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> Again, this has nothing to do with de-dollarization. What makes America economically strong is its consumption demand. Correct. However, we are talking about

> 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
Okay I understand the point you are trying to make (your concern is more about reserves). I'll differ with you slightly here: US dollar reserves are highest purely because we use USD for imports from other countries too. That is why it is the most sought after today. We are all selling to US consumers primarily because we want those dollars to trade with other countries as all trade happens through SWIFT. However, with de-dollarization, we are trading with each other in our own currencies. Now obviously that would mean we wouldn't be storing more than what is minimally required in USD reserves as we would be holding a bigger basket of currencies instead. Would USD reserves still exist? Yes. Would the volume of those reserves remain intact? Absolutely not. It will reduce significantly as it gets replaced by reserve currencies of the countries we have direct bilateral trade with. Is that going to reset the USD price in the market? Obviously yes. Water finds its level. So will USD. Would USD still be the most sought after? Depends on the US consumer. If the US consumer still has an appetite for goods/services it will be the most sought after. You see, until now, all non-US countries were forced to be in the SWIFT system because we had no other way to trade. Now that we do, the reliance on USD as a reserve currency falls. USD will find its level eventually. Also, do not forget demographics. US is losing the demographic race. The "young population" is shrinking rapidly and they are the "consumers" in any consumption economy. Like Elon Musk said recently, demographics is destiny. And US is losing that race and is not realizing it. Consumption will slow down majorly in the coming decades and other countries have to think of alternative solutions. Because consumption will move to where the "young population" is. And demographics decides that.
- actionfromafar 3y ago
  If the US is losing in demographics, what do we call China demographics? Dropping off a cliff?

shri_krishna 3y ago

Okay I understand the point you are trying to make (your concern is more about reserves). I'll differ with you slightly here: US dollar reserves are highest purely because we use USD for imports from other countries too. That is why it is the most sought after today. We are all selling to US consumers primarily because we want those dollars to trade with other countries as all trade happens through SWIFT. However, with de-dollarization, we are trading with each other in our own currencies. Now obviously that would mean we wouldn't be storing more than what is minimally required in USD reserves as we would be holding a bigger basket of currencies instead. Would USD reserves still exist? Yes. Would the volume of those reserves remain intact? Absolutely not. It will reduce significantly as it gets replaced by reserve currencies of the countries we have direct bilateral trade with. Is that going to reset the USD price in the market? Obviously yes. Water finds its level. So will USD. Would USD still be the most sought after? Depends on the US consumer. If the US consumer still has an appetite for goods/services it will be the most sought after. You see, until now, all non-US countries were forced to be in the SWIFT system because we had no other way to trade. Now that we do, the reliance on USD as a reserve currency falls. USD will find its level eventually. Also, do not forget demographics. US is losing the demographic race. The "young population" is shrinking rapidly and they are the "consumers" in any consumption economy. Like Elon Musk said recently, demographics is destiny. And US is losing that race and is not realizing it. Consumption will slow down majorly in the coming decades and other countries have to think of alternative solutions. Because consumption will move to where the "young population" is. And demographics decides that.

actionfromafar 3y ago
If the US is losing in demographics, what do we call China demographics? Dropping off a cliff?