Posted on 06/05/2023 3:29:01 AM PDT by FarCenter
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Economist Stephen Jen at Eurizon SLJ Asset Management notes that “exceptional actions” — including sanctions imposed by the US and its allies against Moscow — have made all too many nations less willing to hold dollars.
Jen is quoted saying that the dollar suffered a “stunning collapse” in its market share as a reserve currency in 2022, “presumably due to its muscular use of sanctions.”
He calculates that the dollar’s share of official global reserves fell to 47% last year, down from 55% in 2021 and a marked collapse from the 73% in 2001. Its loss of market share in 2022 alone was 10 times faster than the steady erosion over the past two decades, Jen says.
Billionaire Ray Dalio, founder of the Bridgewater Associates hedge fund, agrees that “there’s less of an eagerness to buy” US Treasury securities.
He points to Western steps to freeze about $300 billion of Russian central bank assets, punitive moves Dalio says, “increased the perceived risk that those debt assets can be frozen in the way that they’ve been frozen for Russia.”
Yet, even just based on the economics, says BRICS concept founder O’Neill, the global system seems ready for a pivot.
“The US dollar plays a far too dominant role in global finance,” O’Neill notes. “Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic.”
That dynamic helped pave the way for events in Cape Town over the last few days, an event that may have legs in currency circles for generations to come.
(Excerpt) Read more at asiatimes.com ...
A sharp pivot away from the dollar will collapse this nation and give the left everything it wants.
But what to move to?
But what to move to?
It is a mistake to think that the world needs a reserve currency.
Trade will happen using whatever currency both parties agree to use. It can be one of their currencies or a third party currency.
It doesn't matter.
After forcing other nations to comply with our foreign policy by using the dollar, no nation will enslave themselves to another reserve currency.
But once the dollar is rarely used by other nations for trade, its value will drop and our economy will collapse.
Like zero interest rates from the Fed, the dollar as reserve currency artificially props up our economy.
I’m not going to dismiss this BRICS plan, but you know things
have a funny way of not turning out like folks think they will.
Yeah, I can see the potential threat. So will that threat
come to pass and turn into the dire problem some think it
will? Maybe. Maybe not.
China’s currency isn’t strong enough. Nobody’s is. Ours is
under stress right now, but it’s still the best game in the
house.
Good luck folks. This isn’t a simple thing to pull off,
and China is not a strong economic system nation.
I think they play fast and loose, and this may just wind
up backfiring on the BRICS folks. We’ll see in time.
I’m wondering if this is the same world fighting against the deviancy of clown world.
I agree that things rarely unfold as expected.
However, there does not need to be a reserve currency. Nations can trade with each other using their own currencies, avoiding both the dollar and yuan.
Regardless, once the dollar is no longer the world's reserve currency, it will stress our economy.
Like zero interest rates from the Fed, the dollar as reserve currency artificially props up our economy."
I don't think "collapse" is the right word.
"Restructure" might be better.
As the US dollar loses relative value, compared to other currencies, US exports become cheaper to buy and so we'd expect them to increase, which will increase US manufacturing jobs and jobs in services which can be exported.
At the same time, our costs for imports will increase, thus reducing our imports and forcing us to make more of our own stuff, which again will increase our own jobs in manufacturing and services.
We will be forced to balance our books on imports & exports, and also, hopefully, on government spending, to begin paying down the massive debts decades of "free money" have acccumulated.
Yes, no doubt a period of difficult adjustments.
But, long term, not 100% a bad thing.
I'm waiting for the government to require that a significant percentage of private pensions and individual retirement accounts be "invested" in Treasury bonds. They won't steal them outright. Instead they'll just force you to loan it to them at below market rates.
2 dying nations and the most heavily indebted nation in History decide to form their own currency. Not to mention a failed state in Africa.
Give me a break.
While I tend to agree with you about the restructuring that could happen I think the point that was made above still needs to be thought through. The “debt ceiling” debate is, for now, a matter for DC to decide but without the need to hold dollars suddenly people won’t be as willing to own this debt. One day, it won’t matter how high the debt ceiling is, no one will buy the treasuries and securities they need to in order for the debt to be serviced. The cuts the “right” were asking for are probably going to be forced on the country, and more, once the loss of dollar supremecy decreases your global sway.
It all depends on how quickly it happens.
Once they have their own alternatives to the west’s debt-based sysystem, they will be able to renounce their West-backed debt completely, reclaim their natural resources, and start fresh.
Banks, other trade currencies, common funds transfer alternative to SWIFT, own development bank.
The dollar will remain the reserve currency for now. There is no alternative.
You reap what you sow
A sharp pivot away from the dollar will collapse the entire world economy because the dollar is the basis of the world economy and there is nothing to replace it with.
For the last 50 years the dollar = economic stability and attempts to replace it will drive instability.
Witness Russia's dilemma in it's recent BRICS push. It has been dealing in Indian Rupees for it's shift in energy trading to India to try to circumvent Ukraine sanctions. Now it has more Rupees than it knows what to do with and all that Indian rupees are good for are buying (or more correctly - bartering for ) Indian goods and services. Problem is Russia does not want or need all that much in the way of goods and services from India.
So what to do? Not much really.
That does not mean that stupid people will not try to replace the dollar, because they most certainly will try.
Problem is that they will fail and their failure will precipitate economic chaos that could result in economic collapse in our modern interconnected global economic system.
But the dollar is failing too due to our own economic hubris and irresponsibility - which is not a good thing either.
Donald Trump instinctively understood this dynamic and hence his drive to rebuild a self sufficient economic Fortress America by bringing manufacturing back America and by making America not just energy independent but energy dominant.
His goal was to enable America to stand alone and to go it alone if and when the world economic system encountered difficulties.
This was and is the heart of the MAGA agenda - American economic strength combined with American economic independence.
And this is why Donald Trump must be destroyed at all costs by the people, foreign and domestic, who are engineering America's ongoing decline and economic dependence.
China cuts US Treasury holdings to lowest level since global financial crisis
China’s holdings of US Treasuries peaked in 2013.
There will always be buyers, the only real question is, at what price.
For many years, US treasuries paid, essentially, no interest -- I never understood how that could work.
Today treasuries pay circa 5%, which is still not terribly destructive by historical standards.
5% will, however, increase our annual debt service bill by hundreds of billions of dollars, and if Congress does not get ahold of the problem, could quickly become the single biggest Federal budget item, bigger than national defense.
Democrats have clearly and repeatedly demonstrated that they don't give a d*mn about anything except their own spending priorities -- deficits, debts, inflation and devaluing the dollar, they don't care at all about those, so long as Democrat spending priorities are met.
Democrats are perfectly willing to sacrifice Republican priorities, like national defense, but will take no responsibility for any resulting problems.
The problem cannot be fully corrected until Republicans have majorities in Congress and the Presidency.
That day cannot come too soon, and may be delayed beyond our ability to quickly recover.
Yes I know. If one is in dollars what to move to?
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