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These agreements are just agreements. The dollar has been the reserve currency for a long time because (1) the US has been a big promoter of liberalization and

These agreements are just agreements. The dollar has been the reserve currency for a long time because (1) the US has been a big promoter of liberalization and world trade, but really most importantly, (2) despite various conflicts, the US currency has been consistent and stable for decades, and everyone who values stability is going to want to park their value in a currency that continues to be boring. So far, the US has been able to scratch that itch because it’s been the same government that has been predictably the same for nearly 250 years. Now it doesn’t mean the world’s reserve currency won’t change over time but if it does, it’s because some other country or group of people have managed to establish themselves as equally boring for decades. And by the time that happens, the world will have already changed significantly already. Really, the reason the US Dollar has held for so long is because the rest of the world has had a lot of instability (think world wars, governance changes, unions of countries formed or abolished, etc.). The US hasn’t even had a change in states in 60 years.

tcbawo 2y ago
Don’t forget strong property rights, fairly impartial justice system wrt foreign representation, and a large body of corporate case law with predictable outcomes
- User23 2y ago
  And, perhaps most of all, a willingness to run massive deficits to accommodate foreigners' desire to hold those debts as an asset.
- epicureanideal 2y ago
  > fairly impartial justice system Seems like that’s crumbling, to the point it’s concerning even to me.
  - unethical_ban 2y ago
    I took am genuinely worried that our society is losing its respect of rule of law due to disinformation and stupidity on the social web.
- roenxi 2y ago
  What is the argument that makes the US special in this regard, in light of their seizure of Russian assets? Assets which might well end up being tagged for use waging war with Russia and supporting Russia's target? It is hard to see the US system seizing its own assets to donate to the targets of US aggression in a comparable way. But for the sake of argument - impartial it may be, but it doesn't seem like the type of impartiality that is appealing to foreigners. If China goes for Taiwan they'll lose all their US assets for example; I doubt that sits well with them.
  - jayd16 2y ago
    Who is more impartial than the US, in these scenarios?
  - Projectiboga 2y ago
    Those assets are merely 'frozen' currently, all that was approved to be spent is some of the income.
  - XorNot 2y ago
    "Don't invade fellow democracies". Business doesn't like things like wars of conquest where the legal system your factories operate under, your workers and the factories all seized by force or blown up when someone artillery strikes the town they're in to the ground. The whole point of being a reserve currency is to be stable and a key part of that is also enforcing stability - which the US does through things like it's naval supremacy. "Don't invade fellow democracies" is a pretty easy set of rules to play by, and is appealing to every country which would like not to be invaded - which is to say, economically doing business with the US is a very good deal if it means the US has your back if someone does look like they want to invade you. This entire concept is one of the ideas currently being used to try and keep China in check, and it was presumed in Europe that this was what would keep Russia in check (and the failure of that assumption is now the cause of the huge uptick in orders for US military equipment - so even there, the US is doing well out of the policy).
  - corimaith 2y ago
    It's a spectrum, not a binary distinction. The answer would be don't go to war with the explicit notion of overturning the very system that maintains the security of those assets. Any system that is totally impartial to enemies that seek to exploit it's rules against itself is doomed to failure; Ergo there will be ALWAYS be the distinction between "insiders" and "outsiders". But the US is a conglemeration of interests, and if you are businessman, an investor, a Capitalist, your interests are the US interests. If you actually understand what guides US foreign policy it's actually very easy to align yourself with US interests in a beneficial way without much costs. To become an "insider". There is no such thing as "unprovoked US aggression", it's all quite predictable decades ahead from certain actions performed today. The US is predictable, and that makes it easy to invest in. China, Iran, Russia, NK, Cuba etc instead are still guided by nationalist impulses, which unfortunately can result in irrational decisions (Ukraine, Taiwan) that are unalignable with business interests. It's a matter of pride really, and that's a big no-no for the investor. It's unpredictable, we don't know if China will really invade Taiwan or not, and that's going to put a major cost in investing. As for other places like India or the EU, their economies aren't large enough and have good enough returns yet, but even if they did, they would likely operate in a similar manner as the US.
