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Key quote: "Pozsar’s argument: the moment Western nations froze Russian foreign exchange reserves, the assumed risk-free nature of these dollar holdings changed fundamentally. What had been viewed as having negligible credit risk suddenly carried confiscation risk. For any country potentially facing future sanctions, the calculus of holding large dollar reserve positions shifted."

My only critique here is that Russia is an outlier, along with China, because they both hold large dollar reserves and have a contentious relationship with the US. You have to go pretty far down the list to find another nation that is likely to face US sanctions - and those nations, like Libya and Iran, are already heavily sanctioned!

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Normally that would be a fair point (and maybe it was valid in 2022).

But given the US approach to foreign policy in 2025, one could argue that the list of countries that “have a contentious relationship with the US” (or, maybe more accurately, the other way around) is a lot longer and less clear-cut today than it was a few years ago.

Absolutely, but if I mention that the US president is wildly erratic with his foreign policy, then the comment just gets knee-jerk downvoted.

>and have a contentious relationship with the US

I sort of feel many countries that used to not have a contentious relationship with the US have one now and thus the observation of outlier status doesn't really work anymore.

the set of US adversaries is not presently shrinking, to put it mildly

I wouldn't call them "adversaries" yet.

But the fundamental point of your comment is well taken. There are a lot of nations out there who have clearly begun to see the lack of sustainable safety in being called an "ally" by the US.

Of course, we're only in the first year of the new US foreign policy posture. Who knows where we'll be by year 4? Who's even to say this new environment won't last longer than 4 years?

Just a lot of uncertainty out there. And that uncertainty is why we see people, organizations and nation states move to protect themselves.

It should, if no one panics, lead to a new balance. A new normal.

Should.

Brazil and India are actually already being targeted by the current administration

The US and Brazil have an informal defense treaty that will almost certainly outlast the next 3 years of lame duck Trump. Plus, they have a presidential election next year.

I don't know what to say about India. If nothing else, no sane US President would alienate India too much because they're an irreplaceable strategic partner and bulwark against Chinese expansion.

You're right that Russia was an outlier in 2022; but as others already said, the landscape has shifted considerably since then. The argument isn't that most countries face immediate sanctions risk, but that the uncertainty itself changes the risk calculation. Even traditional US partners are now hedging (or considering their options) gold holdings at central banks recently surpassed US Treasury holdings for the first time in 30 years. It's less about countries thinking 'we'll definitely be sanctioned' and more 'the tail risk is now visible and needs to be managed.' That calculus might drive gradual diversification even among countries with good US relationships.

The point is that any nation could face sanctions if their interests do not align with the US. There are many countries that have been sanctioned or threatened with sanctions. I think the risk of confiscation is not the only risk worth mentioning. The Fed has been printing money with abandon, and there is no sign that the national debt will ever be paid.

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