Thread

US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments

152 points · 132 comments · iamnothere

Arubis · 1789753289 · focus · HN ↗
Dedollarizing the world economy has more net losers than the US (though that's the obvious one).
It's not without its benefits -- over the last couple decade, the US has found ways to weaponize access to USD, so if you're not a fan of having a country other than your own able to effectively regulate or sanction you and your business, there's some niceties here.
Being able to trade and invest in a stable, highly liquid, easily converted, low risk currency was a net win for most of the world for about half a century. There isn't an obvious replacement, so we'll just see more friction.
1. nostrademons · 1789753559 · focus · HN ↗
  It's kind of a prelude to a Thucydides Trap.
  The problem with replacing the world reserve currency with something else is that nobody can agree on what that something else should be. Expect to see a lot of jockeying for power as people realize the U.S. isn't the world hegemon anymore. Jockeying, on a state level, usually means war.
  1. tehjoker · 1789753933 · focus · HN ↗
    Only China has the GDP to replace USA. So while the answer isn't written in stone, it looks like it'll be China, or since China favors UN governance, maybe we'll move to an old discarded idea (because it didn't serve American interests) like an international currency system that Keynes favored.
    <a href="https://en.wikipedia.org/wiki/Bancor" rel="nofollow">https://en.wikipedia.org/wiki/Bancor
    Recall that America is currently attacking Iran without provocation and is aiding a genocide.
    Arubis · 1789754528 · focus · HN ↗
    China probably has the fiscal firepower to replace Eurodollars, but while their financial system remains split between "internally used currency" and "currency for everyone else" and while external investment is treated with deep suspicion and harsh rules, it would be limited to liquidity and exchange purposes. Nobody wants to hold a currency like the yuan over an appreciable period of time. That might be enough; that confers a lot of power and influence to the currency issuer. But definitely different ground than US Treasuries cover.
    Historically this is also where we'd insert something into the conversation about who gets to hold the moral high ground, but as you've noted, that's something the current US administration has abandoned entirely.
    stickfigure · 1789756169 · focus · HN ↗
    China is actively broadcasting its plans to start the next Russia/Ukraine conflict. There is no moral high ground there.
    tehjoker · 1789882558 · focus · HN ↗
    What business does America have in Taiwan? It makes no sense.
    stickfigure · 1789912982 · focus · HN ↗
    Same business it has in Ukraine today, or Czechoslovakia in 1938, or Poland in 1939.

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