7 ms·

> diversifying their portfolios, not fleeing the dollar for another currency Aren't these literally the same thing? Selling dollars and buying something else

> diversifying their portfolios, not fleeing the dollar for another currency Aren't these literally the same thing? Selling dollars and buying something else is dedollarization, regardless of whether it's for diversification or some other reason.

aardvarkr 3y ago
If there’s nothing replacing the dollar as the dominant global currency then yeah, it’s a wildly different story. One is a story of diversifying investments so that your country’s wealth isn’t tied to a single country. The latter would mean a global shift in power with massive geopolitical ramifications.
- Phlarp 3y ago
  One empire can crumble into nothing without another empire immediately taking it's place. Previously the rest of the world tripped over one another to put all their eggs into our basket. Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios.
  - WeylandYutani 3y ago
    Apparently nobody in the US seems to understand that debt ceiling shenanigans and government shutdowns makes them look like Argentina.
    - chii 3y ago
      The exact same sentiment was had last time. The consequences from these shenanigans last time had very little real impact - a _very_ slight increase in interest rate on treasuries. And i predict that this time, at the last minute, the bill will pass again, like every other time. Unless the republicans truly believe that it's worth going down with the ship for.
      - ethbr0 3y ago
        The US Republican party, as with all parties even in America, has a continuum of members. Some would be fine letting the US default if their demands aren't met (e.g. Tea Party types). Others not so much. One difference this time is the amount of trouble the House Speaker had getting elected by his own party, and any closed door concessions related to that were very likely promises around budget and the debt ceiling.
      - ikiris 3y ago
        You're literally looking at the graph of the impact here.
  - throwaway6734 3y ago
    >Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios. From who exactly? Most of developed and developing world is facing demographic collapse over the next 50 years. The US is the largest energy producer, one of the largest food producers, the most dominant military, has relatively stable demographics and has no trouble assimilating immigrants, etc.
  - sdwr 3y ago
    https://www.youtube.com/watch?v=DKWKRMxXB0M https://www.youtube.com/watch?v=DKWKRMxXB0M
- bakuninsbart 3y ago
  The first is a necessary step for the latter. There's a reason pundits have been talking about a multi-polar world for 20 years. No country is currently strong enough to cement its position the way the US had, but the move away from the dollar will hurt the US a lot, by limiting the Fed and increasing inflation. It also enables other countries to have a foreign policy more antagonistic to the US, it takes away a good chunk of leverage.
  - fsckboy 3y ago
    no, the move away from the dollar will not hurt the US. Exchange rates are the net result of trade in goods and services (and capital), it's the bottom line fudge factor that makes trade work. If a country imports too much, its currency drops making foreign goods more expensive slowing imports. If it exports too much, its currency rises making its goods more expensive and slowing exports. If the US imports a lot, it sends dollars overseas. If the foreigners want to invest in the US economy, those dollars come back in exchange for assets and the value of a dollar is not affected. If the foreigners don't want dollar denominated assets, they just buy their preferred currency instead, sending the dollar down. (In the case of investment, the US for most of its history ran a huge trade deficit. It was not a problem because economic growth meant foreigners wanted to invest here. Much of the trade deficit was caused by the purchase of capital equipment, used in driving the economy) People who are thinking about exchanging currencies are not doing it on whim, they are doing it for underlying reasons that have to do with economic activity, productivity, long term investment opportunities, etc. These things carry currency denominated prices, but those currency fluctuations do not affect the rates of return of the investments, rather those currency fluctuations are how the books are balanced and change the rates of ebb and flow.
    - mpweiher 3y ago
      > no, the move away from the dollar will not hurt the US I doubt that. The US has been able to both support a trade imbalance and print money at prodigious rates that would be unsustainable for any other country. I remember articles from economists pointing this out going back to the eighties. One important reason for this is that not all dollars the US prints inflate the local money supply. Instead, they go out into the world where they are used by other countries to trade amongst themselves, without US involvement (and reserves). It's like writing a check that is never cashed. Cool if you can pull it off. You mention foreign investment. Well, if the value of the dollar goes down, because demand for those dollars is lower, those investments also become less attractive. Could cascade.
- instagraham 3y ago
