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USD share as global reserve currency drops to lowest since 1994
- gigatexal 10mo agoInsane this administration wants pimp the US out to the highest bidder and let the crypto weirdos run the world. If we ever lost the reserve currency peg treasury bills will spike and it’ll be impossible to fund the government. We spend 7T every year and take in 5T in taxes. This admin is gutting the IRS and banking on tarrifs which are just taxes. So … without the ability to keep interest rates very low because everyone wants our debt …
- detourdog 10mo agoMy understanding is that it has happened. The oil market was tied to the USD. The BRICS have now implemented a payment system as robust as SWIFT system. Oil is now being paid for using that system.
- jeffbee 10mo agoPanics about how oil is being traded in non-USD terms are as old as the internet and, in all likelihood, even older than that. You can find usenet slop from 20-30 years ago about the petro-euro and the "tehran oil bourse". Here's an old site that is/was daily panics about the fall of the dollar, from 15-25 years ago. http://www.engdahl.oilgeopolitics.net/ http://www.engdahl.oilgeopolitics.net/
- detourdog 10mo agoNobody is panicking. BRICS has gotten steadily larger and is gaining as an alternative banking system. This is competition. This just requires more thoughtful strategies.
- gigatexal 10mo agoThe steady building up of alternatives will happen until one day the reserve currency status will change hands all of a sudden. I think the Fed could stem the whole thing by just issuing a stable coin itself pegged to the dollar and re-assert itself as the dominant currency/arbiter... but who knows. Maybe then it'd have insight into every transaction and be able to stem things with even more power than it can now. Nobody stays king forever. Maybe it's time the US is forced to balance its books and stop riding on cheap credit. Losing the power of the reserve currency and the power that that gives to SWIFT and things will take a lot of soft power away from the US. Without allies the US couldn't stop a united China, Russia, insert-other-would-be-ally-of-theirs in a world conflict. As another commenter said there's no leadership at teh top just chaos. People, countries, banks don't invest in chaos.
- detourdog 10mo agoI think the Fed is under powered without consistent planning from our executive office. Erratic behavior does not instill confidence for people trying to rationally plan. I also think the US used the banking system to punish enough nations that an alternative became viable.
- JumpCrisscross 10mo ago> steady building up of alternatives will happen until one day the reserve currency status will change hands all of a sudden This is not how it has ever happened. Instead, we’ll see a gradual erosion as the world switches to multi-polarity and spheres of influence. (And, with decreasing international trade, every country’s reserve mix will vary.)
- detourdog 10mo agoI agree that the next wave may not be dominated by a single currency. I also think that is a superior system. I think the BRICS system is based on honoring multiple currencies rather than using a single currency for settlement.
- JumpCrisscross 10mo ago> Oil is now being paid for using that system The petrodollar hypothesis has been a myth since the 1990s. With America a net oil exporter, it’s an entirely stupid model to keep running.
- detourdog 10mo agoI wish you would elaborate how being a net exporter relates to it being a myth. I don't see the connection. My point is that global trade of which oil is a major component needs to settle the books nightly. If the books aren't reconciled in an efficient manner trade has to slow down.
- JumpCrisscross 10mo ago> how being a net exporter relates to it being a myth. I don't see the connection Petrodollar a U.S. policy comes from the 1970s, when the U.S. guaranteed the House of Saud’s security in exchange for them selling their oil in dollars. The reason wasn’t to do some currency scheme, but to ensure the U.S. could always buy Saudi oil in a currency we controlled. Saudi Arabia then invested its profits in Treasuries, which closed the loop on Wall Street [1]. When America imported oil, keeping oil exporters close was strategically vital. Petrodollar recycling helped with that. Now that we don’t, it doesn’t. > global trade of which oil is a major component Like 4% [2][3]. [1] https://en.wikipedia.org/wiki/Petrodollar_recycling https://en.wikipedia.org/wiki/Petrodollar_recycling [2] https://oilprice.com/Energy/Crude-Oil/Oil-Dominates-the-5-Trillion-Global-Commodity-Market.html https://oilprice.com/Energy/Crude-Oil/Oil-Dominates-the-5-Tr... ~$1.5tn in 2021 [3] https://unctad.org/publication/global-trade-update-december-2025-global-trade-poised-record-breaking-2025-flows https://unctad.org/publication/global-trade-update-december-... 35tn in 2025
- detourdog 10mo agoI see that as a side show to the overall banking system. I trying to express that this was a reactionary response to an immediate problem rather than a key part of banking.
