4 ms·

Trump's gamble puts the dollar at risk as the reserve currency

32 points by MilnerRoute 1y ago

dotcoma 1y ago
https://archive.is/UG8dY https://archive.is/UG8dY
crooked-v 1y ago
Calling it a "gamble" is sanewashing it.
- tonetheman 1y ago
  [dead]
LatteLazy 1y ago
Isn’t destroying the dollars reserve currency status key to his stated goals? I thought that as long as dollars are the reserve currency, people will want them, and trade goods and services for them just for the privilege of holding them. So the US will never get manufacturing jobs back as every other country effectively insists on subsidising exports to the us to get the dollars they need for their reserves? I am not commenting on whether this is true or a good idea etc. but ending the usd as a reserve currency is a key objective, not a risk that might occur unintended no?
- polotics 1y ago
  maybe lookup keywords "exorbitant privilege" and "seigniorage", losing reserve currency status does not help reindustrialization.
  - actionfromafar 1y ago
    I think the exceptionalism is a too entrenched. All the world was giving US free money. When that music stops, it’s not going to be pretty.
daft_pink 1y ago
I think it’s obvious Trump’s objective is a weaker dollar to increase the cost of imports and strengthen exports, but is employing a silent currency strategy or implicit currency strategy to not spook the markets as is customary.
- actionfromafar 1y ago
  Don’t you think the objective is to let the government buy a lot of crypto from Trump?
jleyank 1y ago
Isn’t just “it has to be cheaper from the us?”driving reindustrialization? If we assume that us based salaries and costs will be higher than foreign, there has to be government imposed penalties (tariffs) to provide breathing room for native industries. And, of course, a general rise in costs will accompany these changes. If there’s nothing damaging import prices, how can it be cheaper for non state of the art stuff?
twodave 1y ago
What currency could replace the dollar? I’m not going to pretend I like the idea of trying to hold the world hostage to get more favorable terms for the US, but that is what is happening (as far as the mechanics of economics will allow, at least). Or maybe the idea would be that there would cease to be one? But if you’re a less stable nation (and certainly almost all nations are still less stable than the US, and 4 years is really nothing on a larger timeline), then you have to hold onto something besides your own currency, right?
- dlcarrier 1y ago
  Cryptocurrencies had seemed like a pretty likely candidate, but lately several of the top most-traded cryptocurrencies are stablecoins tethered to the US Dollar which, if anything, deepens the dollars hold as the reserve currency.
  - msgodel 1y ago
    The problem is that someone has to run the derivatives market which is where the dollar actually gets its value from. This occasionally requires physical violence so it's not something you can just put on the blockchain. I'd argue crypto actually augments the dollar as the world reserve currency and they're not alternatives to each other.
    - twodave 1y ago
      Is there a place I can read about this? Sounds interesting. Edit: some cursory Googling turned up this: https://business.columbia.edu/research-brief/dollars-dominance-military-financial-power https://business.columbia.edu/research-brief/dollars-dominan...
- tim333 1y ago
  I think in practice if the dollar fades people will keep reserves in a variety of currencies eg euro pound yen etc. if they don't already. It kind of makes sense to have reserves of what you trade in.
- 1y ago
hagbard_c 1y ago
That status is up for grabs no matter what he or any other US president does. If the current US government - Trump et al - succeeds in lowering the deficit and increasing US-based manufacturing - and those are two big ifs - there is some chance of the dollar remaining the semi-reliable (as in 'reliably depreciating') reserve currency it has been in the last 75 years. If they do not succeed the US will end up going bankrupt and will default on its debt payments which will spell the end of the dollar's hegemony. As to whether they can succeed in avoiding this without touching the sacred entitlement cows - Medicare, Medicaid et al - is doubtful. Many European countries have gone through years of austerity in attempts to come closer to the EU-mandated maximum deficits and I suspect the USA will have to go through a similar process. Even the cuts proposed by DOGE do not seem to fill the prospected gap between government income and spending. I suspect they'll end up raising taxes on high earners but I also suspect this won't be enough since the entitlement programs are inflation-corrected and lack a backing fund. With the current demographical developments in the USA and the rest of the Western and Eastern world an ever shrinking working population will have to pay for an ever increasing non-working population. Since there is no backing fund - current payments are used to pay out current benefits - this system will crash sooner rather than later. If and when the dollar loses its status as international reserve currency the US government won't be able to simply 'print' more dollars to fill the gap and hyperinflation will soon follow.
- actionfromafar 1y ago
  The system is being crashed. The US had a unique advantage which is pissed away.
  - hagbard_c 1y ago
    The system is bankrupt and needs an overhaul. The post-WWII era is over, the petrodollar has lost steam and the world - as in regimes and countries, not 'the planet' - is ready for a re-shuffle. I'd like 'The West' to remain one of the driving forces in whatever 'new world order' we'll end up with because we - my children, my wife, my family, myself - live there and I think 'The West' has the potential to lead this 'new world order' to a direction preferable over some of the competing alternatives [1]. For that to happen 'The West' needs to get its bookkeeping in order. The 'unique advantage' of having a world reserve currency which allows you to essentially tax the world by artificially devaluing that currency in order to finance your national debt is not sustainable. If you don't agree with this I'd like to hear your reasoning on how the system is sustainable. [1] ...and I am not going to apologise for whatever warts that 'Western culture' has since all cultures have them.
incomingpain 1y ago
Trump's actions arent impacting reserve currency. That's not how it works. Reserve currencies dont shift 20% in a year. It's more like 0.5% per year tops. The USD has dropped from 65% in 2014 to 57% in 2024 Euro has dropped from 21% in 2014 to 19% in 2024 Yen, Sterling hasnt moved around 6% CAD is rising slightly 1.75% to 2.75%. Renminbi raised slightly more from 1% to 2%. Easy to predict future shifts. CAD is going to lose its temporary boost. Sterling probably going to take 5% out of the euro's share. Otherwise nothing significant regardless of what trump does.

