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.
    carefree-bob · 1789754985 · focus · HN ↗
    You are confusing being the world's biggest net exporter with being the world's biggest net importer.
    But they are the opposites of each other.
    So it's fair to say that China is the exact opposite of what it would take issue a reserve currency.
    Let China spend a few decades running net trade deficits, let it open its capital market so the CNY fully floats, and allow unfettered foreign capital inflows and outflows for a few decades.
    Then we can have a discussion about how it can be a dominant reserve currency.
    wahern · 1789760427 · focus · HN ↗
    The US was a net exporter for most of the time it was a de jure and de facto reserve currency, up until the dollar was floated (i.e. end of gold convertibility). IOW, it was arguably the reserve currency status that drove the trade deficits, not the other way around. The effect was muted by the artificial constraint of gold convertibility, but the pressures from that restraint manifested in other problems, culminating in a currency crisis and Nixon's decision to end convertibility. That unleashed the deflationary pressures caused by reserved status, accelerating the shift to goods imports.
    [deleted] · 1789764151 · focus · HN ↗
    [deleted]

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