Some of the things that have been happening are grossly underreported on, like this: https://thewire.in/diplomacy/india-signs-deal-to-adopt-mosco...
Let's assume you wanted a route to send/receive money from Russia now, you could do so via India - a country in the good books of both Russia and the West.
Iran has been settling oil sales to China in Yuan more and more over time: https://www.silkroadbriefing.com/news/2023/02/21/iran-increa...
Assuming the dollar gets replaced by one reserve currency is the fallacy. Like with geopolitics, we're seeing a multipolar world return.
Yes, but there's a difference between a shift of power from one entity to another and a shift of power from one entity to many entities (distributed). That's what the people above you are saying.
Tldr: Swap != diversification
https://markets.businessinsider.com/news/currencies/russia-d...
No country is currently strong enough to cement its position the way the US had, but the move away from the dollar will hurt the US a lot, by limiting the Fed and increasing inflation. It also enables other countries to have a foreign policy more antagonistic to the US, it takes away a good chunk of leverage.
Exchange rates are the net result of trade in goods and services (and capital), it's the bottom line fudge factor that makes trade work. If a country imports too much, its currency drops making foreign goods more expensive slowing imports. If it exports too much, its currency rises making its goods more expensive and slowing exports.
If the US imports a lot, it sends dollars overseas. If the foreigners want to invest in the US economy, those dollars come back in exchange for assets and the value of a dollar is not affected. If the foreigners don't want dollar denominated assets, they just buy their preferred currency instead, sending the dollar down. (In the case of investment, the US for most of its history ran a huge trade deficit. It was not a problem because economic growth meant foreigners wanted to invest here. Much of the trade deficit was caused by the purchase of capital equipment, used in driving the economy)
People who are thinking about exchanging currencies are not doing it on whim, they are doing it for underlying reasons that have to do with economic activity, productivity, long term investment opportunities, etc. These things carry currency denominated prices, but those currency fluctuations do not affect the rates of return of the investments, rather those currency fluctuations are how the books are balanced and change the rates of ebb and flow.
I doubt that. The US has been able to both support a trade imbalance and print money at prodigious rates that would be unsustainable for any other country.
I remember articles from economists pointing this out going back to the eighties.
One important reason for this is that not all dollars the US prints inflate the local money supply. Instead, they go out into the world where they are used by other countries to trade amongst themselves, without US involvement (and reserves).
It's like writing a check that is never cashed. Cool if you can pull it off.
You mention foreign investment. Well, if the value of the dollar goes down, because demand for those dollars is lower, those investments also become less attractive. Could cascade.
+All that debt will become 'real'. We could look to UK and see what happens to a nation post (currency) empire. But a word of caution here regarding the analogy: the new empire (US) were allies of the dethroned empire (UK). Come US's time, it is doubtful that the new power will be a Western power. So US will have a harder time than UK and things have not gone well for UK since WW2.
Zombie International Currency: The Pound Sterling 1945-1973, 2021:
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP...
This is wrong - as you point out. When people don't need dollars except to buy/sell from the US, the dollar is a less attractive currency to keep around.
This is going to hurt...
[1] https://www.bloomberg.com/news/features/2016-05-30/the-untol... (https://archive.is/kRW9c)
[2] https://www.currencytransfer.com/blog/expert-analysis/saudi-...
* From [1]: “Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.””
https://www.semanticscholar.org/paper/Showdown-at-Doha%3A-th...
The rise of Islamic Jihadis, financed by KSA and trained by CIA, propagation of Wahabism, tolerating the replacement of a secular ally in Iran with Islamist revolutionaries, ..., are all the direct consequence of this strategic shift by the USA. This is all in the context of post-Vietnam debt, rise of OPEC, and a still very menacing Soviet Union.
The Shah had made the error of thinking that by not joining the oil embargo of Arab states he was proving yet another reason (beyond being a forward Western block allied barrier to Soviet Union’s access to the Persian Gulf) for being considered a strategic ally to US. Nixon and Kissinger publicly and privately also assured of Iran’s importance. But what actually happened was that the oil embargo demanded a reassessment of the value of Shah of Iran to US. It was seen that oil and Arab producing nations’ alignment was far more important than any value Shah’s Iran was providing as a bulwark against the Soviets. The Brezhinski doctrine effectively addressed the means of filling the vacuum: Islamic Fundamentalism.
https://www.zerohedge.com/geopolitical/five-arab-states-plus...
some linger in centuries long decline, some collapse overnight
Well, imho, this question hinges more on the calculations (and subsequent actions) of US's allies rather than the counter-organizing efforts of the rebel states.
