us-dollar-index-historical-chart https://www.macrotrends.net/1329/us-dollar-index-historical-...
skybrian 3y ago
This is about market share in central bank foreign reserves, but a lot of context is missing. Which central bank reserves changed? It wouldn’t be surprising if this were mostly China.
- safog 3y ago
  There was also a lot of propping up of currencies that happened due to dollar strength. A lot of central banks sold UST they held for their local currency to stop currency free fall as rates rose. This is a symptom of rates rising really quickly in the US than any de-dollarization I'd wager.
IAmGraydon 3y ago
This article frames it starting in 2001 for a reason. Go back to 1990 and you will see that the USD only made up about 45% of reserves. It can change quickly.
- anonporridge 3y ago
  And it was 85% in the 70s. https://en.wikipedia.org/wiki/Reserve_currency https://en.wikipedia.org/wiki/Reserve_currency
  - JumpCrisscross 3y ago
    Reserves aren’t as useful a metric as they are in the age of Bretton-Woods.
- riffraff 3y ago
  Also 2001 is the year euro got introduced. The article is trying to imply the USD lost weight compared to renminbi/won but that has been very very marginal.
  - lodovic 3y ago
    Indeed, this seems more like a propaganda piece than actual research.
neom 3y ago
My absolute favorite youtube finance person, Patrick Boyle, did a very interesting video about de-dollarization and brics recently, cannot recommend it (and Patrick) enough! https://www.youtube.com/watch?v=JHZnVdBZJfA https://www.youtube.com/watch?v=JHZnVdBZJfA
- baryphonic 3y ago
  His points about capital flows and that the US is always willing to run deficits to stabilize global markets are really underrated. Also interesting: de-dollarization may benefit the US by increasing domestic growth and investment.
  - throwaway4good 3y ago
    I find the idea that the US' willingness to run deficits is an uniquely American thing very curious. To me it is obvious that any country in the world would do systematic deficits if they could do it without tanking the value of their currency.
    - uoaei 3y ago
      The budget deficit represents the monetary value of everything the government spends money on (e.g., places, programs, assets, investments, etc.).
      - throwaway4good 3y ago
        I was referring to trade deficits.
        uoaei 3y ago
        And I was not. The statement holds for both anyway, in cases of hegemonic, sovereign, fiat currencies.
    - nomay 3y ago
      Then thay are better off doing it their own currency, so they don‘t even have to pay back.
ajross 3y ago
This is a really weird article. It's 100% sourced from one "note" written by some guy at Eurizon, with no alternative perspectives given or seemingly even requested from anyone. (Especially weird given that economists love to talk!) And the perspective being pushed isn't just the fact of the reserve decline, but specifically that is being driven by sanctions on Russia, which seems like a huge, huge reach to push without analysis or rebuttal. This has the smell of a deliberate hit piece, basically.
- gotorazor 3y ago
  It's trash. Sanction on Russia might have affected the dollar as a reserve currency. But, the author is using 2001 to compare the relative decline. Russian sanctions didn't begin until 2014 and didn't serious until last year.
perfecthjrjth 3y ago
It is good for the developing world, as producers/exporters subsidize countries with reserve currencies. That's why inflation in countries with reserve currencies is always a way lower than other counties. MMT claims that one can swap "printed money" with real products (such as cars, commodities, food, clothes). This kind of swapping is possible for the US, EU, UK (Mostly the Western world and Japan). Who wants to swap million barrels of oil to Zimbabwian dollars.
- awestroke 3y ago
  How is USD better than Zimbabwean dollars after the US federal reserve has quadrupled the amount of dollars in less than a year and then claimed only single digit inflation? EDIT: I love how nobody replying is addressing my actual point
  - xboxnolifes 3y ago
    The Zimbabwean dollar had MONTHLY inflation rates reaching 79,000,000,000%.
    - Xylakant 3y ago
      Fun story: There was an advertising campaign for a Zimbabwean newspaper with posters and handouts printed entirely on Zimbabwean dollar bank notes https://en.m.wikipedia.org/wiki/The_Trillion_Dollar_Campaign https://en.m.wikipedia.org/wiki/The_Trillion_Dollar_Campaign
  - baq 3y ago
    Nobody wants to get paid in Zimbabwean dollar.
  - deleted 3y ago
    [deleted]
  - wiseowise 3y ago
    > How is USD better than Zimbabwean dollars It’s backed by the most powerful nation in the world.
TechBro8615 3y ago
Did I predict this [0] a year ago?: > More likely, the SWIFT sanctions will prove a mistake for "the West," when it realizes the downstream effects of cutting off Russia from the dominant payment network of the global reserve currency. Russian banks have already started offering accounts in yuan. This will lead to further balkanization (unfortunate pun notwithstanding) of world reserve currencies, which means increased decentralization and a reduced dependency on the dollar. Eventually the world will naturally diversify their reserve holdings to the point that the dollar loses its power as leverage in diplomatic negotiations. [0] https://news.ycombinator.com/item?id=30633595 https://news.ycombinator.com/item?id=30633595
- anonporridge 3y ago
  Tons of people predicted this when sanctions hit.
  - XorNot 3y ago
    And they're still not right, just like they weren't right in 2010, 2000, 1990, 1980... The idea of the decline of the US as a reserve currency has been "about to happen" for me entire life, and yet another cherry-picked graph won't make it more likely.
    - user_named 3y ago
      Yes, they're right.
    - jliptzin 3y ago
      Same thing with gold. Apparently I needed to be buying gold since before I was born and every year since because hyperinflation is always right around the corner.
      - eska 3y ago
        Gold went up a lot though
NicoJuicy 3y ago
Countries aligning with Yuan just seem stupid, if there are actually countries doing that except Russia ( ain't going well for them either). Except if you want no transparency and want to be bullied around. None of china's neighbors even trust them, I sure of hell wouldn't ( perhaps Vietnam, who gets a lot of china's sanctioned businesses). Note : I'm Belgian, not American.
- jimbob45 3y ago
  Yeah, I'm skeptical that the world has forgotten overnight that China is the posterchild of currency manipulation. I'm also skeptical that Russia's economy isn't entirely smoke and mirrors at this point.
- anonporridge 3y ago
  A lot of countries don't trust the US either or like getting bullied by it.
  - NicoJuicy 3y ago
    Which countries are bullied? Are they neighbors too like with China?
    - gdy 3y ago
      Cuba comes first to my mind. Here is a good list involving dozens of countries: https://en.m.wikipedia.org/wiki/United_States_involvement_in_regime_change https://en.m.wikipedia.org/wiki/United_States_involvement_in...
      - NicoJuicy 3y ago
        Cuba? The ones that placed nuclear missles during the cold war? Sure, I can see why relationship deterred further... since 1961 :) PS. Regime changes isn't what I'm saying, you're changing the subject. Which countries are bullied now? Not 80 years ago. All neighboors of China NOW are being bullied. I'm from Belgium and there's also something to say about something similar in our history, because of 1 king we had...
lettergram 3y ago
People should familiarize themselves with Eurodollars: https://m.youtube.com/watch?v=ye8dbEmBimg&pp=ygUKRXVyb2RvbGxhcg%3D%3D https://m.youtube.com/watch?v=ye8dbEmBimg&pp=ygUKRXVyb2RvbGx... Effectively, banks not in the US denote debt in dollars. The “dollars” in circulation outside the US is massively larger than the domestic supply. “de-dollarization” is not going to happen any time soon, really. They aren’t even true “dollars”, no money or assets move. They’re completely created outside the US.
gotorazor 3y ago
For anyone who actually read the article, a bit context. 2001 was around when the Euro began circulating as a real curreny.
lolinder 3y ago
That chart is... bad. I'm not sure if there's a legitimate reason to represent the data as "percent change from Q2 2004" or if it was done intentionally to make the comparison to other currencies look worse. I don't have access to look at the data in more detail because the only way to view the full report[0] is to email Eurizon SLJ Capital. I pulled the data from the IMF for a better chart that shows how the currencies actually relate to each other [1]. Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency. [0] https://www.eurizonsljcapital.com/dollar-smile/rapid-erosion-of-usd-dominance-as-a-reserve-currency/ https://www.eurizonsljcapital.com/dollar-smile/rapid-erosion... [1] It's a bit slow to load, but here's the link: https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa52159&hide_uv=1 https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa5215...
