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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

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.

shri_krishna 3y ago
> it misses the point that the dollars are basically loans to America because the other country did not save them I did not understand this point. How does USD became a loan to America if say India 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. Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here. > 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 Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies. > If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else - until it is consumed. Okay and what does it have to do with China and India trading with each other or Russia and India trading with each other? We don't need to trade using USD. > 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. All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that communist China is more favourable to democratic India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.
- neximo64 3y ago
  > Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here. Again i will reiterate that this item will not change the reserves of US dollars in place, since even if dollars were used they would go down, then back up and there would be no net change. In terms of 'de dollarization' it would not have an impact on Central Bank Reserves. > Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies. See point above, for India and China to trade without or with US dollars the reserves dont change. Being in the middle of the transaction in a wasteful manner is not where the power of US dollars comes from. > All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that China is more favourable than India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully. I understand what you are saying and it is correct. And there should be no reason to use US dollars in this case - but again it wouldn't reduce the reserves of US dollars. The only way to reduce reserves is to spend them or to stop America creating them by stop selling to them.

shri_krishna 3y ago

> it misses the point that the dollars are basically loans to America because the other country did not save them I did not understand this point. How does USD became a loan to America if say India 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. Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here. > 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 Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies. > If you were to sell your US dollars for Chinese Yuan for example, that bag of US dollars is simply held by someone else - until it is consumed. Okay and what does it have to do with China and India trading with each other or Russia and India trading with each other? We don't need to trade using USD. > 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. All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that communist China is more favourable to democratic India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully.

neximo64 3y ago
> Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about removing SWIFT and US Bank as an intermediary. Russia and India can decide to fix prices (Rubles <-> INR) bilaterally for international trade (unconnected to exchange rate fluctuations) and commit a certain sum of money in each others banks to establish that rate for a period of say 5 years. And then trade against that rate. There is no involvement of USD here anywhere. Neither is a middleman (US Bank) needed here. Again i will reiterate that this item will not change the reserves of US dollars in place, since even if dollars were used they would go down, then back up and there would be no net change. In terms of 'de dollarization' it would not have an impact on Central Bank Reserves. > Again, you are fixated on consumption. Even if I take your point that USD is valuable and is the one currency which is sought after, it is purely on the basis of US Government's benevolence. It can be removed just as quickly if the US Government decides to sanction your country because you woke up from the wrong side of the bed. So de-dollarization has nothing to do with, say, bilateral trade between US and India. We will still trade in USD and INR. So USD won't lose its value vis-a-vis bilateral trade between US and countries it trades with. However, there is no requirement for Russia and India to trade in USD. We can always settle trade in our own currencies. See point above, for India and China to trade without or with US dollars the reserves dont change. Being in the middle of the transaction in a wasteful manner is not where the power of US dollars comes from. > All of this makes no sense when US Government decides to sanction my country overnight. USG sanctioned India for conducting reciprocal nuclear tests (China conducted it first and we were forced to retaliate by conducting our own nuclear tests). Bill Clinton decided that China is more favourable than India and decided to sanction us, while not sanctioning China, for the same effing tests. We were subjected to heavy sanctions and had a tough time trading with other countries who had no connection with the conflict whatsoever. And it is not like only India was sanctioned in the past. Almost every country that has gone against US's favour have been subjected to sanctions in some way or the other. No one is going to keep tolerating a bully. I understand what you are saying and it is correct. And there should be no reason to use US dollars in this case - but again it wouldn't reduce the reserves of US dollars. The only way to reduce reserves is to spend them or to stop America creating them by stop selling to them.