Thread

US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments

152 points · 132 comments · iamnothere

1over137 · 1789747701 · focus · HN ↗
US everything has become unappetizing for everyone outside the US.
1. toomuchtodo · 1789748222 · focus · HN ↗
  Exorbitant privilege is a gift that lasts only as long as the trust does.
  <a href="https://en.wikipedia.org/wiki/Exorbitant_privilege" rel="nofollow">https://en.wikipedia.org/wiki/Exorbitant_privilege
  <a href="https://news.ycombinator.com/item?id=47635834">https://news.ycombinator.com/item?id=47635834 covers this succinctly:
  > America was in practice running an empire that collected tribute from the rest of planet earth in exchange for entries in a database denominated in a currency they controlled and that was accepted everywhere. Really the only way it could go wrong is putting it under the control of someone who doesn't understand the kayfabe...
  from
  Gold overtakes U.S. Treasuries as the largest foreign reserve asset - <a href="https://news.ycombinator.com/item?id=47635056">https://news.ycombinator.com/item?id=47635056 - April 2026 (250 comments)
  1. rayiner · 1789750137 · focus · HN ↗
    This argument fundamentally does not make sense. Look at a chart of U.S. GDP per capita growth: <a href="https://substackcdn.com/image/fetch/$s_!zSCw!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fafa99d7e-749e-4e36-bf66-b4a7a043613e_2048x1249.png" rel="nofollow">https://substackcdn.com/image/fetch/$s_!zSCw!,f_auto,q_auto:...
    The U.S. was growing at the same rate or faster as the UK from 1830 to 1930, when the UK had an empire and the U.S. didn’t. Then, in the second half of the 20th century when the U.S. had an empire and the UK didn’t, the growth rates were more or less the same in both places in the long run trend (ignoring the UK’s step change hit from WWII).
    dixie_land · 1789750766 · focus · HN ↗
    The £ was backed by UK's (perceived) military might just as $ is by the States'.
    The the war on Iran (and many years of war on terror) showed we have anything but
    rtkwe · 1789751623 · focus · HN ↗
    There are other backers to that as well. The main ones being oil trades being settled largely in USD and the need to acquire USD to pay for US goods/services. It's not all military might there's a lot of economic might in there too.
    toomuchtodo · 1789752477 · focus · HN ↗
    This is the important point. Oil was/is settled in dollars. The world is rapidly moving away from oil. China has already hit peak oil. China is 1/3rd of global manufacturing capacity. If you're leaving oil behind, and buying solar, batteries, and EVs from China, your need for dollars declines, and need for yuan goes up. Also, stocks vs flows. You have to keep buying oil every day from petrostates, while the clean tech you buy is yours for its entire service life (a decade or more for EVs, decades for solar and stationary battery storage).
    The US did well when the Saudis required dollars for oil as part of the US-Saudi security and military arrangement, and that arrangement is declining in value over time as the value of oil to the global economy declines. The US loses investors in US treasuries when folks who sold oil for dollars do not have dollars from oil sales. Shades of theta decay.
    China Adds Currencies to Central Clearing in Yuan's Global Push - <a href="https://news.ycombinator.com/item?id=49736124">https://news.ycombinator.com/item?id=49736124 - September 2026
    The Iran War Just Broke the Petrodollar - <a href="https://www.bloomberg.com/opinion/articles/2026-04-06/the-petrodollar-loop-supporting-the-treasury-market-is-broken" rel="nofollow">https://www.bloomberg.com/opinion/articles/2026-04-06/the-pe... | <a href="https://archive.today/RyJA8" rel="nofollow">https://archive.today/RyJA8 - April 6th, 2026
    > "The petrodollar loop requires two moving parts: dollars earned and dollars invested. Both have stopped."
    > The standard reassurance is that there is no alternative to Treasuries — no other market offers the depth, liquidity and legal infrastructure that central banks require. This remains true. Foreign central banks will not abandon Treasuries wholesale. But “no realistic alternative” and “unquestioned safe haven” are not the same thing, and the Iran war is clarifying the difference.
    <a href="https://ember-energy.org/data/china-cleantech-exports-data-explorer/" rel="nofollow">https://ember-energy.org/data/china-cleantech-exports-data-e...
    > As the world’s largest manufacturer of clean technologies, data on China’s cleantech exports provide an important early insight into the pace and scale of the energy transition. In 2024, China produced around 80% of the world’s solar PV modules and battery cells, and 70% of electric vehicles.
    (as of this comment, China is exporting EVs at a 12M unit/year annualized run rate, with the capacity to build 50M EVs/year; they are only constrained by not enough marine vessels to keep up with export demand; every 24 months of EV production destroys ~1M barrels/day of oil demand at current run rates, which continue to increase)
