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>That's always been the deal. This is a bit of popular myth on sites like this but isn't supported by economists, historians or people in finance. The total vo

>That's always been the deal. This is a bit of popular myth on sites like this but isn't supported by economists, historians or people in finance. The total volume of oil trade is small fraction of total global trade or capital flows. Like I said, the USD is the reserve partly because it's beneficial to these surplus economies to have somebody else holding the bags, but also because there aren't viable alternatives because anybody else who can do it dosen't want to. And given there are 180^180 possible exchanges, a reserve currency will exist for practical reasons. >I don't actually think there's any law of nature that reserve currency status == de-industrialization. A currency that assumes reserve currency status will strengthen due to increased demand, thus making their exports more expensive and thus uncompetitive on the international stage. Which is incompatible with the export-driven strategies of the EU, China or Japan, all the main contenders for alternative reserve currencies. If you look at the behaviour of their central banks, when they receive capital inflows, they in turn buy assets elsewhere to offset the appreciation to maintain the value of their currency. But the Fed cannot and dosen't do that.

munksbeer 1y ago
> Which is incompatible with the export-driven strategies of the EU, China or Japan, all the main contenders for alternative reserve currencies. If you look at the behaviour of their central banks, when they receive capital inflows, they in turn buy assets elsewhere to offset the appreciation to maintain the value of their currency. But the Fed cannot and dosen't do that. Late reply. Could you supply some source material to look into this. What "assets elsewhere"?
insane_dreamer 1y ago
But that is counter-balanced by being able to issue debt in your own currency at low interest rates. So while yes you do run a deficit, you are in control of your own destiny so to speak, with the ability to print your way out of it (providing you do so wisely so as not to trigger runaway inflation), rather than being at the mercy of lenders due to foreign-currency issued debt (i.e., South America and the IMF).
- corimaith 1y ago
  Well clearly America has decided that costs of the reserve currency outweight\ the benefits conferred. Many other countries after all manage large debts but also confer the advantages of a surplus economy. >mercy of lenders due to foreign-currency issued debt (i.e., South America and the IMF). Countries come to the IMF when nobody else want to lend to them. It's that or national insolvency. That obviously means some harsh and politically unpopular reforms need to made with spending if they want to restore confidence with everyone else. The IMF is a useful scapegoat that diverts the heat from government to make the actions it needs to make. Nobody is forced to go the IMF, yet despite all the critique, people are still going to them today. In fact the alternatives like China are alot harsher now in their debt relief terms when they realised how many of their lending projects were failing. It's a bit ironically actually when they realise themselves why debt to troubled countries tends to come with stipulations.
  - insane_dreamer 1y ago
    > clearly America has decided that costs of the reserve currency outweight\ the benefits conferred The Trump admin has decided this; that's not necessarily the consensus among economists. Bessent seems capable, but otherwise it's not like this admin is staffed with the best and the brightest by any means, given that the number one criteria is abject loyalty to Trump and his agenda.
sho 1y ago
> This is a bit of popular myth on sites like this but isn't supported by economists, historians or people in finance. The total volume of oil trade is small fraction of total global trade or capital flows. What's a popular myth? That oil, still the strategic commodity worldwide, plays a large role in the USA's security relationships and use of the USD is, written or unwritten, a tacit part of those relationships? That's completely wrong and you have a lot of reading to do to understand the entire post-WWII geopolitical order. Oil is receding yes, but it's still critical and you can't understand anything about the postwar security order - which is very closely tied to the rise of the USD - until you understand that. I mean, the Nimitz is in the Persian Gulf right now keeping the sea lanes open for their client states in the region. That's the USA's part of the deal right there.
- corimaith 1y ago
  I'll leave it to readers to look up on the details of Bretton Woods or the Nixon Shock or any basic econ resource to understand why oil or military aid is not really the main factor behind the reasons of the US reserve currency. The Nimitz cannot physically stop the Iranians from closing the Straits of Hormuz if they wanted BTW, it's rather that there isn't much point to Iran closing said straits and just angering pretty much everyone else in the world. You can look at Yemen to see how things really go when an actor dosen't care anyways.

munksbeer 1y ago

> Which is incompatible with the export-driven strategies of the EU, China or Japan, all the main contenders for alternative reserve currencies. If you look at the behaviour of their central banks, when they receive capital inflows, they in turn buy assets elsewhere to offset the appreciation to maintain the value of their currency. But the Fed cannot and dosen't do that. Late reply. Could you supply some source material to look into this. What "assets elsewhere"?

insane_dreamer 1y ago

But that is counter-balanced by being able to issue debt in your own currency at low interest rates. So while yes you do run a deficit, you are in control of your own destiny so to speak, with the ability to print your way out of it (providing you do so wisely so as not to trigger runaway inflation), rather than being at the mercy of lenders due to foreign-currency issued debt (i.e., South America and the IMF).

corimaith 1y ago
Well clearly America has decided that costs of the reserve currency outweight\ the benefits conferred. Many other countries after all manage large debts but also confer the advantages of a surplus economy. >mercy of lenders due to foreign-currency issued debt (i.e., South America and the IMF). Countries come to the IMF when nobody else want to lend to them. It's that or national insolvency. That obviously means some harsh and politically unpopular reforms need to made with spending if they want to restore confidence with everyone else. The IMF is a useful scapegoat that diverts the heat from government to make the actions it needs to make. Nobody is forced to go the IMF, yet despite all the critique, people are still going to them today. In fact the alternatives like China are alot harsher now in their debt relief terms when they realised how many of their lending projects were failing. It's a bit ironically actually when they realise themselves why debt to troubled countries tends to come with stipulations.
- insane_dreamer 1y ago
  > clearly America has decided that costs of the reserve currency outweight\ the benefits conferred The Trump admin has decided this; that's not necessarily the consensus among economists. Bessent seems capable, but otherwise it's not like this admin is staffed with the best and the brightest by any means, given that the number one criteria is abject loyalty to Trump and his agenda.

sho 1y ago

> This is a bit of popular myth on sites like this but isn't supported by economists, historians or people in finance. The total volume of oil trade is small fraction of total global trade or capital flows. What's a popular myth? That oil, still the strategic commodity worldwide, plays a large role in the USA's security relationships and use of the USD is, written or unwritten, a tacit part of those relationships? That's completely wrong and you have a lot of reading to do to understand the entire post-WWII geopolitical order. Oil is receding yes, but it's still critical and you can't understand anything about the postwar security order - which is very closely tied to the rise of the USD - until you understand that. I mean, the Nimitz is in the Persian Gulf right now keeping the sea lanes open for their client states in the region. That's the USA's part of the deal right there.

corimaith 1y ago
I'll leave it to readers to look up on the details of Bretton Woods or the Nixon Shock or any basic econ resource to understand why oil or military aid is not really the main factor behind the reasons of the US reserve currency. The Nimitz cannot physically stop the Iranians from closing the Straits of Hormuz if they wanted BTW, it's rather that there isn't much point to Iran closing said straits and just angering pretty much everyone else in the world. You can look at Yemen to see how things really go when an actor dosen't care anyways.