- 0xDEF 3y ago
  >Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency. The bulk of the "diversifying their portfolios" is being done by China. The de-dollarization happening in other countries is a rounding error. Generally it is misleading to talk about the rise of "BRICS" and the "Global South". In most contexts it is only China that is relevant and the other countries are rounding errors.
  - thriftwy 3y ago
    Russia has a good incentive to dedollarize now. It's actually harder for China because holding Yuan is not an option for them.
  - generic92034 3y ago
    And I think it is misleading to treat a country like India, with the 5th highest GDP in the world, as rounding error.
neonate 3y ago
https://archive.ph/C8Qd3 https://archive.ph/C8Qd3
ggm 3y ago
When you can't intermediate in dollars (sanctions) you don't intermediate in dollars. Sometimes, you want the explosives or oil more than you care about price. The question really is, what % of world economy will be de-dollarised in 25 years time, assuming sanctions at scale end in 25 years (they haven't for Iran. Uk and Us still hold bank assets and have unfullfilled but fully paid up weapons orders on the books from the 1970s.) I would be surprised if there isn't a significant grey market at world scale in goods transfer which simply isn't denominated at all -The "fictional" value of drugs for instance, is almost meaningless when randomly 75% of your supply chain is lost at sea. "street price" is whatever you can get. How much it's "worth" would demand somebody does realistic pricing against the % of drug supply which even resembles what it's called. Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Does Russia really care what currency its denominated in, if it gets a truckload of SAM missile parts? If you were supplying goods and services to a narco-economy, what currency do you really want anyway? You can buy goods and services with drugs. Why bother with money?
- wkat4242 3y ago
  > Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Not really. Trade continues at a lower pace. Many countries "launder" the origin of Russian oil. And the western world turns a blind eye because of economic interests. https://www.forbes.com/sites/jeffmcmahon/2023/04/18/these-five-countries-are-laundering-russian-oil-study-says-and-selling-it-to-the-west/ https://www.forbes.com/sites/jeffmcmahon/2023/04/18/these-fi...
RC_ITR 3y ago
Just to be clear, there’s a reason this chart cuts off in mid 2022. What the authors are doing is saying “well the dollar is stronger vs. other currencies. Let’s equate that with those other currencies being worth more in our hypothetical baseline.” This is a bad analysis because 1) exchange rates aren’t like inflation. They move in random directions, so “correcting” the way they did is sort of nonsensical (if they extended the analysis to now, the US would be rapidly gaining share as the currency weak waned) 2) Currencies change value due to supply and demand. The dollar became strong because demand increased, but in this model that causes the dollar to lose share. 3) Add Argentinian pesos to this list and it’s the worlds true reserve currency.
gigatexal 3y ago
Competition in the currency space is good just as it’s good for tech to have competition. But what it means — if the dollar really is waning in influence — it means tough time for the soft power that the US and it’s banking system is able to exert on other nations without firing a single round.
bsaul 3y ago
Wonder how far the US is ready to go to keep that tool functioning. Will we soon see it sabotage the EUR ? USD is such a fundamental leverage for the us diplomacy, i don’t think they’ll let it go without a fight. The end of USD hegemony would also probably mean the greatest economy crash since the 1920s…
- PKop 3y ago
  Soon? It's already been happening. This a main thrust of opposition to Nord Stream, as the Euro was essentially a "petro"-Euro for cheap Russian gas that Europeans had control of. Also, Saddam Hussein switched to the Euro for his oil exports in 2000. Then later the US invaded and switched it back to the $. Low-key maneuvering against the Euro has been ongoing for years.
tempestn 3y ago
If this continues, couldn't it represent a significant problem for the US? Not just in terms of ability to throw its weight around due to being the world's currency, but more concretely. The US operates with a persistent trade deficit; it can get away with this long-term because there's a constant demand for USD, and countries are happy to stockpile them and hold US Treasuries as foreign reserves. But if it loses that reserve currency status, ISTM that significant devaluation of the currency could follow, as the holders of those foreign reserves look to divest. And the only way to ultimately draw them down would be to reverse the trade deficit, which is currently running at ~$1T I believe. Of course, significant devaluation of the currency would help with that, but I expect it wouldn't be fun. I'm far from an expert though, so am probably over-simplifying. I guess it's likely this would all happen slowly enough as to not be too disruptive.
- wonnage 3y ago
  The deficit is an outcome of reserve currency status. The dollars everyone is using to trade have to come from somewhere, and mathematically that means dollars leaving the US. Alternatively, the value of the dollar increases due to demand, increasing the cost of US exports while making imports cheaper, which again exacerbates a deficit.
- neilwilson 3y ago
  You can look at it the other way around. At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return for mere promises. Where else are they going to sell that stuff? If they could get something concrete for it, they wouldn't be supplying it to us in return for promises. There isn't a magical source of untapped demand in the world that can absorb this output - or it would already be being supplied. Therefore the only practical option other than taking dollars and pounds is not to produce that sort of output at all. Which means unemployment in the producing countries, and an abandonment of the 'export led growth' belief. The UK is still the third largest net importer on earth. We lost our reserve currency status nearly a century ago. China is not yet ready to free up its capital account and float its currency. Therefore it cannot supply the promises the world demands.
cyclecount 3y ago
Maybe this will end in a more peaceful world order where the US no longer bombs and burns anyone who won't "open up" to their corporations, but they won't go down without a fight. The US will start WWIII before relinquishing their "exorbitant privilege". https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege
- actionfromafar 3y ago
  If this world order ends, you will instead see several local empires bomb and burn anyone within their sphere of influence. Say what you will of the Americans, they will always do the right thing, having explored all other options. I don't have any such hopes of the other powers-to-be waiting in the wings.
  - wunderland 3y ago
    The Americans will always do the right thing? That has not been true in my lifetime.
    - actionfromafar 3y ago
      Maybe you missed "having explored every other option". It's my tongue-in-cheek way of saying, as bad as the US can be, the difference against a Russian or Chinese lead world is so great, it's not even funny. We sure wouldn't be having conversations like this. I'd be silent, in re-education or dead and maybe you'd be happy with that. But you'd talk about different things on different forums, for sure.
      - WitCanStain 3y ago
        This relies on the assumption (possibly correct but I don't think definitively established) that a multi-polar world where e.g. China enjoys a similar status to the US would result in them imposing their own values on the world in a similar manner to how the US has done or deposing distant governments. So far China's interactions with the world outside its immediate vicinity (Taiwan, India, SCS countries) have largely been of an economic nature rather than the more bomb-dropping and CIA-flavoured approach the US has taken. So I don't think that the United States' relative loss of power necessarily means a worse world for those outside the US (again, excluding China's immediate neighbours).
blackbear_ 3y ago
For a contrarian take: https://www.economist.com/leaders/2023/04/27/the-power-and-the-limits-of-the-american-dollar https://www.economist.com/leaders/2023/04/27/the-power-and-t...
