De-dollarization: Not a matter of if, but when

https://responsiblestatecraft.org/2023/05/03/de-dollarization-not-a-matter-of-if-but-when/

by warrenm • 3 years ago

39 50 3 years ago

nine_zeros2• 3 years ago

This is a great summary. But, it makes the same mistake that other such commentators are making.

Other replacement currencies will need to be much more stable and liquid than the dollar. It is not possible today.

But it is right in its sentiment. Most other countries are tired of American sanctions sending generations into poverty. For them, finding anything else is a no brainier. If they can find any currency to replace their trade with, they'll take it in a heartbeat.

macinjosh• 3 years ago

Not necessarily. At some point the pain inflicted by the US gov’t using its financial powers to enforce its will on you is greater than the pain of using a less stable and liquid currency. There is a tipping point.

tw04032023• 3 years ago

I believe you forgot to mention something important.

US does not impose sanctions on the only basis of "hey, we don't like them, let's ruin their lives".

In each case there is a reason, you know, like a blatant violations of human rights, mass rapes, ethnic cleansings, things like that.

If some country is bothered that other countries won't be continuing doing business with it because US sanctioned it then it is implied it intends to do something of the above. I really and sincerely hope its not "most" countries out there.

Consequently, it's not the US that "sends generations into poverty". Typically it's the ruling class who, being bored out of their minds due to their needs being met by their appropriation of national wealth, decide to do something normally unthinkable for "reasons". And let's not forget that people always have a choice of leaving or changing their government.

It is actually good that there is a power on the mudball that can if not coerce idiots to behave but at the very least impose so much pressure they cannot enjoy their lives as if they did nothing wrong, without military involvement.

nine_zeros2• 3 years ago

In each case there is a reason, you know, like a blatant violations of human rights, mass rapes, ethnic cleansings, things like that.

Some of those sanctions are for these reasons. Others are for geopolitical reasons.

Imagine China imposing sanctions on America for geopolitical reasons such that you are unable to buy food for your kids. This amount of power is never admired.

jacooper• 3 years ago

There is no way in any shape or form that the same country the invaded Iraq and Afghanistan, steals OIL left, right and center, and supported more coups than anyone can be though of as caring for human rights.

They don't care at all, it never mattered.

geysersam2• 3 years ago

And let's not forget that people always have a choice of leaving or changing their government

Absolutely don't agree. People definitely don't typically have that power. In authoritarian nations not even motivated majorities might not be able to overthrow their government.

It's a quite rude thing to claim, implying that any time there's a cheating, lying, corrupt bastard leader around, it's because their people choose them.

I'd argue that in the last decades revolution has actually become increasingly difficult because law enforcement authorities benefit a lot from the improvements to surveillance and communication technology.

seunosewa2• 3 years ago

Apart from Russia and China, which other countries are tired of American sanctions?

geysersam2• 3 years ago

Venezuela, Iran, North Korea, Afghanistan, Syria.

Glawen• 3 years ago

https://en.m.wikipedia.org/wiki/United_States_sanctions

rcme• 3 years ago

Gold meets all of those requirements, provided you could set up some type of custodial system that would allow paper trading.

DuckFeathers3• 3 years ago

Dollar is backed by the US military. A credible dedollarization threat will mean that the US will use it's military might to stop it in any way it can. Saddam tried it, Gaddafi tried it... Iran and Venezuala have been trying it and Russia, China and now some middle eastern superpowers have been toying with it.

So far, none of them have had any teeth and it is unlikely that it will happen anytime soon (not in the next 50-100 years).

seunosewa2• 3 years ago

Why aren't US interests threatened by the Euro?

dukeyukey• 3 years ago

Because control of the Euro is split between lots of argumentative, economically-varying countries who are instinctively more interventionist than the US.

RA_Fisher• 3 years ago

Who has higher inflation?

rat872• 3 years ago

The parent comment is conspiratorial. The Iraq invasion was stupid and immoral but there's no evidence it had anything to do with currency plans. The Euro is indeed most likely to overtake the US dollar (although not anytime soon) but they are likely to remain close allies and the dollars status as a reserve currency isn't all upside anyways(it makes our exports less competitive)

DuckFeathers3• 3 years ago

The US interests own Euro with the help of NATO.

FormerBandmate• 3 years ago

Gaddafi was overthrown by his own people

thegaulofthem• 3 years ago

Western countries armed rebels and denied Libyan military their own air space with a no-fly-zone. Hardly a lack of involvement…

DuckFeathers3• 3 years ago

"We came, we saw, he died" - Hillary Clinton.

