6 ms·

> Should the US become an unfriendly power to the rest of the western world, it will find the demand for its currency plummeting, which I don't want to outline

by SllX 9mo ago

> Should the US become an unfriendly power to the rest of the western world, it will find the demand for its currency plummeting, which I don't want to outline is a big issue. Right now this is much more of a maybe, possibly, eventually, over a long enough time horizon. As of the end of 2025, USD still made up 57% of foreign reserves vs 20% for the Euro and 3% for the Chinese renminbi. Nearly all commodities are still priced in USD and about 50% of trade invoicing is done in dollars, closer to 60% if you exclude the Eurozone. USD also makes up about 60% of SWIFT transactions. So the demand is still there today and de-dollarization is not really a thing in aggregate as of January 2026, despite all of the events of the past year or so. So if this time is different, I’m not seeing it yet.

maxglute 9mo ago
>demand is still there today Not all demand the same. There are broadly 2 types of USD buyers 1. price insensitive: sovereign banks, who buys for liquidity/storage 2. price sensitive: hedge funds, private buyer who buys returns Type 1 buyers are bailing out of treasury. Type 1 are marginal buyers, the close auction regardless or rate, this keeps rates low -> debt servicing low. They artificially depress yield to non market rates, without them rate go up because you have more price sensitive buyers who buy for returns. This increases borrowing costs, hence US debt repayment rising massively. Type 1 buyers, i.e. US allies (and historically even adversaries) soaked up treasuries are now de-dollarizing / buying gold in lieu of _more_ USD. Type 1s underpin the "privilege" part of exorbitant privilege. The more they de-dollarize the more dollars become exorbitant, aka debt like everyone else. Type1, sovereign held 60% of USD to 40% in last 5 years. This large part of why interest tripled and debt servicing went from 350B to 1T in 5 years. Type1s exit to 20% in another 5 years and maybe interest goes to 5%, debt servicing 2T+. It's the difference between 10%/20%/30% debt servicing as % of federal revenue. This not to mention USD reserve ticking down at 1% per year means meaningful changes in our lifetimes, and velocity may increase with developments like Saudi no longer locking oil to dollar. Less USD as % of global reserve = more network effects of alternate payment = increased potential velocity of USD reserve drop. This doesn't mean other currencies pickup all slack, i.e. central banks seem to be going in gold / commodities with no counter party risk for new storage. The net result is USD will still be around, in large volumes, but the cost/debt to sustain the system will be "normalized" while US budget is historically is built around USD debt being privileged. AKA difference between borrowing money from family vs payday loans. >Nearly all commodities are still priced in USD PRICED as in benchmarked in USD, but =/= USD is being spent to settle them. There's a fuckload of commodities where PRC alone buys 30/40/50%+ of global production, and while quoted in USD, increasingly settled in rmb/CIPS, bilateral currencies, BRI infra or other swaps mechanisms that bypasses USD. This one of the largest source of dedollarization - PRC went from single digit % to plurality of cross-border settlements in RMB/non USD. Though this is just very recent leading indicator that USD is functionally circumventable.
- cbdevidal 9mo ago
  There is another type of demand that I rarely see mentioned. Not only does the United States owe trillions of US dollars, other nations do, as well. They hold many trillions worth of loans denominated in US dollars. They must be repaid in US dollars and not in any other currency. And not just to the United States but to other nations, as well. South Africa owes US dollars to Australia, Australia owes US dollars to Brazil, Brazil owes US dollars to Argentina, etc. These nations are hungry for every dollar we print. Even if every trading partner dropped the dollar for trade tomorrow, and if everyone who owned Treasuries all sold them at once, there would still be demand for US dollars to repay their loans. The IMF made them an offer they couldn’t refuse, and spun a sticky web of a debt trap as a result. Three minute video: https://m.youtube.com/watch?v=_SaG9HVXMQg&pp=ygUQZG9sbGFyIG1pbGtzaGFrZQ%3D%3D https://m.youtube.com/watch?v=_SaG9HVXMQg&pp=ygUQZG9sbGFyIG1...
  - maxglute 9mo ago
    >They must be repaid in US dollars IMO this one of those cases where dollars is ultimately benchmark than requirement, IOU/settlement forms can always be restructured/renegotiated if USD is no longer lender of last resort, i.e. alternative payment systems enables take it or leave it deals in medium/long term. USD/reserve status snowballed because US controlled techstack postwar which US leveraged (along with military hegemony) to USD controlling primary energy (petrodollar). Civilization/modernity was locked behind USD. Money followed existential goods provider, that's the real USD / unipolarity moat. There's no take it / leave it from US company scrip because leaving eurodollar system = technical default (most usd loans hardcoded on newyork/english law) from eurodollar western financial system = death sentence. Once that lock/dependency erodes all kinds of force majeure geopolitics can rationalize breaking dollar contracts. AKA multipolarity. If alternate techstack/payment systems pops up and reach tipping point, country A can just say to country B who only wants USD (due to alignment or whatever), I don't have enough USD, here's RMB & cips/Brics+ & mbridge basket of equivalent value. This geopolitical layer, if BRIC+ can offer fossil, food without US and PRC can offer renewable energy, capital goods, consumer goods, technology, including 80% as good semi and civil aviation... etc if chokepoint goods are no longer exclusively under USD perview, then USD enforcement mechanism simply dies. If we're talking about loans/aid, IMF is really pittance, low hundreds of billions. It's why PRC is now using their 3T USD surplus to basically do their own shadow USD lending without IMF conditionalities... countries now don't need to buy USD from US. And somehow PRC currently lending / providing swaplines with their USD at lower rates than US treasury. Incidentally, this dollar recycling also lowers demand for new USD bonds, further reduce type1 margin buyers. This circles back to other nations own trillions of USD to each other... when you remove type1s, you're left with type2 private sector / non bank financial institutions - these are the buys where each USD bought increases triffin burden, i.e. they are the exorbitant curse / payday loans traps that makes USD reserve more expensive to maintain. Their demand is a trap, not a benefit.