- _blk 10mo agoAre you trying to project this unto Trump when the Fed is doing everything it can to oppose his measures? I'm only the crypto weirdo guy asking.
- throwawayqqq11 10mo agoSo gutting public institutions and the tarifs do not work as trump intended because the fed opposed it? What did they do achieve that? (Sorry if i come across as trump deranged.)
- Jcampuzano2 10mo agoHave you ever thought it doesn't matter what the fed does to try to minimize the damage. Trust needs to come from the top, and there is none there right now.
- bigbadfeline 10mo ago> Are you trying to project this unto Trump when the Fed is doing everything it can to oppose his measures? The Fed isn't opposing Trump's measures, on the contrary, the Fed is doing everything to accommodate as much of his policies as possible without wider damage to the economy. It's Trump who doesn't understand the risks of unhinged tariffs and low interest rates which he demands because of his personal conflicts of interest.
- duttish 10mo agoI'm not an economist so someone please correct me / expand on this; I'm guessing this is kind of a "It's not a problem until it's a crisis" situation? So far other central banks haven't begun selling treasuries, they've just stopped buying them. But once one starts selling it could become self reinforcing? What could replace it? There doesn't seem to be any new hegemonic power on the same level. Could we enter a world where all central banks hold a mix of currencies and nobody benefits from being the reserve?
- seanmcdirmid 10mo agoUS Treasuries have terms, if you aren’t refreshing your treasury buys, it is the same as selling them. US treasuries and by extension USD was useful because it could soak up billions of dollars of savings (debt for America) without taking a huge inflation hit (treasury rates were often less than inflation, so you still take some hit). As for where that money is going now? Other currencies and saving instruments probably..
- deleted 10mo ago[deleted]
- somenameforme 10mo agoThis is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation is a conceivable longer term outcome. The replacement will probably be a multinational currency with strictly controlled quantity tied to some sort of physical asset(s). Basically Bretton Woods 2.0, except with the learned experience of not just granting a single country immense power and having them pinky swear not to default on their obligations and then abuse that granted power. China's probably betting that that asset will be gold.
- HPsquared 10mo ago
- samsk 10mo agoWho would tell. Economy runs on 'trust' - not on 'by tomorrow we apply this random tax rate to this pinguin island and everone else'.
- nrhrjrjrjtntbt 10mo agoTrend has been negative since 1999 so as much as I like to poke the tango doll, this can not be the reason or only reason.
- bhewes 10mo agoWe do have a trojan horse with social security. Overnight we can become the largest single owner of global corporate stocks and bonds.
- ur-whale 10mo agoHighly unpopular opinion here and I'm going to get downvoted into the ground (who cares), but ... this has been a very long time coming and has very much been a self-inflicted change. My bet is that it will end up being a very good thing for the world at large. China has recently started to buy Arabian oil and paying with yuan. Major countries (India, China) are starting to buy Russian raw materials and paying directly using rubles. In both cases, trade is happening and completely bypassing the once unavoidable USD. The US choosing to weaponize the USD for geopolitical purposes has finally made the world realize the immense loss of sovereignty they had allowed themselves to be subjected to by making the USD the global trading currency. This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status. The golden triangle of Russia (raw materials), India (highly educated workforce, strong demography), China (industrial powerhouse, stole the bulk of Western IP, is now producing more cutting-edge research than the west) finally free of the shackles of the USD and establishing direct overland trade routes that 100% avoid the seas (thereby 100% avoiding potential US embargoes, both financially and militarily enforced) ... the world is going to change in a rather profound way, finally relegating the US to being a simple country instead of the has-been empire it currently is.
- seg_lol 10mo ago[flagged]
- _blk 10mo agoOoooh that must've struck a nerve. Seems we can't post that here without massive loss of reputation. Progressivism != liberalism. That stuff just doesn't fare well, even as sarcasm.
