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. jltsiren · 1789756143 · focus · HN ↗
    That "usually" was in a different world.
    Before the industrial revolution, there was almost no sustained economic growth and business was essentially a zero-sum game. Wars of conquest were high-risk business ventures that promised higher returns than actual business.
    Then the industrial revolution happened. Economic growth made business more lucrative, while wars got deeper into the negative-sum territory. Leaders were slow to understand that, which is why the 19th and 20th centuries saw a series of increasingly destructive wars that left almost everyone worse off.
    But there have been no wars between major powers in the last 80 years. Maybe people in power have realized that all-out wars are no longer productive. But there have been plenty of lesser wars: civil wars, proxy wars, and wars against much weaker states. As well as regional wars, where at least one of the parties is so dysfunctional that it does not benefit from positive-sum business.
    retrac · 1789756690 · focus · HN ↗
    > But there have been no wars between major powers in the last 80 years. Maybe people in power have realized that all-out wars are no longer productive.
    People talked like that before WW I. There hasn't been a major war in Europe since 1870 almost half a century and trade is such a large war would bankrupt all the major powers and so would never happen. The Great Illusion was published in 1909 and was positively received at the time:
    > In The Great Illusion, Angell's primary thesis was, in the words of historian James Joll, that "the economic cost of war was so great that no one could possibly hope to gain by starting a war the consequences of which would be so disastrous."[4][5] For that reason, a general European war was very unlikely to start, and if it did, it would not last long.[6] He argued that war was economically and socially irrational[7] and that war between industrial countries was futile because conquest did not pay.
    jltsiren · 1789757925 · focus · HN ↗
    There was a major war between Russian and Ottoman empires in 1877–1878. And if you look outside Europe, there was an even greater war between Russia and Japan in 1904–1905.
    jopsen · 1789758852 · focus · HN ↗
    These were small wars: <a href="https://en.wikipedia.org/wiki/Russo-Japanese_War" rel="nofollow">https://en.wikipedia.org/wiki/Russo-Japanese_War
    Smaller than the one in Ukraine today.
    jltsiren · 1789759264 · focus · HN ↗
    0.15% of world population was mobilized to fight in the Russo–Japanese war. That would correspond to ~12.5 million combatants today. Napoleon's invasion of Russia saw more casualties from combat, starvation, and disease, but it involved a smaller fraction of world population.
    nostrademons · 1789761912 · focus · HN ↗
    I assume you're going off the 1.365M + 1.2M combatant strength listed in the Wikipedia article?
    Those are figures for the total size of those national armies at the time. It'd be like saying the Iran war involved 3M people because the U.S. has about 2.1M in uniform and Iran has just under 1M counting reservists. Meanwhile there've been precisely zero boots on the ground in Iran, and the total number of military personnel directly affected is on the order of tens of thousands.
    The text of the article has the Russian far east strength at about 95,000 at the start of the war, with another 410,000 trained in over the course of the war. The best proxy for Japanese (and Russian) combat strength might be the Battle of Mukden [1], which had about 250K Japanese and 292K Russian troops. These numbers are smaller by a factor of about 5x.
    The present-day Russo-Ukrainian war is significantly larger. Estimated Russian deaths are 500K+, higher than the total number of Russian soldiers involved in the Russo-Japanese war.
    [1] <a href="https://en.wikipedia.org/wiki/Battle_of_Mukden" rel="nofollow">https://en.wikipedia.org/wiki/Battle_of_Mukden
    jltsiren · 1789764704 · focus · HN ↗
    If you continue reading the article, it mentions that Russia had mobilized almost a million soldiers in the Far East by the end of the war, and that mobilization largely happened after the Battle of Mukden. Without the naval defeat at the Battle of Tsushima, Russia would have had the upper hand at that point, and the war would likely have reached a different conclusion.
    Industrial armies were massive. By the standards of that era, current US military strength exceeds 60 million. But they mostly relied on reserves, which were slow to mobilize. Japan's quick decisive victories ended the Russo–Japanese war before it had a chance to escalate further, potentially reaching the scale of the Eastern Front in WW1. But even then, the Battle of Mukden was one of the largest land battles in history until that point

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