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Old 10-31-2019, 07:53 PM
 
Location: Tijuana Exurbs
4,088 posts, read 10,643,773 times
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Quote:
Originally Posted by Hoonose View Post
If foreigns dump Treasuries, barring world war or other sort of US physical destruction, most likely that would happen over a broad time span. Otherwise sellers would take great losses. And as above, what to do with their new USD supply?

And as they shrink their UST holdings, they receive USD's. So it also depends on where those USD's go. If they stay out in the world, inflation here might not be too bad. (If that is even a worry based on why this is happening in the first place.) Foreigns currently own about $4T in UST's. It doesn't seem likely that all that would come home so soon.
Your point that it wouldn't happen all at once is valid, but even spread out over time it would have negative effects.

It took about 30 years (1945 - 1975) for British sterling to lose the bulk of its reserve currency status. During that period as various governments kept reducing their store of sterling, UK inflation was usually about 2% - 3% higher than US inflation. That higher inflation eroded sterling's reputation as a store of value prompting more reductions in reserve holdings. These caused more inflation and more devaluation which prompted more reductions in reserve currency holdings. It was a vicious cycle.

You also should factor in the loss of Empire which reduced the need for countries to have sterling to trade with Britain. Tariffs and policy locked a lot of colonies into prioritizing trade with Britain or its other colonies and therefore they used a lot of sterling. As the Empire was dismantled, the colonies became free to trade with whomever they wanted and so they needed less sterling.

The key thing for the US is to keep its inflation rate low over the long term, and to not over-use its ability to sanction foreign US Dollar currency transactions. We've been doing a good job on the former. I'm not sure where the tipping point is for the latter.
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Old 10-31-2019, 08:39 PM
 
2,770 posts, read 1,608,807 times
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China has strict capital controls, the Yuan isn't likely to be the dollar replacement. In fact, I'd guess a new Fiat would be most likely perhaps pegged to gold and likely digital only

In addition, when the dollar drops or there are issues domestically creating investment outflow, the Japanese yen tends to be the backup.
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Old 10-31-2019, 08:57 PM
 
1,486 posts, read 545,164 times
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Quote:
Originally Posted by kettlepot View Post
To the OP, you are correct: inflation.

In this theoretical situation, as all of those reserve dollars are disgorged from the vaults of the central banks, they'll flood the foreign exchange market, depress the value of the dollar, raise import prices, raise interest rates (because those reserve dollars are held in the form of treasury bonds which will have to be dumped on the market) and flood the domestic economy with excess dollars thereby generating inflation.

As for an alternative reserve currency, posters above have it right in that the economy of the alternative must be large and liquid, such as the Chinese Yuan or the EU Euro, but not really any others. However, the Euro has issues with political unity and lack of economic dynamism, and the Chinese Yuan suffers from expropriation risk because the country at its core lacks rule of law.

IMF Special Drawing Rights have been suggested as a reserve currency, but the SDR is just an agglomeration of existing hard currencies (42% US dollars) which is essentially what central banks do right now by holding on average 2/3 of their reserves as dollars.
^^^^^^^^^^
This.
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Old 11-01-2019, 08:42 AM
 
Location: NJ
11,919 posts, read 22,139,331 times
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Quote:
Originally Posted by Brave New World View Post
The two main currencies in the world are now the dollar and euro, the Chinese would dearly like their currency to be a global player however this is unlikely in the forseeable future.

I don't currently see any threat to the dollars standing.
I had sent my uncle and cousin in Hungary US dollars. I was worried they wouldn't be able to change it to Euro money but my cousin said that our money is pretty common there and to just send the cash so I did. I didn't realize so many places accepted US dollars
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Old 11-01-2019, 12:45 PM
 
8,769 posts, read 5,466,516 times
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My personal fantasy is a return to the world of, say, 1800. Europe is the undisputed international hegemon, though precisely who in Europe is the dominant force, is a matter of some contention. America meanwhile is a mostly agricultural outpost occasionally mentioned as a promising (if speculative) place to invest.

In this fantasy, the world's reserve currency would be the Euro. Oil and commodities in general would be priced in Euros. If developing nations want loans, they have to secure them in Euros. The international banking system would revolve around the Euro.

