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Expect the U.S. Dollar to lose reserve currency status faster than expected to the Yuan. This can be seen in the Treasury market and with other nations going ar

Expect the U.S. Dollar to lose reserve currency status faster than expected to the Yuan. This can be seen in the Treasury market and with other nations going around sanctions or avoiding future sanctions. For a petrodollar specifically, or petroyuan in the future, the idea could be that the largest manufacturer is going to be the largest consumer of energy for manufacturing. In the past this was the United States which is why the Saudi petrodollar, while overhyped, made sense after the Nixon shock. China has played a key role using its increasingly gold backed currency to settle transactions for sanction reasons and is expanding it to others. It will take time for this change to happen and before long it will be interesting what kind of result this has on funding U.S. Govt debt, if more business is done in yuan than the dollar. All it will take is China loosening controls. The other reason the dollar has been so resilient has been the U.S. Navy providing the backbone to defense agreements. Now China also has a comparable number of ships that will move out of the South China Sea and play an international role with a yuan reserve currency, this advantage isnt what it used to be.

hylaride 2y ago
If China was a rule of law country without capital controls you’d be right, but nobody is rushing. Yuans are worthless unless you want to buy goods in China and if you amass too much, the Chinese government can control how it’s used without much recourse. This is a country whose government banned Winnie the Poo on social media because somebody started a meme of Poo and Tigger walking next to a photo of Obama and Xi walking. The only real alternatives today are the Euro and to a lesser extent the Japanese Yen, and they have their own issues (in particular, the Eurobond market is fragmented between its member states and while the EU does issue its own bonds, it’s not institutionally or politically designed to issue at massive levels). Even Russia, which tried to bypass sanctions and sell oil direct to India was left with either collecting in rupees (that it couldn’t really spend much of) or in rubles (which India had a hard time finding a market to trade rupees for). But again, don’t underestimate the basics of recourse in rule of law. You can own shit tons of US Treasuries and still speak ill of or go against the US government or its leaders. Do you think Saudi Arabia or anybody else wants have to bend the knee to anybody else?
- rmbyrro 2y ago
  > without much recourse If you mean crying is a recourse, otherwise this is an understatement. There's no recourse.
- treebeard901 2y ago
  Russia is doing quite well getting around the dollar. Others are following their lead. You are likely correct in other parts of your reply. Only time will tell. I think the trending direction is clear... Also, rule of law in the U.S. just isn't what it used to be. Many other countries have seen what the U.S. has done with Russian money kept in Western banks.
  - hylaride 2y ago
    > Russia is doing quite well getting around the dollar. Others are following their lead. "Quite well" is debatable. There's large amounts of overhead and complexity involved and Russian energy is being sold at a huge discount. > Also, rule of law in the U.S. just isn't what it used to be. Many other countries have seen what the U.S. has done with Russian money kept in Western banks. Seizing money isn't against the rule of law - that would be like saying a country doesn't have freedom because criminals can be locked up. There's due process and some sanctioned Russian Oligarchs have gotten removed against the US government's wishes because of that - same in Europe.
nradov 2y ago
This is nonsense. China's gold holdings stand at about 0.3% of their currency supply. "Gold backed" my ass. China is working hard to build an effective blue-water navy. They'll probably accomplish it eventually but for now they have virtually zero power projection or expeditionary capability. They struggle to even sustain a small surface action group in the Middle East.

hylaride 2y ago

If China was a rule of law country without capital controls you’d be right, but nobody is rushing. Yuans are worthless unless you want to buy goods in China and if you amass too much, the Chinese government can control how it’s used without much recourse. This is a country whose government banned Winnie the Poo on social media because somebody started a meme of Poo and Tigger walking next to a photo of Obama and Xi walking. The only real alternatives today are the Euro and to a lesser extent the Japanese Yen, and they have their own issues (in particular, the Eurobond market is fragmented between its member states and while the EU does issue its own bonds, it’s not institutionally or politically designed to issue at massive levels). Even Russia, which tried to bypass sanctions and sell oil direct to India was left with either collecting in rupees (that it couldn’t really spend much of) or in rubles (which India had a hard time finding a market to trade rupees for). But again, don’t underestimate the basics of recourse in rule of law. You can own shit tons of US Treasuries and still speak ill of or go against the US government or its leaders. Do you think Saudi Arabia or anybody else wants have to bend the knee to anybody else?

rmbyrro 2y ago
> without much recourse If you mean crying is a recourse, otherwise this is an understatement. There's no recourse.
treebeard901 2y ago
Russia is doing quite well getting around the dollar. Others are following their lead. You are likely correct in other parts of your reply. Only time will tell. I think the trending direction is clear... Also, rule of law in the U.S. just isn't what it used to be. Many other countries have seen what the U.S. has done with Russian money kept in Western banks.
- hylaride 2y ago
  > Russia is doing quite well getting around the dollar. Others are following their lead. "Quite well" is debatable. There's large amounts of overhead and complexity involved and Russian energy is being sold at a huge discount. > Also, rule of law in the U.S. just isn't what it used to be. Many other countries have seen what the U.S. has done with Russian money kept in Western banks. Seizing money isn't against the rule of law - that would be like saying a country doesn't have freedom because criminals can be locked up. There's due process and some sanctioned Russian Oligarchs have gotten removed against the US government's wishes because of that - same in Europe.

nradov 2y ago

This is nonsense. China's gold holdings stand at about 0.3% of their currency supply. "Gold backed" my ass. China is working hard to build an effective blue-water navy. They'll probably accomplish it eventually but for now they have virtually zero power projection or expeditionary capability. They struggle to even sustain a small surface action group in the Middle East.