Chipping away at the US dollar

Unfortunately the USA has abused its position while running the world’s reserve currency and is now facing the consequences. I’m surprised by the speed that it’s happening:

The Chinese Yuan marked a milestone in March when it surpassed the US dollar as the most widely used currency for Chinese cross-border transactions. It was the first time ever the renminbi overtook the greenback, official data showed.

As long as the Yuan is pegged to $USD this doesn’t really matter. And Xi is not going to depeg his currency.


It does matter! If the world no longer wants all those dollars they are going to come home creating an inflation problem for the USA. It happened here in the UK after the dollar displaced sterling in the late 1950’s.

Not quite so important:

Argentina will start to pay for Chinese imports in yuan rather than dollars, according to a government statement published Wednesday.

Perhaps even more important is that the USA won’t be able to run a massive trade deficit with the rest of the world as it does now by printing treasuries. It will have to pay its way in the world!



Not going to argue about us abusing our power as the reserve currency however.

That’s the beauty and fascination of economics - you can always find a well put together opposing view!

After Bretton Woods it took about twelve years for the dollar to replace sterling, these things don’t happen quickly.

Why? The point is one that is not mentioned: The seller is willing to accept Yuan (presumably at a non-premium price for paying with Yuan).

The seller either has a need for Yuan (to buy from China?) or they are able to convert the Yuan they receive to another currency they can use. What we do not know is whether Chinese exporters are allowed to be paid in Yuan from their overseas customers. If so, we do not know what are the limitations and/or restrictions on such sales/payments.

Where, how, is Argentina going to get the Yuan in the first place in order to pay for Chinese imports?

Maybe it’s Russia, using the Yuan it gets for oil and gas sales, to buy Chinese manufactured goods, to replace the now-embargoed western goods. I posted a piece a few weeks ago about how Chinese auto market share is soaring in Russia, due to the lack of western competition.


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Just curious. Does anyone in the world think that if China or Russia or Saudi Arabia controlled the world’s reserve currency that they wouldn’t “abuse” its position for their own benefit?

And to make matters worse, that “abuse” would rest in the hands of just one person who has no accountability to their country’s population.

For all the United States faults and problems (and yes, the list is long), I think most countries aren’t in a hurry to give that power to China, Russia, or Saudi Arabia.

That most certainly will change sometime in the future, but I don’t think we’re anywhere near there, yet.


Another thing that would have to happen is that China would have to allow access to its internal financial markets. Until that happens the chances of the yuan becoming the world’s reserve currency are approximately 0.0%.

The Russia and Saudi economies are far, far too tiny to ever support a reserve currency, even assuming someone was insane enough to hold lots of rubles or riyals. I put the odds there at about 0.00%

I occasionally read cryptocurrency forums and they are sure the dollar will be replaced by the yuan or some BRICS currency or something crypto-related Real Soon Now©, but they never mention the Euro for some reason. The Euro is already the number two currency, and would be the next logical replacement.

Happens even slower than that. The trend of the dollar replacing the pound sterling was in place for about 70 years (depending how you figure it) before the lines finally crossed. A couple world wars sped up the process too.

Some people point to current US borrowing as an analogy for England borrowing to pay for the wars. The key difference though is the US debt is denominated in dollars and mostly held by US entities and the US government. England needed dollars during and after the wars. The US doesn’t need yuan.


Quite agree AlphaWolf. I’m just saying it as I see it.

For all the United States faults and problems (and yes, the list is long), I think most countries aren’t in a hurry to give that power to China, Russia, or Saudi Arabia.

I would imagine that the rest of the world would like two or more payments systems. Any monopoly is asking for trouble (unless you run the monopoly that is). Competition works :slight_smile:

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They might say they want that, but I think they probably don’t. Let’s say you are in Brazil and want to sell sugar to Saudi Arabia who wants to sell oil to Denmark who wants to sell wind turbines to Canada who wants to buy electronics from Japan.

