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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

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
Right. As I understand it, the U.S. is the largest consumptive economy, which necessarily means that, eventually, whatever you're selling needs to involve the exchange of dollars. And if the global demographic trends play out, that's not changing for a very, very long time. So why the sudden surfeit of articles suggesting the dollar-as-reserve is at risk is beyond me.
- neximo64 3y ago
  I believe the sudden dollar articles are showing up because of the Russian war and sanctions and a weaker us dollar. Even if the demographics changes play out the issue is the growing economies are consuming out of investment and not capital, and do not run trade deficits (so the other party doesn't have Yuan saved up for example). So there is nothing to reinvest. Almost every country China trades with has a trade surplus with China. Which means everyone is buying from China and they don't save up Yuan, but save up the other countries currency.
- senectus1 3y ago
  Back in the day (like 10 years ago I think) I was speaking with an exec at the company i work for that had just come back from a business trip to China. He told me an amazing fact that still amazes me. The two biggest customers of china's exports are (explicitly in the following order): Walmart The United states of America... *in that order*
hackernewds 3y ago
Hence why looking at it in terms of total $ is an imbalanced metric, we need to look at how many units of trade / txns are conducted instead given the disparity in Purchasing Power Parity. To illustrate one potent example - Bollywood is magnitudes larger of a movie industry (even adjusted for population), however the collections in $ vs ticket sales paints a very different picture.
- neximo64 3y ago
  Yes this is accounted for, even if you separated them all out and counted the prices people are willing to pay for from each country, the US still comes out ontop because of the consumer culture there. The issue with Bollywood for example not being larger than Hollywood despite more films and possibly a larger view base is the price of North American tickets vs the cinema ticket prices in India for US films - even if they are made abroad that are sold to US consumers. So in aggregate the US consumer alone is quite significant in dollar (but not in individual people) terms vs everyone else. If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries.
  - shri_krishna 3y ago
    > If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries. Yes correct. And this is not a good thing even for US. Since the consumption economy in US is driven largely by debt, what will happen when there is a default (which seems very likely to happen soon considering how US banks are collapsing like dominoes)? Who is going to bail out the US economy? Sure you can bail out banks when there is a banking crisis and is localized to only the banking sector (like 2008). But what will you do when there is an economic crisis that affects everyone? That is the real issue here. US National debt is at an all time high and is not slowing down. QE is still on full swing. One day it is all going to come crashing down. With de-dollarization, the strength of the US economy shifts from being able to control international trade and also drive up its own internal debt to finance World economy (by providing much needed liquidity for international trade through its SWIFT systems) to only having to drive up its own internal debt to finance US economy (which has all the potential to lead to runaway inflation). This shift is going to happen in the coming decade or two and I hope US Citizens are aware and prepared for the fallout.
skybrian 3y ago
That’s not what the article is about. It’s about what central banks are doing.
user_named 3y ago
Lmao, the yuan-denominated market is non-existent?
- neximo64 3y ago
  If you had a startup and you sold things online (outside of China), you would not find many Chinese consumers or customers, even if you allowed Unionpay or Wechat. Sure there is a Yuan denominated market, but when it comes to consumption it is a kitten relative to China's size - because most Chinese consumers opt to not spend their money and save it instead - relative to an American consumer. And the outcome of that is in China you would on average have more savings than an American, but an American would have bought more things if everything else were equal. But on the Americans version of it those dollars they spent are saved up by the vendor and show up on stats vs everyone else and they are larger.
  - user_named 3y ago
    No, I absolutely would find an incredibly large amount of Chinese customers if they were my target market.
    - neximo64 3y ago
      Do you have an example of this, as quite nearly it is the experience of every Shopify seller or SaaS vendor. You can get Chinese customers, but they'll be local customers to your market (e.g selling in America, Australia, Europe, etc) but not from China where you ship there. There's a reason it is hard to fill container ships heading back to China.
      - user_named 3y ago
        Shopify sellers don't market do Chinese costumers. They don't understand how to and they don't speak Chinese.
        neximo64 3y ago
shri_krishna 3y ago
It has nothing to do with consumption demand. Countries have realized that US dollars is not a safe store of value (aka reserve currency) because of decisions taken by the US administration vis-a-vis its sanctions regime. It is not worth having your US dollars frozen and your entire Country beholden to the United States leaving you with zero options on the table (to trade with other countries) just because there are differences in opinions/ideology/politics. This is starkly evident when US has a different set of rules for itself (my way or the highway) vs rules it expects the World to follow (rules based order). This might have worked in the past when other Countries were technologically inept at building necessary infrastructure to connect banking systems and had to rely on SWIFT. However, this is no longer the case today. Most countries now have better home grown systems where transactions are settled instantly (instead of taking multiple days) and have realized that the same can be extended when it comes to inter-country (read it as bilateral) trade too. Instead of India holding USD in a US Bank and Russia holding USD in a US Bank, and using US Bank as an intermediary for any bilateral trade (giving a cut to US Bank as well as being at mercy of the US Government), India and Russia can bypass the middleman (US Bank) and trade directly: India holding Rubles in Russian Bank, while Russia holds INR in Indian Bank. There is no SWIFT being used anywhere in between. Totally avoids sanctions as well as removes the middle man from the equation. De-dollarization has nothing to do with US Dollars losing its value. It has more to do with the US Government losing its economic superpower status where it can control other countries through economic sanctions. Even after de-dollarization, USD might be the most sought after currency purely for its value and not for "fear of the US Government". There is no "perceived loss" for USD as such. But there is significant loss for the US Administration if it cannot use USD as a weapon against another Country. That's the point that is most important to realize. It is all about balancing power dynamics.
- neximo64 3y ago
  My argument is that the US dollars that are on these reserves only exist because consumers have spent them. The argument that this does not have anything to do with consumer demand is almost not understanding where these dollars come from. These reserves can only come from excess consumption. To have an alternative you need another country with the type of consumption the US has. So while your argument is correct about the rules and affect of sanctions it misses the point that the dollars are basically loans to America because the other country did not save them. Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong. It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place. If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else (the person you bought the Yuan/Rupees from) - until it is finally consumed. The issue is they never tend to be consumed. The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.