dyauspitr 9mo ago
That number has been dropping by a percent every year for USD over the last 10 years. It used to be 65% USD in 2015
- SllX 9mo ago
  Sure, and in 1992 it was 46%, and in 2000 it was 71% and in 2013 it was 61%. USD foreign exchange reserves have definitely declined from their peak, but by “declined” we’re talking about going from “overwhelmingly dominant” to “merely dominant” to potentially in a few years “equal to every other foreign currency reserve in the world combined”, and maybe USD foreign exchange reserves will decline even further beyond that point.
  - somenameforme 9mo ago
    There's some major historical events here. It's not just random movement. Here is a sort of visualization of key points and the USD share of global reserves with the events attached. The number in percent is the USD share of global reserves. 1970 (85%) - Up until 1971 [1] the USD was backed by gold by the Bretton Woods system. Other countries could trade USD in for gold at a fixed rate and in exchange would peg their currencies to the USD and trade in the USD. The idea was to prevent the US from ever being able to exploit their power in this system because if we printed too many dollars other countries could just hoover those dollars up on the cheap, convert them to gold, and make a bunch of money. Nonetheless we did print excessive amounts of money and abuse the power this system was granting us. So France dutifully hoovered up those dollars and made a gold call. We said 'nah', defaulted on our debts, and withdrew from Bretton Woods. This led to the famous quote from Nixon's Secretary of the Treasury: "The dollar is our currency, but it's your problem." 1990 (47%) - Following those events, the USD began seeing rapid inflation, and other countries were rapidly dropping the dollar. This 'peaked' around 1990. But then in 1991 the USSR collapsed. This not only left the US as the undisputed and sole 'king' of the world, but also led to these former nations beginning to dollarize once the dust had settled. The USD suddenly again starts to see mass adoption. 2001 (72%) - The adoption reaches its peak in 2001. At this point not only was there the dotcom bubble, but the world order begins clearly shifting with China and Russia developing increasingly rapidly and looking to become viable world powers once again. And there's been a gradual process of de-dollarization since then declining to where it is today to less than 57% and very much trending to where we were right before the USSR collapsed. 2025 (57%) - Where we are today. We're very much trending towards 1990, only 10 points away, which is the level when everybody was dumping the USD, the US economy was shaky at best, and there was another major superpower in the world and nobody was quite sure who would 'win.' This is far more significant than 'random noise' you're implying. --- I am leaving out plenty of relevant happenings including the transition to the petro dollar, South American economic crisis, and so on - but these only contribute to eras I think, while the above are the main drivers. [1] - https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
panarky 9mo ago
The international "rules-based order" is a good idea when most nations play by the rules most of the time, and when the most powerful at least pretend to follow the same rules as everyone else. A world order based on rules makes it possible to live at a much higher level of abstraction. Abstractions like rule of law, democracy, government currencies and stock exchanges are intangible and imaginary. They're mostly just figments of collective belief. But these wispy and unreal ideas that everyone believes in make it possible for most people to live longer, healthier and less difficult lives. The "rules-based order" was always partly mythical, but as long as everyone kept pretending, it mostly continued to function. But when we devolve from the rules-based order to the old order of pure power and might-makes-right, kings and dictators, when there's no more collective belief that the rules apply to the rich and powerful, then the tower of abstractions collapses, and we're back to the cold, hard, brutal and difficult real world. People will find out that life in the real world is a lot poorer and more miserable than life at the top of the tower of abstractions, even if your brokerage account appears to double.
- majormajor 9mo ago
  The US has played by different rules, might makes right, in the western hemisphere for a long time. Screwing around with Greenland shit, on the other hand, seems riskier.
  - deleted 9mo ago
    [deleted]
  - mjanx123 9mo ago
    In practice the US could already do whatever it wanted in Greenland/Canada etc. The options for the motivation behind the theatrics I see. 1. Instill fear in the vassals->support for militarization rises there->they become more useable as proxies against RF/China 2. Just another Trump silliness
    - bdbdbdb 9mo ago
      1. Could also be called Miller silliness
jacquesm 9mo ago
The end of 2026 was remarkably different to the world of today, and it that's logical it is - checks calendar - already 31 days ago. Now imagine another year of this.
- pigeons 9mo ago
  Check that calendar again.
- sodapopcan 9mo ago
  > The end of 2026 Seems you didn't check you calendar hard enough ;)
  - jacquesm 9mo ago
    hah! it was 6 am after a long night of hacking...
    - sodapopcan 8mo ago
      Fair! I clearly didn't check my spelling so I'm not one to talk!
    - superfluous_g 9mo ago
      [dead]
BobbyJo 9mo ago
> So if this time is different, I’m not seeing it yet Compare those numbers to 5 years ago. Remember, this is the timescale of a country, not a beagle. America has run on the strength of the dollar for decades, and the symptoms of that collapsing are likely to play out over decades.
superfluous_g 9mo ago
[dead]
willtemperley 9mo ago
> USD still made up 57% of foreign reserves Yes, but that's the lowest it's been since 1994, in percentage terms. In dollar terms it's been largely flat for the last decade: https://wolfstreet.com/2025/12/26/status-of-the-us-dollar-as-global-reserve-currency-usd-share-drops-to-lowest-since-1994/ https://wolfstreet.com/2025/12/26/status-of-the-us-dollar-as...