8note• 3 years ago

The dollar is also backed by everyone already having infrastructure set up to accept USD, and both the people to buy from, and the people to sell to already having USD, or wanting to get USD.

imtringued3• 3 years ago

And foreign debt in dollars.

joseda-hg• 3 years ago

Venezuela has been trying... Well, maybe on paper, Citizens have been using USD as defacto national currency for a long while by now

m3kw9• 3 years ago

If the US loses a major war like ww3 scale, then it’s likely but otherwise everyone wants to trade with usd because it’s already biggest(network effect), and most stable(military/economic might/feed back effect from being global currency).

diceduckmonk• 3 years ago

because it’s already biggest(network effect)

This is exactly what is downtrending. Nations fear being sanctioned and holding on to dollars they can't use

and most stable(military/economic might/feed back effect from being global currency)

This is also what is being questioned. There is domestic turmoil and the US economy is funky.

I'm just paraphrasing Ray Dalio's recent discussions and extensions on his dialogue on the rise and fall of nations.

andrewjl• 3 years ago

Things look backwards judging by demographics. The US is relatively younger than its peers and is most likely to stay that way because of immigration. On top of that there is an industrial boom happening as manufacturing gets reshored.[1] Looks like the opposite of being on the brink of collapse, really.

[1] https://www.wsj.com/articles/americas-factory-boom-drives-sa...

Octokiddie• 3 years ago

The article does not support the claim made in the title. Similar claims have been made many, many times. They never come to pass. A better approach to this topic would be to acknowledge the failure of earlier prophets and explain what's actually different this time.

myrryr3• 3 years ago

Political instability driving a default would be pretty different.

frozenport• 3 years ago

Tea party tried to do that a decade ago. What’s different this time?

scilro• 3 years ago

The author failed to cite hard numbers, but they can be found elsewhere:

https://markets.businessinsider.com/news/currencies/dollar-d...

"In a Monday note, strategists Joana Freire and Stephen Jen calculated that the greenback accounted for about two-thirds of total global reserves in 2003, then 55% by 2021, and 47% last year."

You can make the argument that the decline of this number will be a lot slower than 2021-2022 going forward, or that it will perhaps bottom out at a relatively high number. But the trend is there.

mark_l_watson• 3 years ago

Weaponization of the dollar was really shortsighted.

My hope is that my country can maintain dollar reserve status for another decade, but that might not happen. I may be wrong, but I think de-dollarization will be gradual with other currencies seeing slow increases in use for international financial settlements. I think that a fast transition would be bad for most of the world’s population.

mannyv• 3 years ago

Until there is a politically stable alternative, the Dollar will rule. Nobody trusts China, even the Chinese. The Euro? Only a few years ago pundits were proclaiming its death. The Pound? Nope.

The US is willing to go to incredible lengths to prop up the world financial system. No other country is willing or able to do that, including China.

nine_k• 3 years ago

«The U.S. has a comparative advantage as a safe financial haven. We have the world’s strongest military and a stable government. Thus, we have a comparative advantage in producing debt, primarily government debt.» (Arnold Kling somewhere online.)

fallingfrog• 3 years ago

When the tipping point arrives, it will be sudden and unexpected. There's a way these things happen- first very slowly, then all at once.

myrryr3• 3 years ago

My partner is from the ex soviet part of the world. She uses the term "very slowly, then all at once" to describe what happened there.

HyperSane• 3 years ago

This has been predicted to happen every year for the last 30 years or so.

seanhunter• 3 years ago

One of the things all these pundits neglect when they focus on the structural drawbacks of the dollar is the existence of a viable alternative. To be a real alternative reserve currency, the other currency must have enormous trading liquidity, very significant debt issuance (ie the issuing nation must have voracious debt appetite backed by a huge productive economy), be broadly accepted for trade (ie I can't just convert on my own - my trading partners need to convert as well) and be relatively more stable in both political and market volatility terms.

It's not enough for the US/dollar to have problems, the alternative would need to be far better, and there would need to be huge capacity for everyone to be able to buy in without massive market moves leading to a catastrophic stampede for the exits.

I personally think we will see (and are in fact already seeing) a gradual shift from absolute dollar hegemony to a more mixed picture but I think it will never amount to actual 'dedollarization' but more likely a situation in which you can trade in RMB, you can trade in EUR or you can trade in USD and there will be an increase in Eurobonds etc where nations raise debt in these foreign currencies as well as USD or their domestic currency to provide trading liquidity.

user_named• 3 years ago

No they don't. It just requires there bring a currency they can use in trade without the risk of having their assets frozen.

imtringued3• 3 years ago

There is no such thing then.

A decentral global reserve currency is not a global reserve currency, that is a global price index with local bank specific currencies denominated in that price index.

euroderf• 3 years ago

Good to point out, for the record, that it was the French who forced the US off the gold standard.

De-dollarization: Not a matter of if, but when

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