  Both represent a global shift in power. Dedollarization doesn't happen overnight. Even though this chart suggests the move is happening quickly. Some of the things that have been happening are grossly underreported on, like this: https://thewire.in/diplomacy/india-signs-deal-to-adopt-moscows-spfs-system-for-banking-payments-to-russia-report https://thewire.in/diplomacy/india-signs-deal-to-adopt-mosco... Let's assume you wanted a route to send/receive money from Russia now, you could do so via India - a country in the good books of both Russia and the West. Iran has been settling oil sales to China in Yuan more and more over time: https://www.silkroadbriefing.com/news/2023/02/21/iran-increasing-use-of-chinas-rmb-yuan-in-international-trade/ https://www.silkroadbriefing.com/news/2023/02/21/iran-increa... Assuming the dollar gets replaced by one reserve currency is the fallacy. Like with geopolitics, we're seeing a multipolar world return.
  - ROTMetro 3y ago
    You point to a sanctioned country where India has no choice but to figure out a new system and a move the the Yuan, a currency pegged to the dollar (so still trading in dollars, just in a really convoluted way). Not sure this shows anything?
  - godelski 3y ago
    > Both represent a global shift in power. Yes, but there's a difference between a shift of power from one entity to another and a shift of power from one entity to many entities (distributed). That's what the people above you are saying. Tldr: Swap != diversification
  - DANmode 3y ago
    > The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades
  - ROTMetro 3y ago
    I'll just leave this here: https://markets.businessinsider.com/news/currencies/russia-dollar-currencies-india-yuan-rupee-china-trade-sanctions-moscow-2023-5 https://markets.businessinsider.com/news/currencies/russia-d...
- Nevermark 3y ago
  Yes, I expect that this isn't just de-dollarification, but a move away from any over-weighted dependency. I.e. countries reserves will move to diversified portfolios of currencies and assets (gold, etc.) that minimize general financial risk, but also foreign economic-political influence.
ak_111 3y ago
I don’t think so, for example if you use dollars to buy Apple stock you are very much still long dollars because a big part of Apple’s valuation is their enormous dollar reserve including t-bills. If instead you used it to buy say Chinese real estate you could say you diversified away from dollar.
- yawboakye 3y ago
  is there any data that shows the movement of the new monetary value? my guess is that, for any economy, significantly cutting down the role of the dollars requires cutting down participation in parts of the US economy that are proxies for the dollar. so, for example, china could decide to acquire lands or farms in the US. that's not necessarily long dollar. they could be buying resources in different parts of the world as well.
  - ethbr0 3y ago
    Land or farms in the US are extremely likely to transact their value or production in dollars, so you'd still be exposed. Believe parent's comment was that you would want something where no/minimal part of its 'value ecosystem' touches dollars. E.g. Chinese real estate, with rent paid in yuan and sales transactions happening in yuan
    - than3 3y ago
      Anything which collateralizes in the currency would be exposed. Additionally, you may want to re-watch the China Hustle. They have no laws protecting foreigners from theft/fraud. Its encouraged. The yuan also has its own issues.
      - ethbr0 3y ago
        I'm in no way suggesting one invest in Chinese real estate. Governments with xenophobic and nationalizing tendencies tend to be poor bets for private investment. Picking up pennies in front of a steamroller, etc.
lolinder 3y ago
When I posted this many of the comments were about how the Chinese currency was going to replace the dollar, which is the story the chart on Bloomberg was trying to tell. So that's what I meant—no single currency is replacing the dollar. Countries aren't fleeing American economic hegemony and running into the arms of the Chinese or any other up-and-coming hegemon, they're leery of hegemonies in general. It's not that there's not a story here, it's that the chart they used wildly misrepresents what the story is. (EDIT: In fact, as I write this the second highest comment on the main thread[0] is speculation about the Yuan becoming the world reserve currency, which is a reasonable line of thinking if you only look at the Eurizon chart and don't realize how misleading it is.) [0] https://news.ycombinator.com/item?id=35800862 https://news.ycombinator.com/item?id=35800862
aeternum 3y ago
CEOs often us this excuse.. I'm not selling company stock, I'm just diversifying.
zsz 3y ago
If you're from the US, then they're the same thing. For the average person (again, from the US), it means an inflation rate more directly coupled to money supply (i.e. the opposite of how it was in the past; some of this is of course already very evident and has been, for about a year and change--modern monetary theory notwithstanding).

aardvarkr 3y ago

If there’s nothing replacing the dollar as the dominant global currency then yeah, it’s a wildly different story. One is a story of diversifying investments so that your country’s wealth isn’t tied to a single country. The latter would mean a global shift in power with massive geopolitical ramifications.