32 points by MilnerRoute 1y ago

dotcoma 1y ago

https://archive.is/UG8dY https://archive.is/UG8dY

crooked-v 1y ago

Calling it a "gamble" is sanewashing it.

tonetheman 1y ago
[dead]

LatteLazy 1y ago

Isn’t destroying the dollars reserve currency status key to his stated goals? I thought that as long as dollars are the reserve currency, people will want them, and trade goods and services for them just for the privilege of holding them. So the US will never get manufacturing jobs back as every other country effectively insists on subsidising exports to the us to get the dollars they need for their reserves? I am not commenting on whether this is true or a good idea etc. but ending the usd as a reserve currency is a key objective, not a risk that might occur unintended no?

polotics 1y ago
maybe lookup keywords "exorbitant privilege" and "seigniorage", losing reserve currency status does not help reindustrialization.
- actionfromafar 1y ago
  I think the exceptionalism is a too entrenched. All the world was giving US free money. When that music stops, it’s not going to be pretty.

daft_pink 1y ago

I think it’s obvious Trump’s objective is a weaker dollar to increase the cost of imports and strengthen exports, but is employing a silent currency strategy or implicit currency strategy to not spook the markets as is customary.

actionfromafar 1y ago
Don’t you think the objective is to let the government buy a lot of crypto from Trump?

jleyank 1y ago

Isn’t just “it has to be cheaper from the us?”driving reindustrialization? If we assume that us based salaries and costs will be higher than foreign, there has to be government imposed penalties (tariffs) to provide breathing room for native industries. And, of course, a general rise in costs will accompany these changes. If there’s nothing damaging import prices, how can it be cheaper for non state of the art stuff?

twodave 1y ago

What currency could replace the dollar? I’m not going to pretend I like the idea of trying to hold the world hostage to get more favorable terms for the US, but that is what is happening (as far as the mechanics of economics will allow, at least). Or maybe the idea would be that there would cease to be one? But if you’re a less stable nation (and certainly almost all nations are still less stable than the US, and 4 years is really nothing on a larger timeline), then you have to hold onto something besides your own currency, right?