But it's interesting this particular "power center" of the world (US dollars for oil) is weakening just as oil's grip on the world is weakening.
The world was totally beholden to oil for what, 100 years?
But everyone with a brain sees that oil demand is going to plummet with EVs and wind/solar to recharge them ... and domestic reserves will likely cover the remaining demand. The political power dynamic of the petrodollar has ... what ... a decade? Or it's already dead?
Power and economic productivity is/were hand in hand. The geopolitical dominance of oil provided direct political dominance over everyone's economy.
But Solar/Wind/EVs are largely independent of geopolitical control. Yes China appears to be dominant in EV production, batteries, and solar cells, but it isn't the ironclad grip of "we have oil underground you don't".
EV drivetrains are simple, everyone can make an electric motor. Viable EV battery chemistries are proliferating and also becoming immune to cobalt, nickel, and even lithium supply constraints. Anyone can make a wind turbine, and solar cell production will likely plummet in cost and diversify in production if/when perovskites and other non-silicon panels hit the mainstream.
But likely we are headed back to a cold war alignment, or even more fascinating, a tri-power alignment (EU, US, China), and economic alignment will be replaced with the good old protection racket of the Cold War.
Oil will probably remain as a military energy source. But likely everyone will be able to solve gas production with, at minimum, biofuels.
What is interesting to me is how ignorance of the actual issue -- our civilization now depends on continual growth that we can not sustain -- shapes the discourse of alternatives to global regime du jour (with the so-called multi-polar model as the 'solution'). This would be nothing more than rearranging the chairs on the Titanic. No one is discussing alternatives that address the credit-interest-growth regime. This is the 'sacrosanct' dimension of the problem, and no one in polite society wants to touch it, anywhere.
The Human Predicament, Nate Hagens (57m) https://www.youtube.com/watch?v=MNzLkdr7UIU
As in, I get there are current dependencies, but what is it fundamentally about the wind turbine's parts is beholden to ground-extracted oil? Plastics/fiberglass (should be replaceable)? The electric dynamo because of needed heat in metallurgy/refining?
For solar (silicon solar cells specifically), again, what is it beholden to? Silicon? Etching chemicals?
I can see oil still being used for lots of industrial processes (and plastic production), but ... EVs are going to drop a massive amount of demand for them. And while plastics suck for lots of reasons, fundamentally plastic is fossil fuel carbon that has been sequestered in a durable long-lived form.
I'll check it out, but again I wonder if the dependence is due to someone "growing up" ensconced in a petroleum world not realizing the full path forward that will eliminate so much of it, particularly the massive scale of burn-into-CO2 part.
No. It's a measure of much foreigners trust the Us economy and it's political and judicial system. What drives the demand for the dollar is the will of people to invest money in American securities and on the American capital market.
Chinese investors invest on the Chinese market in Yuans. Rich Chinese investors invest on the US market with US dollars.
> No.
Actually, what the OP wrote is true: the use of the dollar as both a reserve currency and as a trading currency between non-US countries means there is a demand for the currency itself without actually wanting to buy goods and services from the US or invest there.
What you describe, investing in the US, also happens. But it isn't the only thing that happens, the demand for dollars without such investment also happens, and as far as I know is the larger part.
If it didn't happen the de-dollarization that the fine article talks about couldn't be happening.
If country A trades with country B, it'll either get paid or pay with country B's currency. Country A might not be interested in country B's currency, so it can use the US dollar and a US institution as a proxy between the two. But that doesn't do anything to affect the value of the three currencies. It's simply a matter of convenience (these US dollars get exchanged back into currency A or B seconds after being purchased).
What matters is how confident people are of their respective government, laws and institutions compared to the US. Would they prefer to hold assets in the United States or their own country, or country A or B.
And no, your idea that they change money into dollars, execute the trade and then change right back is an interesting theory, but not actually what happens.
And i predict that this time, at the last minute, the bill will pass again, like every other time. Unless the republicans truly believe that it's worth going down with the ship for.
Some would be fine letting the US default if their demands aren't met (e.g. Tea Party types).
Others not so much.
One difference this time is the amount of trouble the House Speaker had getting elected by his own party, and any closed door concessions related to that were very likely promises around budget and the debt ceiling.
From who exactly? Most of developed and developing world is facing demographic collapse over the next 50 years.
The US is the largest energy producer, one of the largest food producers, the most dominant military, has relatively stable demographics and has no trouble assimilating immigrants, etc.
I.e. countries reserves will move to diversified portfolios of currencies and assets (gold, etc.) that minimize general financial risk, but also foreign economic-political influence.