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

Right. As I understand it, the U.S. is the largest consumptive economy, which necessarily means that, eventually, whatever you're selling needs to involve the exchange of dollars. And if the global demographic trends play out, that's not changing for a very, very long time. So why the sudden surfeit of articles suggesting the dollar-as-reserve is at risk is beyond me.

neximo64 3y ago
I believe the sudden dollar articles are showing up because of the Russian war and sanctions and a weaker us dollar. Even if the demographics changes play out the issue is the growing economies are consuming out of investment and not capital, and do not run trade deficits (so the other party doesn't have Yuan saved up for example). So there is nothing to reinvest. Almost every country China trades with has a trade surplus with China. Which means everyone is buying from China and they don't save up Yuan, but save up the other countries currency.
senectus1 3y ago
Back in the day (like 10 years ago I think) I was speaking with an exec at the company i work for that had just come back from a business trip to China. He told me an amazing fact that still amazes me. The two biggest customers of china's exports are (explicitly in the following order): Walmart The United states of America... *in that order*

hackernewds 3y ago

Hence why looking at it in terms of total $ is an imbalanced metric, we need to look at how many units of trade / txns are conducted instead given the disparity in Purchasing Power Parity. To illustrate one potent example - Bollywood is magnitudes larger of a movie industry (even adjusted for population), however the collections in $ vs ticket sales paints a very different picture.

neximo64 3y ago
Yes this is accounted for, even if you separated them all out and counted the prices people are willing to pay for from each country, the US still comes out ontop because of the consumer culture there. The issue with Bollywood for example not being larger than Hollywood despite more films and possibly a larger view base is the price of North American tickets vs the cinema ticket prices in India for US films - even if they are made abroad that are sold to US consumers. So in aggregate the US consumer alone is quite significant in dollar (but not in individual people) terms vs everyone else. If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries.
- shri_krishna 3y ago
  > If a country were to overtake, they would have to let go of the savings culture and almost spend like an American, which may not actually be the best thing for most countries. Yes correct. And this is not a good thing even for US. Since the consumption economy in US is driven largely by debt, what will happen when there is a default (which seems very likely to happen soon considering how US banks are collapsing like dominoes)? Who is going to bail out the US economy? Sure you can bail out banks when there is a banking crisis and is localized to only the banking sector (like 2008). But what will you do when there is an economic crisis that affects everyone? That is the real issue here. US National debt is at an all time high and is not slowing down. QE is still on full swing. One day it is all going to come crashing down. With de-dollarization, the strength of the US economy shifts from being able to control international trade and also drive up its own internal debt to finance World economy (by providing much needed liquidity for international trade through its SWIFT systems) to only having to drive up its own internal debt to finance US economy (which has all the potential to lead to runaway inflation). This shift is going to happen in the coming decade or two and I hope US Citizens are aware and prepared for the fallout.

