It’s not really the point at issue.
Basically it is very simple. If you are running the world’s reserve currency and use that position to attack a country financially then people will draw their own conclusions and make alternative arrangements. The rights or wrongs of the decision are irrelevant.
I’m generally against monopolies and a bit of competition is good for everyone, except the people who are running the monopoly.
The USA has shot itself in the foot.
So, you are saying that a given country can do anything it wants to, no matter how bad, and the financial system/world reserve currency should not be used to help stop there activities?
If so, we agree to disagree.
Cheers!
Murph
(who wonders how any other country mentioned like China, et al would use the world reserve currency in their hands…but then, we know that based on their recent actions…and so does the world…like a club in circumstances far short of a war of conquest issue)
Not at all.
But if the USA uses its reserve currency status to punish a country that is doing something that the USA doesn’t like then other countries will take note and look for alternatives - they would be foolish not to.
OK, let’s get specific: how about if country #1 (Russia) invades country #2 (Ukraine) in order to conquer it?
Cheers!
Murph
BL Home Fool
(last time I looked most of the world’s countries condemned the Russian invasion, so if they and their “supporters” seek a new reserve currency, what do you think the odds are they will achieve same in a reasonable time?)
You started this thread with the statement that the US had “abused its position while running the world’s reserve currency”.
I have asked a number of times whether there are ANY circumstances under which the actions taken by the US are justified…and have yet to receive an answer.
You go back to the issue of the US made a bad decision to punish Russia for the invasion, and they, China and others will therefore seek a new reserve currency solution.
So what?! I submit that their desire for a new reserve currency was there long before the Russian invasion, and therefore there is little downside for the US in taking the action it did in punishing Russia for a war of conquest.
Your mileage may vary.
Murph
It doesn’t matter what any country does to any other country. The world is now very aware of the power that the USA has, and more and more countries are looking to reduce their vulnerability to the USA’s power. if nothing else, Putin has given this process a boost:
Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony.
So long as the US limits this sort of punishment to invaders of other sovereign nations, I doubt that Russia, China, et al will get much traction on a new reserve currency; perhaps other bad actors like Iran, North Korea, etc.
Will the dollar as reserve currency last forever? Nope! None have so far. Is there any currency that has a practical chance of replacing the dollar any time soon? Very doubtful.
If you think there is, make your case for how that would occur; a case that is more than Russia, China and their supporters are angry.
I should have known that we were essentially done with this “discussion” when you made this statement: "“The rights or wrongs of the decision are irrelevant.”
Wow!
Murph
(sounds like the same sentiment expressed by the Swiss bankers who accepted deposits of looted treasures from the can’t say the N----is)
There are two different ideas here which have sort of become conflated.
The first, the thread starter, is that the dollar is losing its dominance as an international currency. That true, but it is a trend that has been in place for decades as the US share of global GDP shrinks. The next most common currency for international transactions is the Euro coming in at a distant second. The RMB is almost a rounding error. It isn’t a serious contender to replace the dollar, at all.
In the meantime, there are strong structural reasons why the dollar remains the world’s reserve currency. Which brought up the second idea which got mixed up with the first one: An alternative to SWIFT. But SWIFT has little to do with the dollar, other than most SWIFT transaction are in dollars. SWIFT supports any currency in virtually every country and even some places that aren’t countries.
Certainly rogue states like Russia who don’t have much access to SWIFT would like an alternative so they have better access to global financial markets, but again, that doesn’t have anything to do with the dollar. Russia would still need dollars or Euros to conduct international trade regardless of the payment system.
Google thinks I have an interest in cryptocurrency, which I do in a train wreck sort of way, and it sometimes suggests crypto and crypto-adjacent articles for me. Just this morning it suggested an article about a new BRICS reserve currency designed to replace the dollar. The article recycled two quotes from BRICS execs from years ago speculating about just such a thing. My question is: if it is such a great idea how come they haven’t done it already? The answer is because they can’t.
What do you mean by “now”?
Are you saying the world wasn’t aware of US power in World War I? Or in World War II? Or after World War II with widespread economic dominance? Or after the Cold War victory? Etc…
And in a practical sense, what does this mean? Russia can now sell oil (at a discount) to China for yuan instead of USD. Of course, Russia can only spend the yuan in trade with China. The skin off our nose is not very much.
I would say two very different POVs:
USian vs developing world.