- seg_lol 10mo agoDude is giving what many have wanted for years, the largest of which is a massive reduction in US hegemony. Restarted militarization of Europe, accelerated the expansion of China into Africa. Causing Five Eyes to curtail the flow of intel. But at the same time, utterly burning US soft power with the shuttering of USAID and most likely causing 14M excess child deaths world wide. Shutting down USAID was a bigger "mistake" than the invasion of Iraq and the blowback will be even larger. Bro just drove the US empire off a cliff. Manufacturing will have to come back if they succeed in burning US currency. Good thing the rich have so much of it, Elon at 1/10th is still 40-70B.
- mvkel 10mo agoWhenever I see headlines like this, I ask: what happened in 1994? It was post-Cold War and central banks were trimming USD reserves to test alternatives. Then, crises hit (tequila, Asian, Russian, dot com) and the world reconsolidated around USD, thanks to the immense strength of the Federal Reserve and IMF. Similarly now, reserve share is falling as countries hedge sanctions and geopolitics, yet dollar usage in trade, debt, and crisis funding remains dominant, and unless a true full-stack alternative (liquidity, safety, yield, and crisis response) emerges, history will repeat. Makes me wonder: is this just an artifact of the world being relatively "stable" right now?
- MagnumOpus 10mo agoNo, this is an artifact of Russian reserves getting frozen in 2022 and autocracies the world round getting more careful about having all their eggs in that basket. The PRC’s SAFE is selling dollars and buying gold in a very covert but absolutely massive fashion, and most likely, so are many other countries in a smaller way.
- brianwawok 10mo agoGold price is double, not sure it’s that quiet.
- thisislife2 10mo agoIndia has also been quietly bringing back its gold reserves stored abroad. NATO west made a very bad call by freezing, and then publicising their threat to also seize, Russia's foreign reserves in their country.
- deleted 10mo ago[deleted]
- expedition32 10mo agoThe US is now openly threatening countries not to create an alternative to the dollar. Ofcourse this does not work with PRC they are perfectly capable and willing to sink carrier groups if it comes down to it.
- rib3ye 10mo agoSo is "non-traditional reserve currencies" cryptocurrency or not?
- 1over137 10mo agoNot. Cryptocurrency is just nonsense.
- filloooo 10mo agoA 2% change, more likely this has something to do with the global rush for US tech stocks. Some countries like South Korea are crazy on US stock trades. Dollars' depreciation probably helped a bit too.
- roncesvalles 10mo agoThere is a global shift toward higher US equity allocations seeing how well they've performed in the last however-many years. Also it seems like President Trump's sole mandate is to keep the stock market from crashing, so that helps.
- skybrian 10mo agoThere’s more to international trade than what central banks do. The US is still a good place to invest overall, which is why we can run trade deficits. The money earned by foreigners, whether it’s from selling oil, cars, or anything else, goes into US investment of all kinds. Foreigners can buy the S&P 500 just as easily as bonds. US interest rates have been declining lately, so perhaps other investments are more attractive.
- maxglute 10mo agoDollar dominance erosion shifting towards dollar inertia. Post RU sanctions dollar lost much of it's leverage (as geopolitical weapon), i.e. actual useful dominance function (transaction panopticon, sanctions)while still retaining most of the liability (Triffin etc). Dollar going to remain popular by volume because plumbing in place, but parallel payment systems last few years = systematic blindspots where US treasury can't monitor what others buy outside of dollar system, and generally weaker ability coerce countries. What's left of dollar system is US enjoying exorbitant privilege of going into ~35T and rapidly increasing debt to serve as asset for everyone else, while dragging down export via uncompetitive FX. One interesting attack vector vs USD is PRC recycling it's dollar surplus / shadow lending it's USD reserves at more favorable rates than US gov can, i.e. countries (emerging markets / BRI recipients) who would have borrowed USD from FED (or US influenced IMF/WB) now borrow from USD from PRC -> reduce US treasuries demand and drive up US interest -> further increase US debt. PRC basically hijacked and weaponize USD liquidity to make increasingly ineffective dollar system (as geopolitical tool) even more expensive to maintain while PRC can enjoy dollar liquidity without the maintenance costs. And that's probably the ultimately the goal, smart play is not to inherit reserve obligations, but to turn reserve holder's exorbitant privilege to exorbitant curse.