outop 2y ago
> So far, the US has been able to scratch that itch because it’s been the same government that has been predictably the same for nearly 250 years. This is an exaggeration. There have been at least 3 drastic shocks to the United States currency in that time. The secession of the southern states, who adopted their own currency. Leaving the silver standard for the gold standard. And devaluing the dollar then leaving the gold standard unilaterally in the 1970s.
- njarboe 2y ago
  Don't forget FDR's banning private ownership of gold and then changing the value of the dollar from around $20 and ounce to $35 and ounce.
  - dralley 2y ago
    The USD didn't really become the world reserve currency until after WWII when the European empires fell apart and the US was a clear superpower.
    - marcus_holmes 2y ago
      This. The US Dollar could have crises and be flaky because Sterling was the global reserve currency (and everyone on the gold standard, obviously). It'll be interesting to see what happens now. I suspect the Russians will play silly buggers because they seem to enjoy that. And they have significant oil to play silly buggers with.
      - deleted 2y ago
        [deleted]
      - baetylus 2y ago
        There's an active de-dollarization effort from BRICS. Unsure how effective it'll be with the LIO
        2y ago
elzbardico 2y ago
I would say that the freezing of Russian assets has changed this equation considerably for almost every non-western country. People seem to think we are still living in the past, where the US alone accounted for more than 40% of the global GDP and was the single most important trade partner of every country outside the former communist block. It is a different world now. The BRICS GDP in Purchase Power Parity terms has surpassed the G-7, their growth rate is also bigger. Yeah. it is not the end of the world. Things won't change everyday, zero-hedge doomers are a bunch of crazy scammers shorted as fuck. But the situation is dynamic and requires attention.
- JumpCrisscross 2y ago
  > BRICS GDP in Purchase Power Parity terms has surpassed the G-7, their growth rate is also bigger Yes, random arrangement of countries beats another in a stat. Two of the BRICS are increasing military tensions with each other. One just saw a massive change in government, and with it, possible geopolitical alignment. Another is in the shitter. The dollar should wane in importance alongside China’s rise. But BRICS sure as hell won’t have anything to do with it.
  - elzbardico 2y ago
    Yeah. You can see things like that and call the BRICS a random arragement of countries and ignore that it is evolving into a more formal and integrated coalition, all the while believing all the FUD from the press that overvalues the disagreements between China and India. I also wouldn't call the government changes in India a masssive government change. Neither china is in the shitter. Stock and Financial market shenanigans are not as critical in China as they are in the US because they are heavily regulated, they are not as critical for capital financing as in the US, and chinese citizens wealth and retirement are not tied as strongly to stocks. Or you can just see things in another way and realize that most former colonial countries have developed a lot, and that the US and Europe are no longer the former titans compared to what people sometimes call the global south.
    - JumpCrisscross 2y ago
chiefalchemist 2y ago
> Really, the reason the US Dollar has held for so long is because the rest of the world has had a lot of instability (think world wars, governance changes, unions of countries formed or abolished, etc.). The US hasn’t even had a change in states in 60 years. Yes and no. What you're not comsidering is the obligation of The US Federal Reserve (aka The Fed). While dollars are international, The Fed's only concern is the US and US citizens. That is, often enough The Fed makes decisions that achieve this ends, but screws the rest of the world. Such decisions become self-serving to the USA's power, influence, etc. That decision undermines other countries, economies, etc. So yeah, the USD is stabler, and The Fed helps to see to that.
- chii 2y ago
  > The Fed makes decisions that achieve this ends, but screws the rest of the world. any other country would do the same, in the same position. The point is that this happens less, and with less severity in the US than other countries.
  - chiefalchemist 2y ago
    Perhaps. I'm simply pointing out the "flaw" in metaphorical breaking someone's kneecaps and then staring down your nose over the top of your glasses, waving a finger, and mocking them for not being able to walk, not able to help themselves, etc. The Fed and petrodollars have made the US stronger and plenty of others weaker, is the US leadership - gov and private - prepared for a shift in that balance of power? And might there be some looking for revenge, so to speak? Hint: Correct answers are no and yes, in that order.
seanmcdirmid 2y ago
The availability of US treasuries is also a big appeal of the dollar. There really aren’t many places where you can safely park a few billion or even a few ten billion in USD equivalent. The US government is basically a debtor of last resort.