by SllX 9mo ago

maxglute 9mo ago

>demand is still there today Not all demand the same. There are broadly 2 types of USD buyers 1. price insensitive: sovereign banks, who buys for liquidity/storage 2. price sensitive: hedge funds, private buyer who buys returns Type 1 buyers are bailing out of treasury. Type 1 are marginal buyers, the close auction regardless or rate, this keeps rates low -> debt servicing low. They artificially depress yield to non market rates, without them rate go up because you have more price sensitive buyers who buy for returns. This increases borrowing costs, hence US debt repayment rising massively. Type 1 buyers, i.e. US allies (and historically even adversaries) soaked up treasuries are now de-dollarizing / buying gold in lieu of _more_ USD. Type 1s underpin the "privilege" part of exorbitant privilege. The more they de-dollarize the more dollars become exorbitant, aka debt like everyone else. Type1, sovereign held 60% of USD to 40% in last 5 years. This large part of why interest tripled and debt servicing went from 350B to 1T in 5 years. Type1s exit to 20% in another 5 years and maybe interest goes to 5%, debt servicing 2T+. It's the difference between 10%/20%/30% debt servicing as % of federal revenue. This not to mention USD reserve ticking down at 1% per year means meaningful changes in our lifetimes, and velocity may increase with developments like Saudi no longer locking oil to dollar. Less USD as % of global reserve = more network effects of alternate payment = increased potential velocity of USD reserve drop. This doesn't mean other currencies pickup all slack, i.e. central banks seem to be going in gold / commodities with no counter party risk for new storage. The net result is USD will still be around, in large volumes, but the cost/debt to sustain the system will be "normalized" while US budget is historically is built around USD debt being privileged. AKA difference between borrowing money from family vs payday loans. >Nearly all commodities are still priced in USD PRICED as in benchmarked in USD, but =/= USD is being spent to settle them. There's a fuckload of commodities where PRC alone buys 30/40/50%+ of global production, and while quoted in USD, increasingly settled in rmb/CIPS, bilateral currencies, BRI infra or other swaps mechanisms that bypasses USD. This one of the largest source of dedollarization - PRC went from single digit % to plurality of cross-border settlements in RMB/non USD. Though this is just very recent leading indicator that USD is functionally circumventable.