skybrian 3y ago

That’s not what the article is about. It’s about what central banks are doing.

user_named 3y ago

Lmao, the yuan-denominated market is non-existent?

neximo64 3y ago
If you had a startup and you sold things online (outside of China), you would not find many Chinese consumers or customers, even if you allowed Unionpay or Wechat. Sure there is a Yuan denominated market, but when it comes to consumption it is a kitten relative to China's size - because most Chinese consumers opt to not spend their money and save it instead - relative to an American consumer. And the outcome of that is in China you would on average have more savings than an American, but an American would have bought more things if everything else were equal. But on the Americans version of it those dollars they spent are saved up by the vendor and show up on stats vs everyone else and they are larger.
- user_named 3y ago
  No, I absolutely would find an incredibly large amount of Chinese customers if they were my target market.
  - neximo64 3y ago
    Do you have an example of this, as quite nearly it is the experience of every Shopify seller or SaaS vendor. You can get Chinese customers, but they'll be local customers to your market (e.g selling in America, Australia, Europe, etc) but not from China where you ship there. There's a reason it is hard to fill container ships heading back to China.
    - user_named 3y ago
      Shopify sellers don't market do Chinese costumers. They don't understand how to and they don't speak Chinese.
      - neximo64 3y ago

shri_krishna 3y ago

It has nothing to do with consumption demand. Countries have realized that US dollars is not a safe store of value (aka reserve currency) because of decisions taken by the US administration vis-a-vis its sanctions regime. It is not worth having your US dollars frozen and your entire Country beholden to the United States leaving you with zero options on the table (to trade with other countries) just because there are differences in opinions/ideology/politics. This is starkly evident when US has a different set of rules for itself (my way or the highway) vs rules it expects the World to follow (rules based order). This might have worked in the past when other Countries were technologically inept at building necessary infrastructure to connect banking systems and had to rely on SWIFT. However, this is no longer the case today. Most countries now have better home grown systems where transactions are settled instantly (instead of taking multiple days) and have realized that the same can be extended when it comes to inter-country (read it as bilateral) trade too. Instead of India holding USD in a US Bank and Russia holding USD in a US Bank, and using US Bank as an intermediary for any bilateral trade (giving a cut to US Bank as well as being at mercy of the US Government), India and Russia can bypass the middleman (US Bank) and trade directly: India holding Rubles in Russian Bank, while Russia holds INR in Indian Bank. There is no SWIFT being used anywhere in between. Totally avoids sanctions as well as removes the middle man from the equation. De-dollarization has nothing to do with US Dollars losing its value. It has more to do with the US Government losing its economic superpower status where it can control other countries through economic sanctions. Even after de-dollarization, USD might be the most sought after currency purely for its value and not for "fear of the US Government". There is no "perceived loss" for USD as such. But there is significant loss for the US Administration if it cannot use USD as a weapon against another Country. That's the point that is most important to realize. It is all about balancing power dynamics.

neximo64 3y ago
My argument is that the US dollars that are on these reserves only exist because consumers have spent them. The argument that this does not have anything to do with consumer demand is almost not understanding where these dollars come from. These reserves can only come from excess consumption. To have an alternative you need another country with the type of consumption the US has. So while your argument is correct about the rules and affect of sanctions it misses the point that the dollars are basically loans to America because the other country did not save them. Since the US dollars do come from somewhere vs a central bank making them or out of thin air in some way that makes America strong. It is not as if Indian Rupees or Chinese Yuan can replace these as it would mean the consumption would need to originate from China/ or India in the first place. If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else (the person you bought the Yuan/Rupees from) - until it is finally consumed. The issue is they never tend to be consumed. The issue with it looking at it 'strategically' like you are is it forgets that these dollars come from somewhere and they are still there because they are not spent not because of rules but because of savings habits in the other country.