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> If the dollar stops being the reserve currency, the purchasing power of the dollar will crash This is far from clear.

selcuka 7mo ago
The Federal Reserve's Real Broad Dollar Index (RTWEXBGS) is 113.51 as of February. Not saying it would crash losing all of that 13.51 excess overnight, but it's still overvalued against foreign currencies.
- gritspants 7mo ago
  Is this not what the current US administration seeks? You can't simultaneously be the reserve currency and hope to be a net exporter at the same time.
  - engineer_22 7mo ago
    Perpetual trade deficit is modern system of tribute.
    - JumpCrisscross 7mo ago
      > Perpetual trade deficit is modern system of tribute Probably not. Equatorial Guinea, Palau and Kyrgyzstan run the largest current-account deficits as fractions of GDP [1]. (Current account counts goods and services.) [1] https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance https://en.wikipedia.org/wiki/List_of_countries_by_current_a...
      - engineer_22 7mo ago
        Resource extraction... High value infra projects in, low value unprocessed resource out. Edit: Palau is the exception, it's main industry is tourism. Wealthy westerners come and consume and leave. Palau doesn't produce anything so all that consumption must be imported. US current accounts deficit ~1 trillion annually, greater than your counterexamples' total combined economies. This should be a clue it's not the same mechanism of action.
- JumpCrisscross 7mo ago
  > it's still overvalued against foreign currencies That would make imports more expensive and exports more competitive. Some pain, given we run a deficit [1]. But $50bn/month adustment in a $30tn economy is 2%. Not fun. But not a "crash." (There is a genuine argument to be made that American voters have been rejecting dollar hegemony across multiple elections for a couple of decades.) [1] https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services https://www.bea.gov/data/intl-trade-investment/international...
0xbadcafebee 7mo ago
It would cause inflation, which would lower purchasing power of imports; It would raise interest rates, which would raise the cost of loans and debt for individuals; and it would make the Government getting loans much harder, leading to spending cuts and higher taxes. All of these things will come together to weaken the dollar, thus making it have less purchase power. Whether it's a crash or slow bleeding out doesn't make a difference in the end.

The Federal Reserve's Real Broad Dollar Index (RTWEXBGS) is 113.51 as of February. Not saying it would crash losing all of that 13.51 excess overnight, but it's still overvalued against foreign currencies.

gritspants 7mo ago
Is this not what the current US administration seeks? You can't simultaneously be the reserve currency and hope to be a net exporter at the same time.
- engineer_22 7mo ago
  Perpetual trade deficit is modern system of tribute.
  - JumpCrisscross 7mo ago
    > Perpetual trade deficit is modern system of tribute Probably not. Equatorial Guinea, Palau and Kyrgyzstan run the largest current-account deficits as fractions of GDP [1]. (Current account counts goods and services.) [1] https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance https://en.wikipedia.org/wiki/List_of_countries_by_current_a...
    - engineer_22 7mo ago
      Resource extraction... High value infra projects in, low value unprocessed resource out. Edit: Palau is the exception, it's main industry is tourism. Wealthy westerners come and consume and leave. Palau doesn't produce anything so all that consumption must be imported. US current accounts deficit ~1 trillion annually, greater than your counterexamples' total combined economies. This should be a clue it's not the same mechanism of action.
JumpCrisscross 7mo ago
> it's still overvalued against foreign currencies That would make imports more expensive and exports more competitive. Some pain, given we run a deficit [1]. But $50bn/month adustment in a $30tn economy is 2%. Not fun. But not a "crash." (There is a genuine argument to be made that American voters have been rejecting dollar hegemony across multiple elections for a couple of decades.) [1] https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services https://www.bea.gov/data/intl-trade-investment/international...

0xbadcafebee 7mo ago

It would cause inflation, which would lower purchasing power of imports; It would raise interest rates, which would raise the cost of loans and debt for individuals; and it would make the Government getting loans much harder, leading to spending cuts and higher taxes. All of these things will come together to weaken the dollar, thus making it have less purchase power. Whether it's a crash or slow bleeding out doesn't make a difference in the end.