That whole process is exponentially easier if everyone uses the same currency. Doesn’t matter which one. We’ve been hearing for decades that somebody has a plan to overthrow the dollar, but it never works out. It is a bit of a tautology, but everyone uses the dollar because everyone uses the dollar.


But look at what is happening!

I agree that it is simplier if everyone uses the same system, but not if the people running the system turn on you. The USA has signalled to the world what it can do to a country’s economy so what do you expect people to do?

Anyway, I’m all for a bit of competition, even for world payments systems. No one is going to be forced to use the BRICS payment system or any other payments system and can still use SWIFT if they wish.

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That depends do we want legitimate governments with a peaceful transfer of power, Aristotle, or do we want to turn a blind eye here and abroad to illegitimate governments?

As usual the world is on edge.

Even the bad actors try to start out on the right page.

Complain, mostly. The US’s percentage of global GDP has been shrinking for decades but 85-90% of cross border payments are still in USD. Again, there is a bit of a tautology. If the dollar strengthens it slows foreign growth–which makes the dollar more attractive. If the dollar weakens other countries economies expand and need access to US capital markets. No matter what happens, everyone wants dollars. It could change over time, but the changes are glacial.

SWIFT is payment system that is neither run nor created by the US, and SWIFT payments can be made with any currency. BRICS is not a payment system. Occasionally, you hear some rumors about a BRICS currency. This is fantastically unlikely. If order to have a common currency, you have to surrender at least some control over your own economy. We saw how this played out with the PIIGS and the European debt crisis, where Germany and France were able to dictate economic and even domestic policy in other countries.

If you are Russia, do you want China to have political control over your economic and domestic policies? Do you think Putin will sign off on that?

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The United States, European Union and United Kingdom on Saturday agreed to put in place crippling sanctions on the Russian financial sector, including a block on its access to the global financial system and, for the first time, restrictions on its central bank in retaliation for its invasion of Ukraine.

The actions of the USA and Europe have made the world realize how vulnerable they are to the wims of the USA. There are already alternatives emerging:

China’s Cross-Border International Payments System could give Russia a lifeline and accelerate de-dollarization

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“The actions of the USA and Europe have made the world realize how vulnerable they are to the wims of the USA.”

And rightfully so for any country who invades another sovereign country as Russia did Ukraine: a country whose territorial integrity and sovereignty it guaranteed in 1994.

“But, but, wait! The US invaded Iraq!!” This strawman (and others like it) gets destroyed via motive and end game: did the US invade Iraq to gain permanent territory a la Putin’s stated objectives? Did the US target civilians and use scorched earth tactics?

BL Home Fool


Try Vietnam

Having been pronounced as the winning weapon of the Korean War, napalm was part of the US arsenal from the very beginning of the conflict in Vietnam. In the decade from 1963 to 1973, 388,000 tons of napalm were dropped on Vietnam. That is ten times the amount of napalm used in Korea (32,357 tons) and almost twenty times more than was used in the Pacific (16,500 tons). First, it was used via flamethrowers by the US Army and their ARVN allies to clear out bunkers, foxholes, and trenches. Even if the flames could not penetrate into the bunker, the fire consumed enough oxygen to cause suffocation inside it.

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Started to list that one also but thought you might. Many things were done wrong in that war, but they were primarily tactical, not war of conquest motive-driven. If you cannot differentiate the motives of the USA during that time period versus Russia/Putin 50+ years later, we see the world quite differently.

Do you think we wanted to add any of the following countries to our sovereign nation (i.e. make them a state or colony of the USA):

Any part of Europe after WWII (contrast what we did with what Russia did)
Korea (North or South)

I think you get the idea–Was the US conducting wars of conquest or not?

Now, focus on Russia right now and tell me whether you think they are conducting a war of conquest or not (hint see Putin quotes on the issue starting around 2014 or so, IIRC).

If you agree that they are doing this, do you agree that he monetary sanctions you cited were justified or not?