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Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. It's too

Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. It's too much power that's too tempting to abuse. But they also learned from the collapse of Bretton Woods that even orchestrated agreements with built-in penalties just don't work, because countries can simply ignore them when beneficial. So I think we're headed to a future where no currency will dominate. This is probably also why the dollar's decline doesn't have any clear successor filling the vacuum. If anything, countries are accumulating far larger stores of gold. I expect this is also why BRICS is having difficulty creating their own trading currency. No countries can, or should, trust other ones which complicates matters greatly.

david927 2mo ago
This is exactly my take. Except I think there was never an interest by China to make the yuan the new global reserve currency but instead slow walk it back to a gold standard, and that's what has been happening since 2008. If a single country's currency is the global reserve currency, all you're finding out is whose thumb you're under.
nradov 2mo ago
No country is accumulating more than token amounts of gold. There just isn't much physical gold available relative to the size of the world economy.
- somenameforme 2mo ago
  The amount of money in the world is also minuscule relative to the size of the world economy. Such is the nature of widescale financialization that the market capitalization of various financial assets greatly exceeds the amount of money in the world. When you think about it, it sometimes makes you wonder if people will look back at this time with some degree of bemusement. I mean it's easy to understand how, and even why, we ended up here. But it's still a nonsensical place to be nonetheless.
  - nradov 2mo ago
    Your comment makes no sense. There's no need for a larger money supply. The current situation is sensible (at least to anyone who understands basic finance).
    - somenameforme 2mo ago
      I'm not saying there's need for a larger monetary supply. I'm saying that the world economy's 'value' is heavily driven by financialization, which is increasingly disconnected from reality, even more so as governments have gradually descended to 'stock market = economy' which leads directly to Goodhart's Law, and will eventually culminate in a 'correction.' So for instance yeah the US only has about 1PE (Peak Elon) of gold, but the entire global level of US reserves are only about 5PE!
      - nradov 2mo ago
        So what. The amount of physical gold held by the USA (or any other country) is almost entirely irrelevant to the real economy. It's a pointless relic of the past. We could sell off all of our gold so that people could make jewelry out of it and nothing would change.
        somenameforme 2mo ago
        You misunderstood something: that 5 "PE" I'm speaking of isn't gold, but the entire global reserves of USD. That has a tremendous impact on the economy of the world and is arguably the sole source of the US' economic power. The financialization is 'worth' many times more than 5PE, but it has very little connection to the "real economy."
        nradov 2mo ago
        Foreign USD reserve holdings have very little to do with the US' economic power. Where are you coming up with this nonsense? Even if every other country sold off their USD reserves we would still the same assets, same population, same intellectual capital, same natural resources, same legal system, etc.
jcfrei 2mo ago
> Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. That's a misleading statement. First of all at the beginning of the 20th century the British pound was clearly the global currency - where a lot of the international commerce happened. Then towards the 1930s and later on the Dollar took over that role. But that role carried much less weight back then - globalization was still in its infancy and a "global reserve currency" as we understand it today simply didn't exist back then. Right now some Dutch pensioners money is invested in American, Canadian, Australian, German, etc. companies. And the parts for most consumer goods are coming from all over the world. Pre Bretton Woods basically none of this existed. This global financial system we speak of today is unprecedented and only exists since the late 70s - where most countries abandoned their currency controls (apart from the US and CH which never really had them).
- somenameforme 2mo ago
  I agree that speaking of a global reserve currency is putting the cart before the horse, but I think the meaning was also clear. It was obvious that the 'foundational' currency within Bretton Woods was going to give its creator something that could be easily weaponized against other countries. And so they sought to make it 'impossible' to do that, but ultimately did so in a naive way - 'Here's all this power - please honor these rules that will punish you if you abuse it.'
- Danox 2mo ago
  Britain’s downfall was World War I
KellyCriterion 2mo ago
- no currency will dominate.... There is excellent research in "currency diversity", start with Prof B. Lietaer https://www.youtube.com/watch?v=T9EI2PrDpmw https://www.youtube.com/watch?v=T9EI2PrDpmw

david927 2mo ago

This is exactly my take. Except I think there was never an interest by China to make the yuan the new global reserve currency but instead slow walk it back to a gold standard, and that's what has been happening since 2008. If a single country's currency is the global reserve currency, all you're finding out is whose thumb you're under.

nradov 2mo ago

No country is accumulating more than token amounts of gold. There just isn't much physical gold available relative to the size of the world economy.

somenameforme 2mo ago
The amount of money in the world is also minuscule relative to the size of the world economy. Such is the nature of widescale financialization that the market capitalization of various financial assets greatly exceeds the amount of money in the world. When you think about it, it sometimes makes you wonder if people will look back at this time with some degree of bemusement. I mean it's easy to understand how, and even why, we ended up here. But it's still a nonsensical place to be nonetheless.
- nradov 2mo ago
  Your comment makes no sense. There's no need for a larger money supply. The current situation is sensible (at least to anyone who understands basic finance).
  - somenameforme 2mo ago
    I'm not saying there's need for a larger monetary supply. I'm saying that the world economy's 'value' is heavily driven by financialization, which is increasingly disconnected from reality, even more so as governments have gradually descended to 'stock market = economy' which leads directly to Goodhart's Law, and will eventually culminate in a 'correction.' So for instance yeah the US only has about 1PE (Peak Elon) of gold, but the entire global level of US reserves are only about 5PE!
    - nradov 2mo ago
      So what. The amount of physical gold held by the USA (or any other country) is almost entirely irrelevant to the real economy. It's a pointless relic of the past. We could sell off all of our gold so that people could make jewelry out of it and nothing would change.
      - somenameforme 2mo ago
        You misunderstood something: that 5 "PE" I'm speaking of isn't gold, but the entire global reserves of USD. That has a tremendous impact on the economy of the world and is arguably the sole source of the US' economic power. The financialization is 'worth' many times more than 5PE, but it has very little connection to the "real economy."
        nradov 2mo ago
        Foreign USD reserve holdings have very little to do with the US' economic power. Where are you coming up with this nonsense? Even if every other country sold off their USD reserves we would still the same assets, same population, same intellectual capital, same natural resources, same legal system, etc.

jcfrei 2mo ago

> Prior to Bretton Woods countries were well aware that no single country could be entrusted with the power granted in being the global reserve currency. That's a misleading statement. First of all at the beginning of the 20th century the British pound was clearly the global currency - where a lot of the international commerce happened. Then towards the 1930s and later on the Dollar took over that role. But that role carried much less weight back then - globalization was still in its infancy and a "global reserve currency" as we understand it today simply didn't exist back then. Right now some Dutch pensioners money is invested in American, Canadian, Australian, German, etc. companies. And the parts for most consumer goods are coming from all over the world. Pre Bretton Woods basically none of this existed. This global financial system we speak of today is unprecedented and only exists since the late 70s - where most countries abandoned their currency controls (apart from the US and CH which never really had them).

somenameforme 2mo ago
I agree that speaking of a global reserve currency is putting the cart before the horse, but I think the meaning was also clear. It was obvious that the 'foundational' currency within Bretton Woods was going to give its creator something that could be easily weaponized against other countries. And so they sought to make it 'impossible' to do that, but ultimately did so in a naive way - 'Here's all this power - please honor these rules that will punish you if you abuse it.'
Danox 2mo ago
Britain’s downfall was World War I

KellyCriterion 2mo ago

- no currency will dominate.... There is excellent research in "currency diversity", start with Prof B. Lietaer https://www.youtube.com/watch?v=T9EI2PrDpmw https://www.youtube.com/watch?v=T9EI2PrDpmw