cbdevidal 9mo ago
There is another type of demand that I rarely see mentioned. Not only does the United States owe trillions of US dollars, other nations do, as well. They hold many trillions worth of loans denominated in US dollars. They must be repaid in US dollars and not in any other currency. And not just to the United States but to other nations, as well. South Africa owes US dollars to Australia, Australia owes US dollars to Brazil, Brazil owes US dollars to Argentina, etc. These nations are hungry for every dollar we print. Even if every trading partner dropped the dollar for trade tomorrow, and if everyone who owned Treasuries all sold them at once, there would still be demand for US dollars to repay their loans. The IMF made them an offer they couldn’t refuse, and spun a sticky web of a debt trap as a result. Three minute video: https://m.youtube.com/watch?v=_SaG9HVXMQg&pp=ygUQZG9sbGFyIG1pbGtzaGFrZQ%3D%3D https://m.youtube.com/watch?v=_SaG9HVXMQg&pp=ygUQZG9sbGFyIG1...
- maxglute 9mo ago
  >They must be repaid in US dollars IMO this one of those cases where dollars is ultimately benchmark than requirement, IOU/settlement forms can always be restructured/renegotiated if USD is no longer lender of last resort, i.e. alternative payment systems enables take it or leave it deals in medium/long term. USD/reserve status snowballed because US controlled techstack postwar which US leveraged (along with military hegemony) to USD controlling primary energy (petrodollar). Civilization/modernity was locked behind USD. Money followed existential goods provider, that's the real USD / unipolarity moat. There's no take it / leave it from US company scrip because leaving eurodollar system = technical default (most usd loans hardcoded on newyork/english law) from eurodollar western financial system = death sentence. Once that lock/dependency erodes all kinds of force majeure geopolitics can rationalize breaking dollar contracts. AKA multipolarity. If alternate techstack/payment systems pops up and reach tipping point, country A can just say to country B who only wants USD (due to alignment or whatever), I don't have enough USD, here's RMB & cips/Brics+ & mbridge basket of equivalent value. This geopolitical layer, if BRIC+ can offer fossil, food without US and PRC can offer renewable energy, capital goods, consumer goods, technology, including 80% as good semi and civil aviation... etc if chokepoint goods are no longer exclusively under USD perview, then USD enforcement mechanism simply dies. If we're talking about loans/aid, IMF is really pittance, low hundreds of billions. It's why PRC is now using their 3T USD surplus to basically do their own shadow USD lending without IMF conditionalities... countries now don't need to buy USD from US. And somehow PRC currently lending / providing swaplines with their USD at lower rates than US treasury. Incidentally, this dollar recycling also lowers demand for new USD bonds, further reduce type1 margin buyers. This circles back to other nations own trillions of USD to each other... when you remove type1s, you're left with type2 private sector / non bank financial institutions - these are the buys where each USD bought increases triffin burden, i.e. they are the exorbitant curse / payday loans traps that makes USD reserve more expensive to maintain. Their demand is a trap, not a benefit.

dyauspitr 9mo ago

That number has been dropping by a percent every year for USD over the last 10 years. It used to be 65% USD in 2015