leroman 3y ago
Pretty sure that Israel, for example, is selling it's Dollar reserves due to the strong dollar, to control it's currency. Israel accumulated these reserves during when the NIS was strong to limit the opposite effect..
ur-whale 3y ago
> De-dollarization is happening at a ‘stunning’ pace And - knowing fully well that it is a highly unpopular on american-centric HN - I still claim that, if true, this would be a very, very good thing for the planet. Monopolies are bad. Period. Wherever they show up, they always spell trouble. If the USD monopoly goes the way of the dodo, and I most certainly hope that happens as soon as possible given how the US has been using the USD reserve currency status as a means of exerting all kinds of unwelcome political pressure around the world, the planet will be a much, much better place.
nologic01 3y ago
The graph shows also a sharp spike upwards in euro reserves (Europe participates in sanctions) so the story is (as always) more complex than what is convenient
- prox 3y ago
  There are also seems to be a wide push to show the Dollar is weaker, like a new concerted push to change the optics. Perhaps from nation states. Not saying it isn’t true news or happening, but I see a lot of chatter to push the narrative since it is, like you say, convenient for some.
- neatze 3y ago
  Changes in gold reserves are missing from chart too.
nova22033 3y ago
> Smaller nations are experimenting with de-dollarization while China and India are pushing to internationalize their currencies for trade settlement "Are pushing" doesn't mean anything..India is not even close to being a player. Also...India and China...members of the "get along with each other" club
- shp0ngle 3y ago
  India and China very recently had a skirmish on the Ladakh border...
  - edgyquant 3y ago
    That’s the joke
throwawaydirty 3y ago
As long as west welcomes the dirty money dollar doest loose it's power. Hundreds of billions in dirty money flow into the west every year it's like other countries are funding USA war machine
DoreenMichele 3y ago
On the upside, I guess this means the expected global repercussions should the US default on June first will likely be less dire than many expect. Though I imagine Americans would still be screwed.
avidphantasm 3y ago
One hopes that this article and the data behind it will be used in the ludicrous “negotiations” over the fake debt ceiling.
dicroce 3y ago
The Yuan becoming the world reserve currency would mean the Yuan had significant value outside of China... which would mean Chinese citizens could leave the country with their wealth, and China doesn't want that. What they want is the hurt the US, so propaganda that scares Americans and even causes financial havoc is valuable.
- naasking 3y ago
  > which would mean Chinese citizens could leave the country with their wealth You're just assuming that China would let people leave the country with their wealth. Are you forgetting that countries have control over their borders and how finances are handled?
  - mixdup 3y ago
    I think that is their point? That China wouldn't let that happen, meaning the Yuan is unlikely to become the world's new reserve currency?
    - naasking 3y ago
      I believe he's actually saying that Yuan becoming a reserve currency means increased risk of capital flight from China. China benefits if everyone outside of China is using the Yuan, and if they mitigate capital flight, there's no downside.
- lolinder 3y ago
  It sounds like you're already aware of this, but since there was a lot of speculation about the Yuan earlier: Note that while the chart Bloomberg used makes it look like the Yuan is poised to take over from the dollar, it's not. It's gone up... to 2.69%. This is how the currencies stacked up in Q4 2022 according to the IMF[0]: * the US dollar (58.36%) * the Euro (20.47%) * the Yen (5.51%) * the Pound (4.95%) * the sum of all currencies not in the top 8 (3.45%) * the Yuan/Renmibi (2.69%) * the Canadian dollar (2.38%) * the Australian dollar (1.96%) * the Swiss franc (0.26%) So it's not that the Yuan is becoming the world reserve currency, it's that countries are avoiding relying on a single reserve currency. The lesson from the Ukraine sanctions wasn't to avoid the dollar, it was that relying too much on any outside country's currency puts your sovereignty at risk, so they're diversifying. If you look at the chart in the link below, the gains from the dollar's loss are spread out pretty evenly. [0] https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa52159&hide_uv=1 https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa5215...
hahamaster 3y ago
https://en.wikipedia.org/wiki/Boiling_frog https://en.wikipedia.org/wiki/Boiling_frog
hackeraccount 3y ago
I don't think the the dollar's position as the reserve currency does the U.S. any favors. It seems to me it's a resource curse - like oil in the gulf states. Nominally sitting on all that oil is good for them but it also stops them from doing anything else - because nothing else will ever be as productive as pumping oil out of the ground. The U.S. on some level is literally making money. The consequences of making too much are felt by everyone in the world as opposed to just people in the U.S. If you can do that - why do anything else?
balderdash 3y ago
The perpetual hole in all these stories about the end of dollar hegemony in my mind comes down to alternatives - and there are no large scale alternatives (SGD.DKK.CHF etc are fine for me, but not global trade). People are going to feel safer in yuan, rupees, or real? Unlikely. If southern Europe gets its act together, or china trades autocracy for democracy and rule of law, then maybe the dollar has something to worry about.
- TexanFeller 3y ago
  Before there wasn't so much incentive to dedollarize, dollar hegemony worked Ok for most people, enough to accept it if only grudgingly. Now major players have large incentives to make it happen. When large incentives exist the market usually eventually finds a way to happen. Now that we have used out financial system as a weapon(Russia) states may see it as a national defense(aka military capability) issue. After we've let inflation run rampant there may be less confidence in our currency, though admittedly many other countries are in the same inflationary boat.
  - balderdash 3y ago
    I don’t disagree with the desire/demand statement - but again who’s is going to step into that gap, that can run large trade deficits, has the deep financial/borrowing markets to fund those deficits, has rule of law etc.? China? Nope. Europe I guess - but doesn’t really offer any advantages over the dollar, who else? No one…
IAmGraydon 3y ago
If you're interesting in learning why this narrative is completely fabricated, look no further than this video. Yes, I absolutely hate linking to YouTube, but this is Patrick Boyle, and if you know anything about him, you know that he knows what he's talking about: https://www.youtube.com/watch?v=JHZnVdBZJfA https://www.youtube.com/watch?v=JHZnVdBZJfA My question is why is the narrative being fabricated in the first place. Certainly the governments of Russia and specially China understand that they could never be the world reserve currency. Is it just the media vying for clicks or something more insidious?
- konart 3y ago
  >Yes, I absolutely hate linking to YouTube Why? >but this is Patrick Boyle, and if you know anything about him I don't, maybe you should start your comment with some intoduction about him instead of "...hate linking to YouTube..."? >you know that he knows what he's talking about He obviously knows what he is talking about. Do you? >Russia and specially China understand that they could never be the world reserve currency Neither of them is trying to create new reserve currency (at least neither thing of ruble or yuan being the one). The 'narrative' is about using local currencies in trade between the parties instead of using USD.
intalentive 3y ago
1. The dollar will soon lose reserve currency status. 2. The dollar's dominance is waning. The first is unlikely, the second is inarguable. Bilateral trade agreements that sidestep the dollar are on the rise. If Saudi Arabia and China agree to settle oil trade in yuan, that will mark the end of the petrodollar.
ikiris 3y ago
Whelp, that's what happens when you set up repeated risk of massive currency issues via defaults in credit over and over and over again for political leverage to prevent poor people having more food stamps. I hope it was worth it.
stan_kirdey 3y ago
it is not good news for the only currency in the world that can generate wealth by issuing ... more currency. welp.
mensetmanusman 3y ago
This would be great for America. It’s drowning in wealth and dying of apathy.