dlcarrier 1y ago
Cryptocurrencies had seemed like a pretty likely candidate, but lately several of the top most-traded cryptocurrencies are stablecoins tethered to the US Dollar which, if anything, deepens the dollars hold as the reserve currency.
- msgodel 1y ago
  The problem is that someone has to run the derivatives market which is where the dollar actually gets its value from. This occasionally requires physical violence so it's not something you can just put on the blockchain. I'd argue crypto actually augments the dollar as the world reserve currency and they're not alternatives to each other.
  - twodave 1y ago
    Is there a place I can read about this? Sounds interesting. Edit: some cursory Googling turned up this: https://business.columbia.edu/research-brief/dollars-dominance-military-financial-power https://business.columbia.edu/research-brief/dollars-dominan...
tim333 1y ago
I think in practice if the dollar fades people will keep reserves in a variety of currencies eg euro pound yen etc. if they don't already. It kind of makes sense to have reserves of what you trade in.
1y ago

hagbard_c 1y ago

That status is up for grabs no matter what he or any other US president does. If the current US government - Trump et al - succeeds in lowering the deficit and increasing US-based manufacturing - and those are two big ifs - there is some chance of the dollar remaining the semi-reliable (as in 'reliably depreciating') reserve currency it has been in the last 75 years. If they do not succeed the US will end up going bankrupt and will default on its debt payments which will spell the end of the dollar's hegemony. As to whether they can succeed in avoiding this without touching the sacred entitlement cows - Medicare, Medicaid et al - is doubtful. Many European countries have gone through years of austerity in attempts to come closer to the EU-mandated maximum deficits and I suspect the USA will have to go through a similar process. Even the cuts proposed by DOGE do not seem to fill the prospected gap between government income and spending. I suspect they'll end up raising taxes on high earners but I also suspect this won't be enough since the entitlement programs are inflation-corrected and lack a backing fund. With the current demographical developments in the USA and the rest of the Western and Eastern world an ever shrinking working population will have to pay for an ever increasing non-working population. Since there is no backing fund - current payments are used to pay out current benefits - this system will crash sooner rather than later. If and when the dollar loses its status as international reserve currency the US government won't be able to simply 'print' more dollars to fill the gap and hyperinflation will soon follow.

actionfromafar 1y ago
The system is being crashed. The US had a unique advantage which is pissed away.
- hagbard_c 1y ago
  The system is bankrupt and needs an overhaul. The post-WWII era is over, the petrodollar has lost steam and the world - as in regimes and countries, not 'the planet' - is ready for a re-shuffle. I'd like 'The West' to remain one of the driving forces in whatever 'new world order' we'll end up with because we - my children, my wife, my family, myself - live there and I think 'The West' has the potential to lead this 'new world order' to a direction preferable over some of the competing alternatives [1]. For that to happen 'The West' needs to get its bookkeeping in order. The 'unique advantage' of having a world reserve currency which allows you to essentially tax the world by artificially devaluing that currency in order to finance your national debt is not sustainable. If you don't agree with this I'd like to hear your reasoning on how the system is sustainable. [1] ...and I am not going to apologise for whatever warts that 'Western culture' has since all cultures have them.

incomingpain 1y ago

Trump's actions arent impacting reserve currency. That's not how it works. Reserve currencies dont shift 20% in a year. It's more like 0.5% per year tops. The USD has dropped from 65% in 2014 to 57% in 2024 Euro has dropped from 21% in 2014 to 19% in 2024 Yen, Sterling hasnt moved around 6% CAD is rising slightly 1.75% to 2.75%. Renminbi raised slightly more from 1% to 2%. Easy to predict future shifts. CAD is going to lose its temporary boost. Sterling probably going to take 5% out of the euro's share. Otherwise nothing significant regardless of what trump does.