China and India make up 33% of the world population.
Add Africa and SE Asia, and it totals 66% of the world population.
Add Latin America… Total 70%.
At some level of % population, the economies of scale tilt away from the USD.
African and Indian YouTube channels and “news sources” (al Jazeera English, BBC, Reuters), all carry “news” with non-USian biases / POV.
Many “developing countries” with very sparse or undeveloped natural resources, are having real problems FEEDING their people, and keeping the lights on.
And they are BLAMING THE US.
Ukraine being aggressed by Russia is real low on their list of things-to-be-incensed-about.
China’s New Silk Road initiative IS MAKING PROGRESS in these “developing countries”, in getting the countries to start building the fintek infrastructure to use yuan in place of USD.
From what I think I see on these nonUS centric “news” sites, China is using the “carrot”… And after a century (or more) of the US “stick” these countries are listening.
Latin America and Africa seem particularly ready to embrace the New Silk Road way.
Many of the other smaller (3rd world) developing countries also seem to be “leaning” toward China.
I put “news” in quotes cause of the obvious biases.
BUT! Due to being on YouTube, TikTok, Twitter, etc SM… They are INFLUENCERs, spreading their philosophies.
As such, they are a danger to US/Western control of the world economy.
JMO, your opinion may vary and all that?
ralph
Why do they blame the US for this?
Cheers!
Murph
Here’s a mildly interesting statistic. The great majority of “world reserve countries” last a century, plus or minus, with the average being about 90. Depending on the historian and the website, the dollar has been the world reserve currency since 1921, 1940, or 1945.
Since 1450 there have been six major world reserve currency periods.
- Portugal (1450–1530),
- Spain (1530–1640),
- Netherlands (1640–1720),
- France (1720–1815),
- Great Britain (1815–1920), and the
- United States from 1921 to today.
If you notice the average currency span is 94 years. The US dollar presently has been the world’s reserve currency for roughly 99 years.
Many of those epochs ended at the conclusion of a war, not favorably for the “reserve” country, or in the case of some bankrupting the victor anyway.
Yes
You even discuss it as abuse and want a new order to arrive.
Dars gold in dem dar hills I tell you!!
Dats all dats matters.
Now that I said that again, I will buy more gold.
The sanctions championed by the US, have disrupted the status quo for food and oil/coal. These countries’ economies are fragile, and supply disruptions are fueling inflation.
To avoid civil unrest, the leaders need to blame someone, and they point the finger at the US.
At least that’s what I get from the non-USian YouTube sources.
ralph
Of course there is a blame game. The strongmen need the blame game to survive in office. It is not really because of any other excuse. In a better power sharing government blame is mitigated to a larger degree in search of a solution. A single strongman says he will solve problems but things only get worse.
Oddly enough as China liberalized their economy also did better. China is now reverting to idiocy and their economy is worsening. Xi is not an intelligent man. Mean, awful and cowardly yes, and that makes him act out to control his country. Intelligent nah any ejit can do what he is constantly on about.
Interesting!
Russia’s invasion is the root cause of these shortages/higher costs, and we get the blame. 10’s of thousands of acres of Ukrainian farmland can’t be farmed because they are heavily mined or in a combat zone, and Russia is still playing games with the grain shipment agreement. Ah well…
Russia’s Global Food Shortage - WSJ
Cheers!
Murph
Murphy,
We saw the same blaming going on from 2016 to 2020 in this country rather than mitigating our internal problems.
Just as Disney is being used in Florida. Man against mouse so man can win? Big important man.
From the article (yea, the dollar will be replaced really soon. LOL)
India won’t pay Russia in US dollars over concerns that it may face secondary sanctions and won’t pay in rubles because of worries about obtaining Russia’s currency on global markets at a fair rate, sources told Bloomberg last month.
Meanwhile, Russia won’t take Indian rupees because of exchange-rate volatility, the report added. Moscow has also rejected an idea from New Delhi for the Kremlin to invest rupees from arms payments back into Indian capital markets so the currency doesn’t pile up.
Currency concerns with Russia’s currency have also plagued its other trade relations. Recently, it agreed to use the yuan to for payments on a [nuclear-power plant deal](De-Dollarization: Bangladesh to Pay Russia in Yuan for Nuclear Plant Loan) with Bangladesh, after previously insisting on using its ruble.