289 points by andreygrehov 3y ago

It is quite plausible that bitcoin becomes the global reserve asset, just as gold was in the past. Bitcoin is superior to gold in every single aspect except for the number of years it has existed. To learn more: https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861 https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern...

arcticbull 3y ago
Gold was a terrible reserve asset which is why we stopped using it. Recreating all the same things that made it bad, and also removing industrial applications, doesn't a good reserve make. And any book with a [edit](foreword) by Michael Saylor, the man whose fraud basically popped the 2001 tech bubble isn't worth the paper it's printed on. The man should have at the time been banned from running any publicly traded company. [1] [edit] What's next, a medical ethics book by Elizabeth Holmes with a [edit](foreword) by Martin Shkrelli? [1] https://www.computerworld.com/article/2589923/update--microstrategy-executives-to-pay--11-million-to-settle-sec-fraud-ch.html https://www.computerworld.com/article/2589923/update--micros...
- monero-xmr 3y ago
  Gold was great, except the difficulty storing, transporting, and conducting commerce in it meant centralized institutions (the Bank of England) monopolized its storage out of convenience for international trade. Seizures, debasement, and so on until the gold standard ended. Biggest mistake ever made, but luckily bitcoin exists now.
  - awb 3y ago
    It was amazing for countries rich with it. But not great for countries without it, or for undeveloped countries with it that couldn’t defend it.
    - robocat 3y ago
      Oil would make a far better base than gold, for a bunch of good reasons. Not that it would be good, because it has a bunch of obvious problems, many of which would occur with gold too. Of course many commodities are used instead of currency by blocked countries. As are cryptocurrencies.
- hackernewds 3y ago
  TIL. I did not know this about M Saylor. Thank you for sharing it. Also I think you meant to write "foreword"
  - arcticbull 3y ago
    Yeah, haha, I did. macOS autocorrect keeps changing one for the other out from under me. Thanks for catching it.
Gustomaximus 3y ago
Would not gold have the superior aspect it has actual use behind its value? Obviously the store of value part pushes up price, but there is also a big need for gold in electronics and jewellery etc. Bitcoin at the moment is largely speculation and has little use beyond that currently, though has potential to become an active currency of significance, we are yet to see that.
- gotorazor 3y ago
  There is very little use for gold in electronics. In jewellry, yes. But that's only because people in developing world see their jewellry as a form of savings. Those are the same contries where the people don't buy jewellry lower than 18k. Nobody in North America or Europe knows how to get the fair value of gold in the crappy 14k necklaces. USD is useful because it is a meaning unit of exchange.
- roenxi 3y ago
  Not really; because the price of gold tends to the marginal cost to produce. If a marginal producer can generate a kilo of gold for $60k, then gold is worth around $60k/kilo. Its uses or lack thereof are not that important. If all the uses of gold went away magically, it'd be worth less for various reasons but still a similar order of magnitude.
postalrat 3y ago
We will probably have the math in a few years to defeat the crypto in Bitcoin. Then it's RIP Bitcoin.

markdown 3y ago

Great news. It's really unhealthy for the global economy to be so dependant on one currency. Hopefully we see the Euro and Indian Rupee grow in prominence.

smitty1e 3y ago
I submit that the single currency is less an issue than the DranO-snorting antics of the U.S. Congress.
- markdown 3y ago
  Over a long enough time period, every government pulls "drano-snorting antics". Ergo if you want stability, you have to diversify.
rank0 3y ago
Why would you want the euro to grow in prominence? The euro is an extremely young currency which lost almost 1/3 of its value against the USD over the past two years. …at a time when the dollar saw the worst inflation in 40 years!
- olddustytrail 3y ago
  When the Euro was introduced, it was set to be about the same value as $1. It's currently at $1.10 so it's actually stronger vs USD than it was initially.
- The_Colonel 3y ago
  > which lost almost 1/3 of its value against the USD over the past two years Two years ago on this day the exchange rate was ~1.2 USD per 1 EUR, today it is ~1.1, so the loss is ~9%. The current exchange rate is nothing extraordinary, and has been hit many times in the past years/decades.
  - rank0 3y ago
    I stand corrected. I had my dates wrong. And had not realized the recent gains the euro has made after reaching 1:1 parity. My main point still stands though. Take a look at the historic volatility: https://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart https://www.macrotrends.net/2548/euro-dollar-exchange-rate-h... The exchange rate ~2010 hovered around 1.5 and recent dipped as low as 1:1 party. Compare that to something like the Swiss franc which has actually appreciated against the dollar over the same period and has a much longer history: https://www.macrotrends.net/2558/us-dollar-swiss-franc-exchange-rate-historical-chart https://www.macrotrends.net/2558/us-dollar-swiss-franc-excha...

neximo64 3y ago

I sometimes feel startup founders would understand the issue with 'De dollarizing' the most. American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)). Looking at it from a strategy or top level point of view of course it looks like dollars are dominant, but from a customer point of view - and the US trade deficit its easy to see why: You have a customer base that is profitable, and a large amount of them. Far more than any other country. It is just very hard to get an alternative to an American consumer. The poor rate of savings, the spending of more than you have, etc results in a pretty good deal for the person on the other side and the manifestation of it is in the accumulated dollar capital

ElectricalUnion 3y ago
> American customers tend to be the best, pay the most so of course the customer base is largest in dollar terms (as opposed to say Euros, or Yuan (practically non-existent customer/consumer base)). It depends on where you are established or what markets are you serving. Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible. So if you plan on going real big and disruptive, possibly like Huawei was, going for the US market domination doesn't seem like the best idea.
- 908B64B197 3y ago
  > Let's suppose you're a foreign country hitech company like Huawei, in that case, when you start disrupting US markets and US incumbents, you instead are disrupted yourself, so the US market as "valuable as it might be" ends up being worse that worthless, the reason "why your company is sanctioned" and inaccessible. All you have to do is not be a foreign state-controlled company and not try to circumvent sanctions to known bad actors. Case point: Ericsson and Siemens have no issue selling in America.
maroonblazer 3y ago

mariojv 3y ago

I was a little curious how this compares to the use of USD during the Cold War, before USSR collapse, but it's hard to compare since so much of that period was under the Bretton Woods system. A long term historical perspective to the potential consequences of de-dollarization would be an interesting read.