- JumpCrisscross 10mo ago> countries (emerging markets / BRI recipients) who would have borrowed USD from FED (or US influenced IMF/WB) now borrow from USD from PRC -> reduce US treasuries demand This makes no sense. If the PRC is lending U.S. dollars, that doesn’t reduce Treasury demand. It increases demand for dollar-denominated assets, goods and service providers. The borrowing country has to spend those lent dollars after all.
- maxglute 10mo agoPRC lending their USD surplus to countries to buy more PRC shit. "Increases demand for dollar-denominated assets, goods and service" =/= increase demand for US treasury, aka it doesn't fund US deficits. The attack is not on dollar circulation / liquidity but cost of treasury Old: PRC recycle surplus USD into US bonds, increase US treasury demand, subsidizes cheap US debt. New: PRC recycle surplus USD into BRI finance, said USD doesn't return to US treasury to buy bonds, decrease US treasury demand, treasury increase interest to fill hole, makes exorbitant privilege more exorbitant. PRC parallel dollar bond lending COMPETES with US treasury bond lending. PRC dollars gets recycled towards PRC goods / BRI projects, not US treasury. PRC leveraging dollar liquidity for PRC geopolitical interests, meanwhile taking demand away from treasury bond sales, so US drive rates up to compete. US treasury had to find other buyers to fill ~600 billions (and raising) of USD bonds that PRC no longer holds. Filling hole that size = finding more price sensitive buyers (vs PRC who previously default recycled into treasury), so raise interest, increase debt servicing. US 10 year going from 0% (countries basically paying to hold USD) to ~0.8% cost US ~300B+ annually. Now that's not all PRC doing, but 100 billion here and there and soon we are talking about real money.
- Havoc 10mo agoUSD position as global reserve is very much based on trust. Between the weaponizing that for sanctions via SWIFT, US becoming unreliable as a partner (militarily, politically and economically) and Trump rambling about replacing pieces of the financial system with crypto [0] that trust was bound to waiver Think we'll have a parallel system in record time. Question is who/how. Russia wants it but they're well Russia. China's yuan isn't open enough. Euro is a bit to regional and dependent on the US lead system anyway. So there isn't an obvious candidate. Something is going to have to give though given US shenanigans. [0] https://www.reddit.com/r/economy/comments/1otdio8/trump_says_the_current_financial_system_is/ https://www.reddit.com/r/economy/comments/1otdio8/trump_says...
- gethly 10mo agotl;dr dollars are coming home. expect weimar republic levels of inflation in next decades.
- deleted 10mo ago[deleted]
- seanieb 10mo agoJudging by the comments Americans still don’t intuitively understand what the rest of the world does. Everyone is trying to create distance from the United States. The US no longer represents the smart deal, it represents risk, risk that countries can’t afford. The US has spent the last year creating chaos and punishing its closest allies and trading partners. The instability goes beyond Trumps term too, they’re rightfully afraid of the system that elected Trump twice. When they have a choice between euro’s, dollar’s or yuan they’re going to choose dollars less frequently to avoid exposure to the US.
- Koffiepoeder 10mo agoCan confirm, one example: the company that I am currently working for put all its plans for investing in the US in the fridge and is exploring other markets now.
- thoughtstheseus 10mo agoThat’s entirely the point. Leave the USA financial system or contribute more. If you pick an single alternative currency I’ll run through the reasons why most would choose the US Dollar.
- coldtea 10mo agoThe US worked hard for this outcome. After stupidly weaponizing the financial system, and stupidly outsourcing their industrial capacity and basing GDP progress on bubbles, there's no wondering why countries and global players wont trust their money to the dollar...
- thoughtstheseus 10mo agoSome dude at Treasury even wrote a book about. Juan Zarate, author of Treasury's War: The Unleashing of a New Era of Financial Warfare.
- rajnathani 10mo agoThe key point, which at least the top comment here is missing and others may overlook of the article, is that the article states that the USD currency reserve is still the same but that the other currencies being present in the mix have increased and thus the USD proportion has decreased (not that the absolute amount of USD being held decreased). However, the implication is still the same and that is that the rest of the world's central banks are holding relatively less USD.