tcbawo 2y ago

Don’t forget strong property rights, fairly impartial justice system wrt foreign representation, and a large body of corporate case law with predictable outcomes

User23 2y ago
And, perhaps most of all, a willingness to run massive deficits to accommodate foreigners' desire to hold those debts as an asset.
epicureanideal 2y ago
> fairly impartial justice system Seems like that’s crumbling, to the point it’s concerning even to me.
- unethical_ban 2y ago
  I took am genuinely worried that our society is losing its respect of rule of law due to disinformation and stupidity on the social web.
roenxi 2y ago
What is the argument that makes the US special in this regard, in light of their seizure of Russian assets? Assets which might well end up being tagged for use waging war with Russia and supporting Russia's target? It is hard to see the US system seizing its own assets to donate to the targets of US aggression in a comparable way. But for the sake of argument - impartial it may be, but it doesn't seem like the type of impartiality that is appealing to foreigners. If China goes for Taiwan they'll lose all their US assets for example; I doubt that sits well with them.
- jayd16 2y ago
  Who is more impartial than the US, in these scenarios?
- Projectiboga 2y ago
  Those assets are merely 'frozen' currently, all that was approved to be spent is some of the income.
- XorNot 2y ago
  "Don't invade fellow democracies". Business doesn't like things like wars of conquest where the legal system your factories operate under, your workers and the factories all seized by force or blown up when someone artillery strikes the town they're in to the ground. The whole point of being a reserve currency is to be stable and a key part of that is also enforcing stability - which the US does through things like it's naval supremacy. "Don't invade fellow democracies" is a pretty easy set of rules to play by, and is appealing to every country which would like not to be invaded - which is to say, economically doing business with the US is a very good deal if it means the US has your back if someone does look like they want to invade you. This entire concept is one of the ideas currently being used to try and keep China in check, and it was presumed in Europe that this was what would keep Russia in check (and the failure of that assumption is now the cause of the huge uptick in orders for US military equipment - so even there, the US is doing well out of the policy).
- corimaith 2y ago
  It's a spectrum, not a binary distinction. The answer would be don't go to war with the explicit notion of overturning the very system that maintains the security of those assets. Any system that is totally impartial to enemies that seek to exploit it's rules against itself is doomed to failure; Ergo there will be ALWAYS be the distinction between "insiders" and "outsiders". But the US is a conglemeration of interests, and if you are businessman, an investor, a Capitalist, your interests are the US interests. If you actually understand what guides US foreign policy it's actually very easy to align yourself with US interests in a beneficial way without much costs. To become an "insider". There is no such thing as "unprovoked US aggression", it's all quite predictable decades ahead from certain actions performed today. The US is predictable, and that makes it easy to invest in. China, Iran, Russia, NK, Cuba etc instead are still guided by nationalist impulses, which unfortunately can result in irrational decisions (Ukraine, Taiwan) that are unalignable with business interests. It's a matter of pride really, and that's a big no-no for the investor. It's unpredictable, we don't know if China will really invade Taiwan or not, and that's going to put a major cost in investing. As for other places like India or the EU, their economies aren't large enough and have good enough returns yet, but even if they did, they would likely operate in a similar manner as the US.

outop 2y ago

> So far, the US has been able to scratch that itch because it’s been the same government that has been predictably the same for nearly 250 years. This is an exaggeration. There have been at least 3 drastic shocks to the United States currency in that time. The secession of the southern states, who adopted their own currency. Leaving the silver standard for the gold standard. And devaluing the dollar then leaving the gold standard unilaterally in the 1970s.

