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Comment by Animats | Hacker News Reader

Whether China's yuan should be freely convertible to other currencies is something the PRC has struggled with for years. A freely convertible yuan would increase China's influence on the world financial system, but it would also increase the influence of the world financial system on China. And it would require much easing, if not elimination, of China's exchange controls.

A decade ago, a freely convertible yuan was seen as likely. But China has backed off from that. Xi Jinping's "China 2025" is about autarky - reducing China's dependency on the rest of the world.

So, the yuan as a world currency isn't really happening yet.

Euros, though...

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The yuan won’t be freely convertible because that would open the floodgates to capital flight from China. As long as that possibility exists, free convertibility will not.

Yeah, on top of the issues of infrastructure around payments/settlements/collateral management/kyc laws that often go ignored in these discussions as well as the high correlation of lowering (euro)dollar usage globally with lower global growth rates… ideally you'd have higher growth rates with lower (euro)dollar usage if there was any serious alternative.

Fundamentally speaking, I think non CB backed cryptos (combined with hedging tools via futures/options/swaps/ndfs/etc) have a better chance because they can be used to lower the costs intl of payments/settlements/etc, esp in these times when the trust in central banking becomes more and more contested. But I only see this happening slowly until there's a catalyst to push this to the next level.

I would expect cryptocurrency to ascend in a series of hops, “chaos is a ladder” style. Every time a central bank somewhere takes home their toys, crypto will click forward.

Yeah, that's probably a better way to put what I think I wanted to get at.

Actually they're flooding with yuans. 2018 and 19 they opened the gates to avoid the economy crash.

Flooding their market. Converting to dollars or other currencies is still very limited. [1] and [2]

1 - https://www.bloomberg.com/news/articles/2019-12-12/after-a-d...

2 - https://www.scmp.com/economy/china-economy/article/3012312/c...

Given the extreme questionability of all currencies for anyone who wants to, y'know, hold on to currencies; why not just do without? There isn't any theoretical reason a world currency is needed. Instead of pricing Yuan and Euros in terms of some third currency people could price them in terms of each other and cut out the middle man.

Speaking as an Australian; about 3-4% of our trading by value is with the United States. I shouldn't ever have to see a value priced in US dollars. I really don't care what the price of anything is in US dollars. The only reason the US dollar impacts me as far as I can tell is because it is embedded deeply into SWIFT and is required internationally to trade in oil. Important in practice but not in theory.

7 days late here, but its not an accident that things are priced in USD in the middle of transactions, and its not purely because the US wanted it that way.

Imagine if you as an Australian wanted to trade with venezuela. You go and make a deal selling something for some bolivars. But by the time you get the money the bolivars are not the worth the same in AUD as when you started the deal. Now you might say that the Venezualans should just hold some AUD in order to trade with australia. but they want to trade with the rest of the world as well so they would have to hold some of everyones currencies based on how much they plan to trade with them. This is infeasible so instead they use USD as the middle man to trade with everyone else, and everyone else agrees that they will accept USD for their trades. this removes the currency risk between countries assuming the USD is liquid and remains somewhat steady, which it has for the purpose of world trade.

agree with your comment except the last semi-sentance.

the euro has other issues, including dismal growth rates of the Euro area, an ineffective ECB, multiple diverging national financial strategies, and very long term, the massive ageing and shrinking of the european population. i don't see the Euro as anything but a very short term panacea. it needs to solve its structural issues before it can become more than it is.

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