Shall I go on? In this fantasy, the European Union becomes a true super-state. It expands, admitting more of Eastern Europe. It integrates, with centralized power over both monetary and fiscal policy - in other words, not only the power to set interest rates, but to levy taxes and to declare a budget.
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Old 11-01-2019, 07:33 PM
 
187 posts, read 33,270 times
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Quote:
Originally Posted by NJBoy3 View Post
The Chinese Yuan is a world currency..
The African countries owe China a lot of money,Chinese made goods are selling well there,you can get a brand new Chinese car with no A/C or get a used American or Japanese car,I mean really used,dusty and falling apart ones.for the same money,and more are choosing the Chinese ones,how do they sruvive with no A/C in Africa,I dont know?
May be like my postman,mount a battery driven toy fan to the dashboard?
And dare we talk about cell phones?Huawei or Samsung or Apple?
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Old 11-02-2019, 09:18 AM
 
9,612 posts, read 4,227,848 times
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Quote:
Originally Posted by ohio_peasant View Post
My personal fantasy is a return to the world of, say, 1800. Europe is the undisputed international hegemon, though precisely who in Europe is the dominant force, is a matter of some contention. America meanwhile is a mostly agricultural outpost occasionally mentioned as a promising (if speculative) place to invest.

In this fantasy, the world's reserve currency would be the Euro. Oil and commodities in general would be priced in Euros. If developing nations want loans, they have to secure them in Euros. The international banking system would revolve around the Euro.

Shall I go on? In this fantasy, the European Union becomes a true super-state. It expands, admitting more of Eastern Europe. It integrates, with centralized power over both monetary and fiscal policy - in other words, not only the power to set interest rates, but to levy taxes and to declare a budget.
And your idea still ignores the fact that the individual EU countries give up a lot of their sovereign monetary control to an outside agency. The same EU weakness today vs the USA. Your EU is a monetary union without a political union. Yours creates weak states like Greece, the USA gets Mississippi.
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Old 11-02-2019, 09:23 AM
 
6,022 posts, read 3,235,945 times
Reputation: 10961
Quote:
Originally Posted by ohio_peasant View Post
My personal fantasy is a return to the world of, say, 1800. Europe is the undisputed international hegemon, though precisely who in Europe is the dominant force, is a matter of some contention. America meanwhile is a mostly agricultural outpost occasionally mentioned as a promising (if speculative) place to invest.

In this fantasy, the world's reserve currency would be the Euro. Oil and commodities in general would be priced in Euros. If developing nations want loans, they have to secure them in Euros. The international banking system would revolve around the Euro.

Shall I go on? In this fantasy, the European Union becomes a true super-state. It expands, admitting more of Eastern Europe. It integrates, with centralized power over both monetary and fiscal policy - in other words, not only the power to set interest rates, but to levy taxes and to declare a budget.
Cool fantasy bro!
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Old 11-02-2019, 12:17 PM
 
Location: Myrtle Creek, Oregon
13,139 posts, read 13,185,004 times
Reputation: 21300
Quote:
Originally Posted by SWFL_Native View Post
The Petro dollar is currently more important than whether the BRICS use the dollar for cross-border transactions.
The dollar is the petro dollar, but the US has little control over that. It's more of an historic anomaly than a requirement.

https://www.reuters.com/article/us-s...-idUSKCN1RH008
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Old 11-02-2019, 12:26 PM
 
Location: Myrtle Creek, Oregon
13,139 posts, read 13,185,004 times
Reputation: 21300
Quote:
Originally Posted by Hoonose View Post
If foreigns dump Treasuries, barring world war or other sort of US physical destruction, most likely that would happen over a broad time span. Otherwise sellers would take great losses. And as above, what to do with their new USD supply?

And as they shrink their UST holdings, they receive USD's. So it also depends on where those USD's go. If they stay out in the world, inflation here might not be too bad. (If that is even a worry based on why this is happening in the first place.) Foreigns currently own about $4T in UST's. It doesn't seem likely that all that would come home so soon.
Much of our trade deficit is being repatriated as other countries buy US assets, like farm and forest lands, mines, urban real estate and businesses. The Chinese own Smithfield. It has been decades since Rockefeller Center fell to the Japanese. US farmers are being squeezed out of the land market and turned into sharecroppers by foreign money. The US has vast resources ripe for exploitation by foreign interests.
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