than3 3y ago
There's a lot of garbage out there about de-dollarization. MMT for example, magical monetary thinking is more appropriate since it lacks any rationality or understanding of the fundamentals of who sets prices for produced goods.
- jjtheblunt 3y ago
  Is that what Paul Krugman in the NYT opinions section touts (and got a Nobel prize in economics for)?
  - Afforess 3y ago
    No... What led you to believe that was the case? You're way, way off. https://www.nobelprize.org/prizes/economic-sciences/2008/krugman/facts/ https://www.nobelprize.org/prizes/economic-sciences/2008/kru...
    - bediger4000 3y ago
      Krugman was a lightning rod from 2000 on, like Fauci is today. The Denver Post ran Krugman in the business section, and offered a special on line place for businessmen to sound off against him. Quite hilarious.
    - jjtheblunt 3y ago
      I didn't believe it was the case: i was asking because I didn't know. (And, thanks for the link. interesting stuff.)

erulabs 3y ago

Curious if others are familiar with the “dollar milkshake theory” - this seems to be the first sign of it being a miscalculation. Alternatively, this rate of dedollarization may have been calculated by the fed ahead of time. I’d love to know how far off prediction this 10x acceleration is.

awaythrow483 3y ago
I'm not supporting or attacking the dollar milkshake theory but I don't think this contradicts it. I think the theory would say that this will counterintuitively result in an eventual huge dollar spike as new dollar demand but also liquidity dry up while existing demand from existing USD loans stay constant. I think it's too early to tell. I don't believe in his USD superspike but I do think the underlying dynamic is real and this will not result in the dollar being substantially lower in the let's say 1-3 year time frame (ie DXY < 90)

paulpauper 3y ago

Meh. It looks like De-Dollarization is yet another 'current thing' or meme. It begins by smaller social media accounts and outlets coining a neologism, which goes viral and picked up by big media even if there is no evidence to back it. It then keeps spreading until public loses interest or replaced. There is no evidence to suggest this is happening. Look how much the Turkish Lira has fallen for example. The US dollar index is still close to 10-year highs. Look how poorly 'dollar alternatives' such as Bitcoin have performed recently. Or the Yen. For perspective, not much has changed: https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/chart%201_4.png https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/... or here https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-dominance-blog.jpg https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d... A small uptick of dollar alternatives

user_named 3y ago
Read the article. It is happening.
sneak 3y ago
https://www.epsilontheory.com/dedollarization-is-not-a-thing/ https://www.epsilontheory.com/dedollarization-is-not-a-thing...

matthewaveryusa 3y ago

How do you hedge against this if you think the Yuan will be the dominant currency? Investing in chinese stocks is obviously very risky as you can only hold VIEs and ADRs which either the SEC or the PRC could end at a moments notice. edit: My current viewpoint is the s&p500 is enough of a hedge given that these companies are multinationals trading in many currencies already -- I'm often wrong though :)

marlor 3y ago
I’m sure the Yuan will increase somewhat as a reserve currency, but I’m skeptical it will become dominant. China has systemic issues at the moment, with a working-age population that peaked some time ago and a property market that is perpetually on the verge of implosion. There are mounting pressures in domestic consumers, and an increasing move towards “dual circulation” (with a focus on the domestic part of that duality). Then there’s the risk of a miscalculation in the East China or South China seas. Given that CNY trades in a tight, centrally-managed range against the USD (it’s almost always between 6-7 CNY to the dollar, and only briefly traded outside that during the pandemic), I’m not sure there’s a big incentive to use CNY as a hedge against USD.
Gustomaximus 3y ago
I think the hedge is more about not being too USD centric. I wouldn't bet on any one currency too heavily. China has its own set of problems. My guess is more likely we'll see more diverse currency in trade relevant to the trading countries. Broader, IMO I think the USD is walking dead. I don't know when, but fundamentally you have a government debt no-one expects to be paid back, and growing quite rapidly. I respect most people would say otherwise and I'm often wrong, but I don't see how this ends with anything other than default, which will be preceeded by money printing most likely. The US is a huge and dynamic economy, so maybe they will prove this view wrong, or more likely drag things out for a long time, but humans being humans, at the first sign people start feeling they might not get their monies worth from USD, the response will be rapid as people try to protect their worth. This de-dollarisation seems part of the process and given Ukraine/Taiwan tensions no doubt is a strong drive from other nations. But off tangent but generally I would go with diversified vs focus on one alternative. Personally I went 15% cash and gold each from my shares a couple months back... Time will tell if I'm right or miss the next bull moment.

wins32767 3y ago

Alternate explanation: there is a massive dollar shortage globally due to US based and Eurodollar banks being unable/unwilling to lend and dollars are preferentially being spent to import important goods because what else are people going to take?

xuki 3y ago
DXY is at the bottom of 52 week range does not support this.
- IAmGraydon 3y ago
  A hilarious take given the DXY is up almost 50% in the last 10 years. By all means, keep picking those cherries, though.
- rybosworld 3y ago
  There is no way to to use DXY as a barometer for/against de-dollarization. This is equivalent to "there was abnormal amount of snow last week so global warming must not be real"
Proven 3y ago
[dead]

sheeshkebab 3y ago

DX short funds spreading fud?

paulpauper 3y ago
agree. for perspective, not much has changed: https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/chart%201_4.png https://www.schwab.com/learn/sites/g/files/eyrktu1246/files/... or here https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-dominance-blog.jpg https://www.imf.org/wp-content/uploads/2022/06/COTW-dollar-d... The headline is technically correct just exaggerated https://upload.wikimedia.org/wikipedia/commons/a/a7/Global_Reserve_Currencies.png https://upload.wikimedia.org/wikipedia/commons/a/a7/Global_R...

tiahura 3y ago

https://www.macrotrends.net/1329/us-dollar-index-historical-chart https://www.macrotrends.net/1329/us-dollar-index-historical-...

skybrian 3y ago

This is about market share in central bank foreign reserves, but a lot of context is missing. Which central bank reserves changed? It wouldn’t be surprising if this were mostly China.

safog 3y ago
There was also a lot of propping up of currencies that happened due to dollar strength. A lot of central banks sold UST they held for their local currency to stop currency free fall as rates rose. This is a symptom of rates rising really quickly in the US than any de-dollarization I'd wager.