Phlarp 3y ago
One empire can crumble into nothing without another empire immediately taking it's place. Previously the rest of the world tripped over one another to put all their eggs into our basket. Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios.
- WeylandYutani 3y ago
  Apparently nobody in the US seems to understand that debt ceiling shenanigans and government shutdowns makes them look like Argentina.
  - chii 3y ago
    The exact same sentiment was had last time. The consequences from these shenanigans last time had very little real impact - a _very_ slight increase in interest rate on treasuries. And i predict that this time, at the last minute, the bill will pass again, like every other time. Unless the republicans truly believe that it's worth going down with the ship for.
    - ethbr0 3y ago
      The US Republican party, as with all parties even in America, has a continuum of members. Some would be fine letting the US default if their demands aren't met (e.g. Tea Party types). Others not so much. One difference this time is the amount of trouble the House Speaker had getting elected by his own party, and any closed door concessions related to that were very likely promises around budget and the debt ceiling.
    - ikiris 3y ago
      You're literally looking at the graph of the impact here.
- throwaway6734 3y ago
  >Now we are getting sideways looks with a mixture of "You doing OK America?" and quietly diversifying their portfolios. From who exactly? Most of developed and developing world is facing demographic collapse over the next 50 years. The US is the largest energy producer, one of the largest food producers, the most dominant military, has relatively stable demographics and has no trouble assimilating immigrants, etc.
- sdwr 3y ago
  https://www.youtube.com/watch?v=DKWKRMxXB0M https://www.youtube.com/watch?v=DKWKRMxXB0M
bakuninsbart 3y ago
The first is a necessary step for the latter. There's a reason pundits have been talking about a multi-polar world for 20 years. No country is currently strong enough to cement its position the way the US had, but the move away from the dollar will hurt the US a lot, by limiting the Fed and increasing inflation. It also enables other countries to have a foreign policy more antagonistic to the US, it takes away a good chunk of leverage.
- fsckboy 3y ago
  no, the move away from the dollar will not hurt the US. Exchange rates are the net result of trade in goods and services (and capital), it's the bottom line fudge factor that makes trade work. If a country imports too much, its currency drops making foreign goods more expensive slowing imports. If it exports too much, its currency rises making its goods more expensive and slowing exports. If the US imports a lot, it sends dollars overseas. If the foreigners want to invest in the US economy, those dollars come back in exchange for assets and the value of a dollar is not affected. If the foreigners don't want dollar denominated assets, they just buy their preferred currency instead, sending the dollar down. (In the case of investment, the US for most of its history ran a huge trade deficit. It was not a problem because economic growth meant foreigners wanted to invest here. Much of the trade deficit was caused by the purchase of capital equipment, used in driving the economy) People who are thinking about exchanging currencies are not doing it on whim, they are doing it for underlying reasons that have to do with economic activity, productivity, long term investment opportunities, etc. These things carry currency denominated prices, but those currency fluctuations do not affect the rates of return of the investments, rather those currency fluctuations are how the books are balanced and change the rates of ebb and flow.
  - mpweiher 3y ago
    > no, the move away from the dollar will not hurt the US I doubt that. The US has been able to both support a trade imbalance and print money at prodigious rates that would be unsustainable for any other country. I remember articles from economists pointing this out going back to the eighties. One important reason for this is that not all dollars the US prints inflate the local money supply. Instead, they go out into the world where they are used by other countries to trade amongst themselves, without US involvement (and reserves). It's like writing a check that is never cashed. Cool if you can pull it off. You mention foreign investment. Well, if the value of the dollar goes down, because demand for those dollars is lower, those investments also become less attractive. Could cascade.
instagraham 3y ago
Both represent a global shift in power. Dedollarization doesn't happen overnight. Even though this chart suggests the move is happening quickly. Some of the things that have been happening are grossly underreported on, like this: https://thewire.in/diplomacy/india-signs-deal-to-adopt-moscows-spfs-system-for-banking-payments-to-russia-report https://thewire.in/diplomacy/india-signs-deal-to-adopt-mosco... Let's assume you wanted a route to send/receive money from Russia now, you could do so via India - a country in the good books of both Russia and the West. Iran has been settling oil sales to China in Yuan more and more over time: https://www.silkroadbriefing.com/news/2023/02/21/iran-increasing-use-of-chinas-rmb-yuan-in-international-trade/ https://www.silkroadbriefing.com/news/2023/02/21/iran-increa... Assuming the dollar gets replaced by one reserve currency is the fallacy. Like with geopolitics, we're seeing a multipolar world return.
- ROTMetro 3y ago
  You point to a sanctioned country where India has no choice but to figure out a new system and a move the the Yuan, a currency pegged to the dollar (so still trading in dollars, just in a really convoluted way). Not sure this shows anything?
- godelski 3y ago
  > Both represent a global shift in power. Yes, but there's a difference between a shift of power from one entity to another and a shift of power from one entity to many entities (distributed). That's what the people above you are saying. Tldr: Swap != diversification
- DANmode 3y ago
  > The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades
- ROTMetro 3y ago
  I'll just leave this here: https://markets.businessinsider.com/news/currencies/russia-dollar-currencies-india-yuan-rupee-china-trade-sanctions-moscow-2023-5 https://markets.businessinsider.com/news/currencies/russia-d...
Nevermark 3y ago
Yes, I expect that this isn't just de-dollarification, but a move away from any over-weighted dependency. I.e. countries reserves will move to diversified portfolios of currencies and assets (gold, etc.) that minimize general financial risk, but also foreign economic-political influence.