SllX 9mo ago
Sure, and in 1992 it was 46%, and in 2000 it was 71% and in 2013 it was 61%. USD foreign exchange reserves have definitely declined from their peak, but by “declined” we’re talking about going from “overwhelmingly dominant” to “merely dominant” to potentially in a few years “equal to every other foreign currency reserve in the world combined”, and maybe USD foreign exchange reserves will decline even further beyond that point.
- somenameforme 9mo ago
  There's some major historical events here. It's not just random movement. Here is a sort of visualization of key points and the USD share of global reserves with the events attached. The number in percent is the USD share of global reserves. 1970 (85%) - Up until 1971 [1] the USD was backed by gold by the Bretton Woods system. Other countries could trade USD in for gold at a fixed rate and in exchange would peg their currencies to the USD and trade in the USD. The idea was to prevent the US from ever being able to exploit their power in this system because if we printed too many dollars other countries could just hoover those dollars up on the cheap, convert them to gold, and make a bunch of money. Nonetheless we did print excessive amounts of money and abuse the power this system was granting us. So France dutifully hoovered up those dollars and made a gold call. We said 'nah', defaulted on our debts, and withdrew from Bretton Woods. This led to the famous quote from Nixon's Secretary of the Treasury: "The dollar is our currency, but it's your problem." 1990 (47%) - Following those events, the USD began seeing rapid inflation, and other countries were rapidly dropping the dollar. This 'peaked' around 1990. But then in 1991 the USSR collapsed. This not only left the US as the undisputed and sole 'king' of the world, but also led to these former nations beginning to dollarize once the dust had settled. The USD suddenly again starts to see mass adoption. 2001 (72%) - The adoption reaches its peak in 2001. At this point not only was there the dotcom bubble, but the world order begins clearly shifting with China and Russia developing increasingly rapidly and looking to become viable world powers once again. And there's been a gradual process of de-dollarization since then declining to where it is today to less than 57% and very much trending to where we were right before the USSR collapsed. 2025 (57%) - Where we are today. We're very much trending towards 1990, only 10 points away, which is the level when everybody was dumping the USD, the US economy was shaky at best, and there was another major superpower in the world and nobody was quite sure who would 'win.' This is far more significant than 'random noise' you're implying. --- I am leaving out plenty of relevant happenings including the transition to the petro dollar, South American economic crisis, and so on - but these only contribute to eras I think, while the above are the main drivers. [1] - https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

panarky 9mo ago

The international "rules-based order" is a good idea when most nations play by the rules most of the time, and when the most powerful at least pretend to follow the same rules as everyone else. A world order based on rules makes it possible to live at a much higher level of abstraction. Abstractions like rule of law, democracy, government currencies and stock exchanges are intangible and imaginary. They're mostly just figments of collective belief. But these wispy and unreal ideas that everyone believes in make it possible for most people to live longer, healthier and less difficult lives. The "rules-based order" was always partly mythical, but as long as everyone kept pretending, it mostly continued to function. But when we devolve from the rules-based order to the old order of pure power and might-makes-right, kings and dictators, when there's no more collective belief that the rules apply to the rich and powerful, then the tower of abstractions collapses, and we're back to the cold, hard, brutal and difficult real world. People will find out that life in the real world is a lot poorer and more miserable than life at the top of the tower of abstractions, even if your brokerage account appears to double.

majormajor 9mo ago
The US has played by different rules, might makes right, in the western hemisphere for a long time. Screwing around with Greenland shit, on the other hand, seems riskier.
- deleted 9mo ago
  [deleted]
- mjanx123 9mo ago
  In practice the US could already do whatever it wanted in Greenland/Canada etc. The options for the motivation behind the theatrics I see. 1. Instill fear in the vassals->support for militarization rises there->they become more useable as proxies against RF/China 2. Just another Trump silliness
  - bdbdbdb 9mo ago
    1. Could also be called Miller silliness

jacquesm 9mo ago

The end of 2026 was remarkably different to the world of today, and it that's logical it is - checks calendar - already 31 days ago. Now imagine another year of this.

pigeons 9mo ago
Check that calendar again.
sodapopcan 9mo ago
> The end of 2026 Seems you didn't check you calendar hard enough ;)
- jacquesm 9mo ago
  hah! it was 6 am after a long night of hacking...
  - sodapopcan 8mo ago
    Fair! I clearly didn't check my spelling so I'm not one to talk!
  - superfluous_g 9mo ago
    [dead]

BobbyJo 9mo ago

> So if this time is different, I’m not seeing it yet Compare those numbers to 5 years ago. Remember, this is the timescale of a country, not a beagle. America has run on the strength of the dollar for decades, and the symptoms of that collapsing are likely to play out over decades.

superfluous_g 9mo ago

[dead]

willtemperley 9mo ago

> USD still made up 57% of foreign reserves Yes, but that's the lowest it's been since 1994, in percentage terms. In dollar terms it's been largely flat for the last decade: https://wolfstreet.com/2025/12/26/status-of-the-us-dollar-as-global-reserve-currency-usd-share-drops-to-lowest-since-1994/ https://wolfstreet.com/2025/12/26/status-of-the-us-dollar-as...