IAmGraydon 3y ago

This article frames it starting in 2001 for a reason. Go back to 1990 and you will see that the USD only made up about 45% of reserves. It can change quickly.

anonporridge 3y ago
And it was 85% in the 70s. https://en.wikipedia.org/wiki/Reserve_currency https://en.wikipedia.org/wiki/Reserve_currency
- JumpCrisscross 3y ago
  Reserves aren’t as useful a metric as they are in the age of Bretton-Woods.
riffraff 3y ago
Also 2001 is the year euro got introduced. The article is trying to imply the USD lost weight compared to renminbi/won but that has been very very marginal.
- lodovic 3y ago
  Indeed, this seems more like a propaganda piece than actual research.

neom 3y ago

My absolute favorite youtube finance person, Patrick Boyle, did a very interesting video about de-dollarization and brics recently, cannot recommend it (and Patrick) enough! https://www.youtube.com/watch?v=JHZnVdBZJfA https://www.youtube.com/watch?v=JHZnVdBZJfA

baryphonic 3y ago
His points about capital flows and that the US is always willing to run deficits to stabilize global markets are really underrated. Also interesting: de-dollarization may benefit the US by increasing domestic growth and investment.
- throwaway4good 3y ago
  I find the idea that the US' willingness to run deficits is an uniquely American thing very curious. To me it is obvious that any country in the world would do systematic deficits if they could do it without tanking the value of their currency.
  - uoaei 3y ago
    The budget deficit represents the monetary value of everything the government spends money on (e.g., places, programs, assets, investments, etc.).
    - throwaway4good 3y ago
      I was referring to trade deficits.
      - uoaei 3y ago
        And I was not. The statement holds for both anyway, in cases of hegemonic, sovereign, fiat currencies.
  - nomay 3y ago
    Then thay are better off doing it their own currency, so they don‘t even have to pay back.

ajross 3y ago

This is a really weird article. It's 100% sourced from one "note" written by some guy at Eurizon, with no alternative perspectives given or seemingly even requested from anyone. (Especially weird given that economists love to talk!) And the perspective being pushed isn't just the fact of the reserve decline, but specifically that is being driven by sanctions on Russia, which seems like a huge, huge reach to push without analysis or rebuttal. This has the smell of a deliberate hit piece, basically.

gotorazor 3y ago
It's trash. Sanction on Russia might have affected the dollar as a reserve currency. But, the author is using 2001 to compare the relative decline. Russian sanctions didn't begin until 2014 and didn't serious until last year.

perfecthjrjth 3y ago

It is good for the developing world, as producers/exporters subsidize countries with reserve currencies. That's why inflation in countries with reserve currencies is always a way lower than other counties. MMT claims that one can swap "printed money" with real products (such as cars, commodities, food, clothes). This kind of swapping is possible for the US, EU, UK (Mostly the Western world and Japan). Who wants to swap million barrels of oil to Zimbabwian dollars.

awestroke 3y ago
How is USD better than Zimbabwean dollars after the US federal reserve has quadrupled the amount of dollars in less than a year and then claimed only single digit inflation? EDIT: I love how nobody replying is addressing my actual point
- xboxnolifes 3y ago
  The Zimbabwean dollar had MONTHLY inflation rates reaching 79,000,000,000%.
  - Xylakant 3y ago
    Fun story: There was an advertising campaign for a Zimbabwean newspaper with posters and handouts printed entirely on Zimbabwean dollar bank notes https://en.m.wikipedia.org/wiki/The_Trillion_Dollar_Campaign https://en.m.wikipedia.org/wiki/The_Trillion_Dollar_Campaign
- baq 3y ago
  Nobody wants to get paid in Zimbabwean dollar.
- deleted 3y ago
  [deleted]
- wiseowise 3y ago
  > How is USD better than Zimbabwean dollars It’s backed by the most powerful nation in the world.

TechBro8615 3y ago

Did I predict this [0] a year ago?: > More likely, the SWIFT sanctions will prove a mistake for "the West," when it realizes the downstream effects of cutting off Russia from the dominant payment network of the global reserve currency. Russian banks have already started offering accounts in yuan. This will lead to further balkanization (unfortunate pun notwithstanding) of world reserve currencies, which means increased decentralization and a reduced dependency on the dollar. Eventually the world will naturally diversify their reserve holdings to the point that the dollar loses its power as leverage in diplomatic negotiations. [0] https://news.ycombinator.com/item?id=30633595 https://news.ycombinator.com/item?id=30633595

anonporridge 3y ago
Tons of people predicted this when sanctions hit.
- XorNot 3y ago
  And they're still not right, just like they weren't right in 2010, 2000, 1990, 1980... The idea of the decline of the US as a reserve currency has been "about to happen" for me entire life, and yet another cherry-picked graph won't make it more likely.
  - user_named 3y ago
    Yes, they're right.
  - jliptzin 3y ago
    Same thing with gold. Apparently I needed to be buying gold since before I was born and every year since because hyperinflation is always right around the corner.
    - eska 3y ago
      Gold went up a lot though

NicoJuicy 3y ago

Countries aligning with Yuan just seem stupid, if there are actually countries doing that except Russia ( ain't going well for them either). Except if you want no transparency and want to be bullied around. None of china's neighbors even trust them, I sure of hell wouldn't ( perhaps Vietnam, who gets a lot of china's sanctioned businesses). Note : I'm Belgian, not American.

jimbob45 3y ago
Yeah, I'm skeptical that the world has forgotten overnight that China is the posterchild of currency manipulation. I'm also skeptical that Russia's economy isn't entirely smoke and mirrors at this point.
anonporridge 3y ago
A lot of countries don't trust the US either or like getting bullied by it.
- NicoJuicy 3y ago
  Which countries are bullied? Are they neighbors too like with China?
  - gdy 3y ago
    Cuba comes first to my mind. Here is a good list involving dozens of countries: https://en.m.wikipedia.org/wiki/United_States_involvement_in_regime_change https://en.m.wikipedia.org/wiki/United_States_involvement_in...
    - NicoJuicy 3y ago
      Cuba? The ones that placed nuclear missles during the cold war? Sure, I can see why relationship deterred further... since 1961 :) PS. Regime changes isn't what I'm saying, you're changing the subject. Which countries are bullied now? Not 80 years ago. All neighboors of China NOW are being bullied. I'm from Belgium and there's also something to say about something similar in our history, because of 1 king we had...

lettergram 3y ago

People should familiarize themselves with Eurodollars: https://m.youtube.com/watch?v=ye8dbEmBimg&pp=ygUKRXVyb2RvbGxhcg%3D%3D https://m.youtube.com/watch?v=ye8dbEmBimg&pp=ygUKRXVyb2RvbGx... Effectively, banks not in the US denote debt in dollars. The “dollars” in circulation outside the US is massively larger than the domestic supply. “de-dollarization” is not going to happen any time soon, really. They aren’t even true “dollars”, no money or assets move. They’re completely created outside the US.

gotorazor 3y ago

For anyone who actually read the article, a bit context. 2001 was around when the Euro began circulating as a real curreny.

lolinder 3y ago

That chart is... bad. I'm not sure if there's a legitimate reason to represent the data as "percent change from Q2 2004" or if it was done intentionally to make the comparison to other currencies look worse. I don't have access to look at the data in more detail because the only way to view the full report[0] is to email Eurizon SLJ Capital. I pulled the data from the IMF for a better chart that shows how the currencies actually relate to each other [1]. Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency. [0] https://www.eurizonsljcapital.com/dollar-smile/rapid-erosion-of-usd-dominance-as-a-reserve-currency/ https://www.eurizonsljcapital.com/dollar-smile/rapid-erosion... [1] It's a bit slow to load, but here's the link: https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa52159&hide_uv=1 https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa5215...