ak_111 3y ago

I don’t think so, for example if you use dollars to buy Apple stock you are very much still long dollars because a big part of Apple’s valuation is their enormous dollar reserve including t-bills. If instead you used it to buy say Chinese real estate you could say you diversified away from dollar.

yawboakye 3y ago
is there any data that shows the movement of the new monetary value? my guess is that, for any economy, significantly cutting down the role of the dollars requires cutting down participation in parts of the US economy that are proxies for the dollar. so, for example, china could decide to acquire lands or farms in the US. that's not necessarily long dollar. they could be buying resources in different parts of the world as well.
- ethbr0 3y ago
  Land or farms in the US are extremely likely to transact their value or production in dollars, so you'd still be exposed. Believe parent's comment was that you would want something where no/minimal part of its 'value ecosystem' touches dollars. E.g. Chinese real estate, with rent paid in yuan and sales transactions happening in yuan
  - than3 3y ago
    Anything which collateralizes in the currency would be exposed. Additionally, you may want to re-watch the China Hustle. They have no laws protecting foreigners from theft/fraud. Its encouraged. The yuan also has its own issues.
    - ethbr0 3y ago
      I'm in no way suggesting one invest in Chinese real estate. Governments with xenophobic and nationalizing tendencies tend to be poor bets for private investment. Picking up pennies in front of a steamroller, etc.

lolinder 3y ago

When I posted this many of the comments were about how the Chinese currency was going to replace the dollar, which is the story the chart on Bloomberg was trying to tell. So that's what I meant—no single currency is replacing the dollar. Countries aren't fleeing American economic hegemony and running into the arms of the Chinese or any other up-and-coming hegemon, they're leery of hegemonies in general. It's not that there's not a story here, it's that the chart they used wildly misrepresents what the story is. (EDIT: In fact, as I write this the second highest comment on the main thread[0] is speculation about the Yuan becoming the world reserve currency, which is a reasonable line of thinking if you only look at the Eurizon chart and don't realize how misleading it is.) [0] https://news.ycombinator.com/item?id=35800862 https://news.ycombinator.com/item?id=35800862

aeternum 3y ago

CEOs often us this excuse.. I'm not selling company stock, I'm just diversifying.

zsz 3y ago

If you're from the US, then they're the same thing. For the average person (again, from the US), it means an inflation rate more directly coupled to money supply (i.e. the opposite of how it was in the past; some of this is of course already very evident and has been, for about a year and change--modern monetary theory notwithstanding).