    China growth straining global auto shipping capacity - <a href="https://news.ycombinator.com/item?id=49553327">https://news.ycombinator.com/item?id=49553327 - September 2026 (0 comments)
    China's Manufacturing Advantage, Explained [video] - <a href="https://news.ycombinator.com/item?id=49451076">https://news.ycombinator.com/item?id=49451076 | <a href="https://www.youtube.com/watch?v=OgYKVpOsMJs" rel="nofollow">https://www.youtube.com/watch?v=OgYKVpOsMJs - August 2026
    (think in systems)
    carefree-bob · 1789756975 · focus · HN ↗
    Oil being settled in dollars is completely unimportant.
    It makes no difference in what currency a trade is conducted.
    What matters is the jurisdiction in which you store the proceeds.
    That selection of jurisdiction drives everything else.
    I can declare that all oil must be settled in blue seashells. Who cares? What matters is that I do not keep my profits from selling oil as a pile of blue seashells, I invest those profits in some country. As long as that country remains the US, disproportionately, then oil can be marked in British pounds, seashells, hollywood B-list handjobs, it really makes no difference at all.
    But, you object, "Doesn't oil being priced in dollars mean that nations need to have dollars to buy oil?". Nope, there are forex markets. So let's look at a situation in which oil is priced in Euros but Saudi Arabia stores its surpluses in dollars.
    Which currency sees an increase in demand?
    Japan goes to buy oil, so it sells the Yen and buys Euros. Those Euros are handed over to Saudi Arabia, which immediately sells them to buy dollars.
    So the net result is that the euro transactions cancel out and all that matters is the selling of Yen and the buying of dollars. The yen falls against the dollar and the euro goes nowhere. It's a literal null op, in terms of net demand for the currency. It means nothing. The jurisdiction in which the proceeds are stored - that is everything.
    Now I would ask you, in which jurisdictions do you think Saudi Arabia can efficiently store the ten billion or so it earns each day from selling oil? Nepal? Where does it store a couple trillion dollars worth of financial assets each year? Argentina? Which nation allows such vast unrestricted capital inflows and outflows? Go ahead, make a list.
    So you see, whereas one can literally invent anything in which oil is priced in, to find a jurisdiction that can accept those capital inflows, that limits you to basically a single choice. Now, given that Saudi Arabia needs (not wants, but needs) to store its proceeds in dollars, it makes sense that it would price the oil in dollars to save on transaction fees. But really it can price the oil in anything it wants, no one cares except people caught in dank youtube caverns where the ominous phrase "petrodollar" is scrawled on the walls by torchlight.
    rtkwe · 1789758878 · focus · HN ↗
    No France still needs X USD to send to Saudi Arabia for Y barrels of oil. The only way the USD becomes funny money is if SA buys X from France also denominated in USD so that the cycle is closed, otherwise France needs a continuous source of USD to send over to SA. [0]
    [0] Simplifying to national here; yes it's not just one unit in France and one in SA but on net there's X trade between the major money movers in each country.
    carefree-bob · 1789760953 · focus · HN ↗
    I am asking you to imagine a situation in which oil is priced in currency A but the proceeds are stored in currency B in order to determine whether it is A or B that matters, or both.
    In your example, A and B are the same (dollars) and you demonstrate that there is a need for the common currency of A and B, but you are unable to distinguish between the demand caused by A and the demand caused by B, so I don't think you are groking the example. Suppose A and B were different. Oil is priced in dollars but the proceeds are stored in yen. So
    1. France sells euros to buy dollars 2. France gives the dollars to KSA for oil 3. KSA sells the exact same number of dollars for Yen.
    So now we see that 1 and 3 cancel the net demand for dollars to zero, and what remains is a transaction in which euros were sold for Yen, so the Yen rises against the euro and nothing at all happens to the dollar. No demand for the dollar due to oil being priced in dollars. All that matters is the currency in which you store the proceeds.
    By the way, this used to be an adage of currency traders - it doesn't matter what currency a thing is priced in, what matters is the currency where you store the proceeds of the sale. This was shorthand for "the seller determines which currency gains from a trade, and the buyer determines which currency loses". So France, in selling euros for dollars, determines that euros will lose value, but does not determine that dollars will increase. It is Saudi Arabia, the seller, in choosing where to store the proceeds that determines which currency, in this case, the yen, will increase.
    rtkwe · 1789768327 · focus · HN ↗
    There's still a net flow of USD across those countries unless KSA buys the Yen from France...

Open on Hacker News to reply ↗

Unofficial Hacker News client; not affiliated with Y Combinator.