0xDEF 3y ago
>Yes, there's been a substantial decline in the use of the dollar, but that's not because some other currency is shooting up to take its place. It looks like countries are diversifying their portfolios, not fleeing the dollar for another currency. The bulk of the "diversifying their portfolios" is being done by China. The de-dollarization happening in other countries is a rounding error. Generally it is misleading to talk about the rise of "BRICS" and the "Global South". In most contexts it is only China that is relevant and the other countries are rounding errors.
- thriftwy 3y ago
  Russia has a good incentive to dedollarize now. It's actually harder for China because holding Yuan is not an option for them.
- generic92034 3y ago
  And I think it is misleading to treat a country like India, with the 5th highest GDP in the world, as rounding error.

neonate 3y ago

https://archive.ph/C8Qd3 https://archive.ph/C8Qd3

ggm 3y ago

When you can't intermediate in dollars (sanctions) you don't intermediate in dollars. Sometimes, you want the explosives or oil more than you care about price. The question really is, what % of world economy will be de-dollarised in 25 years time, assuming sanctions at scale end in 25 years (they haven't for Iran. Uk and Us still hold bank assets and have unfullfilled but fully paid up weapons orders on the books from the 1970s.) I would be surprised if there isn't a significant grey market at world scale in goods transfer which simply isn't denominated at all -The "fictional" value of drugs for instance, is almost meaningless when randomly 75% of your supply chain is lost at sea. "street price" is whatever you can get. How much it's "worth" would demand somebody does realistic pricing against the % of drug supply which even resembles what it's called. Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Does Russia really care what currency its denominated in, if it gets a truckload of SAM missile parts? If you were supplying goods and services to a narco-economy, what currency do you really want anyway? You can buy goods and services with drugs. Why bother with money?

wkat4242 3y ago
> Right now, because Sanctions, Iranian and Russian Oil might as well be cocaine. Not really. Trade continues at a lower pace. Many countries "launder" the origin of Russian oil. And the western world turns a blind eye because of economic interests. https://www.forbes.com/sites/jeffmcmahon/2023/04/18/these-five-countries-are-laundering-russian-oil-study-says-and-selling-it-to-the-west/ https://www.forbes.com/sites/jeffmcmahon/2023/04/18/these-fi...

RC_ITR 3y ago

Just to be clear, there’s a reason this chart cuts off in mid 2022. What the authors are doing is saying “well the dollar is stronger vs. other currencies. Let’s equate that with those other currencies being worth more in our hypothetical baseline.” This is a bad analysis because 1) exchange rates aren’t like inflation. They move in random directions, so “correcting” the way they did is sort of nonsensical (if they extended the analysis to now, the US would be rapidly gaining share as the currency weak waned) 2) Currencies change value due to supply and demand. The dollar became strong because demand increased, but in this model that causes the dollar to lose share. 3) Add Argentinian pesos to this list and it’s the worlds true reserve currency.

gigatexal 3y ago

Competition in the currency space is good just as it’s good for tech to have competition. But what it means — if the dollar really is waning in influence — it means tough time for the soft power that the US and it’s banking system is able to exert on other nations without firing a single round.

bsaul 3y ago

Wonder how far the US is ready to go to keep that tool functioning. Will we soon see it sabotage the EUR ? USD is such a fundamental leverage for the us diplomacy, i don’t think they’ll let it go without a fight. The end of USD hegemony would also probably mean the greatest economy crash since the 1920s…

PKop 3y ago
Soon? It's already been happening. This a main thrust of opposition to Nord Stream, as the Euro was essentially a "petro"-Euro for cheap Russian gas that Europeans had control of. Also, Saddam Hussein switched to the Euro for his oil exports in 2000. Then later the US invaded and switched it back to the $. Low-key maneuvering against the Euro has been ongoing for years.

tempestn 3y ago

If this continues, couldn't it represent a significant problem for the US? Not just in terms of ability to throw its weight around due to being the world's currency, but more concretely. The US operates with a persistent trade deficit; it can get away with this long-term because there's a constant demand for USD, and countries are happy to stockpile them and hold US Treasuries as foreign reserves. But if it loses that reserve currency status, ISTM that significant devaluation of the currency could follow, as the holders of those foreign reserves look to divest. And the only way to ultimately draw them down would be to reverse the trade deficit, which is currently running at ~$1T I believe. Of course, significant devaluation of the currency would help with that, but I expect it wouldn't be fun. I'm far from an expert though, so am probably over-simplifying. I guess it's likely this would all happen slowly enough as to not be too disruptive.

wonnage 3y ago
The deficit is an outcome of reserve currency status. The dollars everyone is using to trade have to come from somewhere, and mathematically that means dollars leaving the US. Alternatively, the value of the dollar increases due to demand, increasing the cost of US exports while making imports cheaper, which again exacerbates a deficit.
neilwilson 3y ago
You can look at it the other way around. At present the rest of the world generates a surplus of real stuff and supplies it to Net deficit countries in return for mere promises. Where else are they going to sell that stuff? If they could get something concrete for it, they wouldn't be supplying it to us in return for promises. There isn't a magical source of untapped demand in the world that can absorb this output - or it would already be being supplied. Therefore the only practical option other than taking dollars and pounds is not to produce that sort of output at all. Which means unemployment in the producing countries, and an abandonment of the 'export led growth' belief. The UK is still the third largest net importer on earth. We lost our reserve currency status nearly a century ago. China is not yet ready to free up its capital account and float its currency. Therefore it cannot supply the promises the world demands.

cyclecount 3y ago

Maybe this will end in a more peaceful world order where the US no longer bombs and burns anyone who won't "open up" to their corporations, but they won't go down without a fight. The US will start WWIII before relinquishing their "exorbitant privilege". https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege

actionfromafar 3y ago
If this world order ends, you will instead see several local empires bomb and burn anyone within their sphere of influence. Say what you will of the Americans, they will always do the right thing, having explored all other options. I don't have any such hopes of the other powers-to-be waiting in the wings.
- wunderland 3y ago
  The Americans will always do the right thing? That has not been true in my lifetime.
  - actionfromafar 3y ago
    Maybe you missed "having explored every other option". It's my tongue-in-cheek way of saying, as bad as the US can be, the difference against a Russian or Chinese lead world is so great, it's not even funny. We sure wouldn't be having conversations like this. I'd be silent, in re-education or dead and maybe you'd be happy with that. But you'd talk about different things on different forums, for sure.
    - WitCanStain 3y ago
      This relies on the assumption (possibly correct but I don't think definitively established) that a multi-polar world where e.g. China enjoys a similar status to the US would result in them imposing their own values on the world in a similar manner to how the US has done or deposing distant governments. So far China's interactions with the world outside its immediate vicinity (Taiwan, India, SCS countries) have largely been of an economic nature rather than the more bomb-dropping and CIA-flavoured approach the US has taken. So I don't think that the United States' relative loss of power necessarily means a worse world for those outside the US (again, excluding China's immediate neighbours).

blackbear_ 3y ago

For a contrarian take: https://www.economist.com/leaders/2023/04/27/the-power-and-the-limits-of-the-american-dollar https://www.economist.com/leaders/2023/04/27/the-power-and-t...

leroman 3y ago

Pretty sure that Israel, for example, is selling it's Dollar reserves due to the strong dollar, to control it's currency. Israel accumulated these reserves during when the NIS was strong to limit the opposite effect..

