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So if the USA was to lose its status as the world's only superpower, or if the world loses faith in its ability to back the dollar, or if the world is unconvinc
by SturgeonsLaw 1y ago
So if the USA was to lose its status as the world's only superpower, or if the world loses faith in its ability to back the dollar, or if the world is unconvinced that the US is governed by the rule of law, then that wouldn't bode well for the US dollar's position as the world's reserve currency, right?
- dgfitz 1y agoI posit that if the US loses their status as the dominant superpower, WWIII will swiftly follow.
- Kon-Peki 1y agoPresumably, for the dollar to be the world’s reserve currency the world needs to have sufficient excess reserves to be able to buy lots of US Treasuries. If there were some event or events that causes a dramatic contraction in world trade and set off financial crises around the world, many countries may be unable to buy treasuries in the same quantity. A potentially scary thought exercise may be to figure out what the collective reduction in treasury purchases needs to be before it all blows up. I have no clue what that number may be. But I have a feeling that if the dollar ceases to be the reserve currency, it will not be because the world has decided on something else.
- fatbird 1y agoYour second and third options, absolutely. For the first, it's a matter of whether the sovereignty of US could be credibly threatened militarily, which would is hard to imagine without a long, long fall in its military power. It's not the superpower status, it's the absence of credible military threat against it. Canada or Mexico (or Finland, or Vietnam or North Korea) can't guarantee the absence of instability by their military heft alone.