njarboe 2y ago
Don't forget FDR's banning private ownership of gold and then changing the value of the dollar from around $20 and ounce to $35 and ounce.
- dralley 2y ago
  The USD didn't really become the world reserve currency until after WWII when the European empires fell apart and the US was a clear superpower.
  - marcus_holmes 2y ago
    This. The US Dollar could have crises and be flaky because Sterling was the global reserve currency (and everyone on the gold standard, obviously). It'll be interesting to see what happens now. I suspect the Russians will play silly buggers because they seem to enjoy that. And they have significant oil to play silly buggers with.
    - deleted 2y ago
      [deleted]
    - baetylus 2y ago
      There's an active de-dollarization effort from BRICS. Unsure how effective it'll be with the LIO
      - 2y ago

elzbardico 2y ago

I would say that the freezing of Russian assets has changed this equation considerably for almost every non-western country. People seem to think we are still living in the past, where the US alone accounted for more than 40% of the global GDP and was the single most important trade partner of every country outside the former communist block. It is a different world now. The BRICS GDP in Purchase Power Parity terms has surpassed the G-7, their growth rate is also bigger. Yeah. it is not the end of the world. Things won't change everyday, zero-hedge doomers are a bunch of crazy scammers shorted as fuck. But the situation is dynamic and requires attention.

JumpCrisscross 2y ago
> BRICS GDP in Purchase Power Parity terms has surpassed the G-7, their growth rate is also bigger Yes, random arrangement of countries beats another in a stat. Two of the BRICS are increasing military tensions with each other. One just saw a massive change in government, and with it, possible geopolitical alignment. Another is in the shitter. The dollar should wane in importance alongside China’s rise. But BRICS sure as hell won’t have anything to do with it.
- elzbardico 2y ago
  Yeah. You can see things like that and call the BRICS a random arragement of countries and ignore that it is evolving into a more formal and integrated coalition, all the while believing all the FUD from the press that overvalues the disagreements between China and India. I also wouldn't call the government changes in India a masssive government change. Neither china is in the shitter. Stock and Financial market shenanigans are not as critical in China as they are in the US because they are heavily regulated, they are not as critical for capital financing as in the US, and chinese citizens wealth and retirement are not tied as strongly to stocks. Or you can just see things in another way and realize that most former colonial countries have developed a lot, and that the US and Europe are no longer the former titans compared to what people sometimes call the global south.
  - JumpCrisscross 2y ago

chiefalchemist 2y ago

> Really, the reason the US Dollar has held for so long is because the rest of the world has had a lot of instability (think world wars, governance changes, unions of countries formed or abolished, etc.). The US hasn’t even had a change in states in 60 years. Yes and no. What you're not comsidering is the obligation of The US Federal Reserve (aka The Fed). While dollars are international, The Fed's only concern is the US and US citizens. That is, often enough The Fed makes decisions that achieve this ends, but screws the rest of the world. Such decisions become self-serving to the USA's power, influence, etc. That decision undermines other countries, economies, etc. So yeah, the USD is stabler, and The Fed helps to see to that.

chii 2y ago
> The Fed makes decisions that achieve this ends, but screws the rest of the world. any other country would do the same, in the same position. The point is that this happens less, and with less severity in the US than other countries.
- chiefalchemist 2y ago
  Perhaps. I'm simply pointing out the "flaw" in metaphorical breaking someone's kneecaps and then staring down your nose over the top of your glasses, waving a finger, and mocking them for not being able to walk, not able to help themselves, etc. The Fed and petrodollars have made the US stronger and plenty of others weaker, is the US leadership - gov and private - prepared for a shift in that balance of power? And might there be some looking for revenge, so to speak? Hint: Correct answers are no and yes, in that order.

seanmcdirmid 2y ago

The availability of US treasuries is also a big appeal of the dollar. There really aren’t many places where you can safely park a few billion or even a few ten billion in USD equivalent. The US government is basically a debtor of last resort.