ur-whale 3y ago

> De-dollarization is happening at a ‘stunning’ pace And - knowing fully well that it is a highly unpopular on american-centric HN - I still claim that, if true, this would be a very, very good thing for the planet. Monopolies are bad. Period. Wherever they show up, they always spell trouble. If the USD monopoly goes the way of the dodo, and I most certainly hope that happens as soon as possible given how the US has been using the USD reserve currency status as a means of exerting all kinds of unwelcome political pressure around the world, the planet will be a much, much better place.

nologic01 3y ago

The graph shows also a sharp spike upwards in euro reserves (Europe participates in sanctions) so the story is (as always) more complex than what is convenient

prox 3y ago
There are also seems to be a wide push to show the Dollar is weaker, like a new concerted push to change the optics. Perhaps from nation states. Not saying it isn’t true news or happening, but I see a lot of chatter to push the narrative since it is, like you say, convenient for some.
neatze 3y ago
Changes in gold reserves are missing from chart too.

nova22033 3y ago

> Smaller nations are experimenting with de-dollarization while China and India are pushing to internationalize their currencies for trade settlement "Are pushing" doesn't mean anything..India is not even close to being a player. Also...India and China...members of the "get along with each other" club

shp0ngle 3y ago
India and China very recently had a skirmish on the Ladakh border...
- edgyquant 3y ago
  That’s the joke

throwawaydirty 3y ago

As long as west welcomes the dirty money dollar doest loose it's power. Hundreds of billions in dirty money flow into the west every year it's like other countries are funding USA war machine

DoreenMichele 3y ago

On the upside, I guess this means the expected global repercussions should the US default on June first will likely be less dire than many expect. Though I imagine Americans would still be screwed.

avidphantasm 3y ago

One hopes that this article and the data behind it will be used in the ludicrous “negotiations” over the fake debt ceiling.

dicroce 3y ago

The Yuan becoming the world reserve currency would mean the Yuan had significant value outside of China... which would mean Chinese citizens could leave the country with their wealth, and China doesn't want that. What they want is the hurt the US, so propaganda that scares Americans and even causes financial havoc is valuable.

naasking 3y ago
> which would mean Chinese citizens could leave the country with their wealth You're just assuming that China would let people leave the country with their wealth. Are you forgetting that countries have control over their borders and how finances are handled?
- mixdup 3y ago
  I think that is their point? That China wouldn't let that happen, meaning the Yuan is unlikely to become the world's new reserve currency?
  - naasking 3y ago
    I believe he's actually saying that Yuan becoming a reserve currency means increased risk of capital flight from China. China benefits if everyone outside of China is using the Yuan, and if they mitigate capital flight, there's no downside.
lolinder 3y ago
It sounds like you're already aware of this, but since there was a lot of speculation about the Yuan earlier: Note that while the chart Bloomberg used makes it look like the Yuan is poised to take over from the dollar, it's not. It's gone up... to 2.69%. This is how the currencies stacked up in Q4 2022 according to the IMF[0]: * the US dollar (58.36%) * the Euro (20.47%) * the Yen (5.51%) * the Pound (4.95%) * the sum of all currencies not in the top 8 (3.45%) * the Yuan/Renmibi (2.69%) * the Canadian dollar (2.38%) * the Australian dollar (1.96%) * the Swiss franc (0.26%) So it's not that the Yuan is becoming the world reserve currency, it's that countries are avoiding relying on a single reserve currency. The lesson from the Ukraine sanctions wasn't to avoid the dollar, it was that relying too much on any outside country's currency puts your sovereignty at risk, so they're diversifying. If you look at the chart in the link below, the gains from the dollar's loss are spread out pretty evenly. [0] https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa52159&hide_uv=1 https://data.imf.org/?sk=c22e624f-ce09-4c9e-a70b-647defa5215...

hahamaster 3y ago

https://en.wikipedia.org/wiki/Boiling_frog https://en.wikipedia.org/wiki/Boiling_frog

hackeraccount 3y ago

I don't think the the dollar's position as the reserve currency does the U.S. any favors. It seems to me it's a resource curse - like oil in the gulf states. Nominally sitting on all that oil is good for them but it also stops them from doing anything else - because nothing else will ever be as productive as pumping oil out of the ground. The U.S. on some level is literally making money. The consequences of making too much are felt by everyone in the world as opposed to just people in the U.S. If you can do that - why do anything else?

balderdash 3y ago

The perpetual hole in all these stories about the end of dollar hegemony in my mind comes down to alternatives - and there are no large scale alternatives (SGD.DKK.CHF etc are fine for me, but not global trade). People are going to feel safer in yuan, rupees, or real? Unlikely. If southern Europe gets its act together, or china trades autocracy for democracy and rule of law, then maybe the dollar has something to worry about.

TexanFeller 3y ago
Before there wasn't so much incentive to dedollarize, dollar hegemony worked Ok for most people, enough to accept it if only grudgingly. Now major players have large incentives to make it happen. When large incentives exist the market usually eventually finds a way to happen. Now that we have used out financial system as a weapon(Russia) states may see it as a national defense(aka military capability) issue. After we've let inflation run rampant there may be less confidence in our currency, though admittedly many other countries are in the same inflationary boat.
- balderdash 3y ago
  I don’t disagree with the desire/demand statement - but again who’s is going to step into that gap, that can run large trade deficits, has the deep financial/borrowing markets to fund those deficits, has rule of law etc.? China? Nope. Europe I guess - but doesn’t really offer any advantages over the dollar, who else? No one…

IAmGraydon 3y ago

If you're interesting in learning why this narrative is completely fabricated, look no further than this video. Yes, I absolutely hate linking to YouTube, but this is Patrick Boyle, and if you know anything about him, you know that he knows what he's talking about: https://www.youtube.com/watch?v=JHZnVdBZJfA https://www.youtube.com/watch?v=JHZnVdBZJfA My question is why is the narrative being fabricated in the first place. Certainly the governments of Russia and specially China understand that they could never be the world reserve currency. Is it just the media vying for clicks or something more insidious?

konart 3y ago
>Yes, I absolutely hate linking to YouTube Why? >but this is Patrick Boyle, and if you know anything about him I don't, maybe you should start your comment with some intoduction about him instead of "...hate linking to YouTube..."? >you know that he knows what he's talking about He obviously knows what he is talking about. Do you? >Russia and specially China understand that they could never be the world reserve currency Neither of them is trying to create new reserve currency (at least neither thing of ruble or yuan being the one). The 'narrative' is about using local currencies in trade between the parties instead of using USD.

intalentive 3y ago

1. The dollar will soon lose reserve currency status. 2. The dollar's dominance is waning. The first is unlikely, the second is inarguable. Bilateral trade agreements that sidestep the dollar are on the rise. If Saudi Arabia and China agree to settle oil trade in yuan, that will mark the end of the petrodollar.

ikiris 3y ago

Whelp, that's what happens when you set up repeated risk of massive currency issues via defaults in credit over and over and over again for political leverage to prevent poor people having more food stamps. I hope it was worth it.

stan_kirdey 3y ago

it is not good news for the only currency in the world that can generate wealth by issuing ... more currency. welp.

mensetmanusman 3y ago

This would be great for America. It’s drowning in wealth and dying of apathy.