| To: Fiscally Conservative who wrote (281472) | 11/15/2020 8:04:57 AM | | From: Sun Tzu | | | | Lack of alternative is the only reason why the USD has remained the reserve currency for so long. But you must realize that the world is dynamic and that things should offer inherent value rather than rely on lack of alternatives... Having a status due to lack of alternatives is like being a boyfriend/girlfriend until Mr./Ms. Right comes along. It's not a viable long-term relationship.
But since you ask, there are a number reasonable situations that can arise to challenge the USD dominance and its role as the reserve currency. And to be clear, reasonable means that active and substantial progress is being made on these fronts.
The first is replacing the SWIFT Network with a smart contract and/or blockchain based network for clearing international trade.
Another possibility is the Chinese RMB once they open up their bond and currency markets.
A third will be a stable coin based on a basket of currencies and commodities.
I personally think that all 3 will happen. It will start with the first item, the 2nd will be a contributing factor to bring about the 3rd as the final solution. |
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| To: Sun Tzu who wrote (281473) | 11/15/2020 7:33:00 PM | | From: Arran Yuan | | | | | A single currency as the reserve currency is a hegemony like absolute political and/or financial power that is inherently bound to be corrupt. Nature tells us a diverse ecological system tends to be more stable than a singular one. Even the US FRN$ won't hold its single reserve currency status, it should remain to be one of the major currencies of at least 3, such as a combo of US FRN$, RMB Yuan, and something new from Europe(?). |
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| To: Arran Yuan who wrote (281474) | 11/15/2020 8:35:33 PM | | From: Sun Tzu | | | | You are only partially correct. There are advantages that are afforded to the nation that prints the reserve currency. The other part is that as time goes by, the advantages diminish - mostly because the nation tends to piss it away like a kid that has too much time on his hands and doesn't know what to do with it. USD being the reserve currency is what has allowed the US to rackup so much stupid debt. Without it America would have shown better fiscal responsibility. The advantages also diminish in relative terms because the rest of the world moves forward and catches up.
Nor are the advantages completely one sided. The reason USD appreciates in value every time there is a global crisis is because the people in LatAm and developing nations trust the US government more with their money than they trust their own government. In return, and this is not due to the kindness of their heart but out of necessity, the Federal Reserve takes the USD denominated foreign debt and the impact on other markets into account as it makes up its own policy.
Having the reserve currency has certainly allowed the US to expand and maintain its empire. But empires are inherently dumb idea and not worth the headache. But somehow nobody seems to get that lesson from history. No country seems to have enough self control to know when enough is enough and always engages in world gluttony and suffers the consequences of having to run an unwieldy empire. |
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| To: Fiscally Conservative who wrote (281475) | 11/15/2020 8:43:42 PM | | From: Sun Tzu | | | | Can you explain to me why some other country has to beat the US on GDP before the USD gives up the throne? Why for example the countries could not trade based on some basket of currencies that are used simply as a metric of value conversion while they simply barter with each other?
BTW, do you know what happened in Asia Pacific today? Do you remember that Asia trade deal that Obama wanted to push and the congress refused to sign on b/c it came from Obama (even though it was really the world of GWB)? Well that deal died and China took over to make a new treaty and today 15 Asian countries representing the largest trading block in the world signed up to it. India was the only major country that declined to sign in. The deal complements China's Belt and Road initiative and pretty much cements their leadership.
PS on PPP basis Chinese economy is the largest in the world with an estimated value of 25 trillion dollar vs US of about $20T. |
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