No one would ever trust that a floated Yuan would stay that way. China operates at the whim of its current dictator--sometimes stable, sometimes feckless.
Does Australia’s Superannuation system have anything to do with investors diversifying into Australian dollars (9.5% soon rising to 12% of every Aussies gross income is put into legislated retirement savings accounts, we’ve had it since the 90s and it now has 2 Trillion in assets under management, which is a bigger number than others mentioned in this post) or is that irrelevant because the majority of Super is in shares and it’s just that as a stable, law based, growing economy it’s a good choice for the same reason Canada and Sth Korea are?
“Can somebody tell me when the U.s. dollar lost its status as the world’s reserve currency?” -- Jack Dorsey, Block CEO
A $2 trillion loss in cryptocurrency markets and not a ripple in currency markets, stock exchanges, etc. Blockchain has applications, but not in crypto currencies.
Also, "gold-backed" and "stable" are mutually exclusive properties, unless you're one of those morons who insists that if the price of gold in dollars doubles, the value of the dollar has halved, even if the price of a loaf of bread in dollars remains unchanged.
Why is no one making the point that only the Republicans have caused the US Credit Rating to be reduced by S&P? No, the Republicans have not causqed the US to default, but their threat did casue S&P tp remove the US AAA rating.
In the latter part of the 2010s, the BRICS countries were also pushing their own "internet", which basically was having a single ingress/egress to the country which they could turn off, filter, etc (as China/Russia do already). Their argument was "a better faster internet for the next generation", China is still pushing the ITU to accept some of their proposals. It's now on the back burner.
The dollar market is huge, dwarfing all other currencies. As an example, 10-15 years ago a Mexican branch of a non-Mexican bank (sorry, I don’t remember the bank) was sanctioned by U.S. Treasury Department (FINCEN) for facilitating drug cartels’ money laundering. I was curious about why the branch would use U.S. dollars to launder the money if they knew that the U.S. government could go after them? I called an acquaintance at the Fed who was an expert in foreign transactions. He said the branch really had no choice. No other world currency, including the Euro had sufficient financial depth to handle the huge volume of the illegal drug trade. Even if the transactions originate in Europe or Asia, the shear volume of the transactions meant that they would eventually have to use U.S. dollars to clear through one of the New York clearing systems, subjecting the originators to U.S. anti-money laundering laws.
This all raises the question of why there are so much misinformation on currencies out there to begin with. Two reasons:
1) Right-wing retirees paranoid about their wealth are most likely to get invested in this conversation online, and they are neither reliable sources of information not especially discerning consumers of information. This is the engine that drives the bad business/econ content.
2) There is real money to be made manipulating opinion on foreign currencies and inflation. The most obvious is a pump-and-dumps originally at the behest of gold-traders (remember Bush-Obama era cranks) and now at the behest of crypto-traders. Afforementioned right-wing paranoid retirees are often the marks, but are mid-level marketers of the collective pyramid scheme.
In it he talks about “ the idea of “BRICS coin” as a commodity-weighted neutral reserve asset that encourages members to pledge their commodities to the BRICS “cause” “
Might this have more chance of displacing the USD in commodity flows? Despite your fourth point, it seems to me to be very useful for the US to buy commodities in a currency it’s able to print…
One of the things that Saddam Husein was up to, before the Iraq War, besides starting the Intifada in Israel, was a determination to create a basket of currencies in which to accept for his oil. Have contended, that was perhaps the main reason for the war, a desire to maintain the dollar, at all costs to the Iraq's.
I've waited for an explainer like this for so long. Thank you. Makes me laugh at all the anxiety spikes I'd get when reading some dollar doom article on Bloomberg.
This was a great piece that got me thinking - does the US Treasury hold foreign currency reserves? And the answer was easy to find - it does! Mainly in Euro and Yen. The other question is this - why, as the world's fiat currency, would the US hold any foreign currency reserves at all?
Didn't the Swiss do something a few years ago where their currency was appreciating too much because people saw it as a safe haven, so the Swiss bank essentially said 'we will literally do whatever it takes to keep the price of the currency stable,' and that effectively stopped the buying of francs. Am I remembering that right?
I always thought of CHF as being one of those secondary reserve currencies but I see it's way behind the countries you mention. I'm guessing China is also afraid of a scenario like that, where foreign traders have too much influence on the price of the yuan?
Russia and Iran certainly wouldn't use Tether to conduct trade. It's a centrally managed currency with a blacklist that would definitely be invoked if the US government leant on them.
They could try using a decentralised alternative like DAI instead, although I don't know why they would do that instead of just using their own currencies.
And Still; the undisputed and highest liquidity currency out there; The US 'greenback' Dollar.
For what is worth we cannot deny the cable (british pound) had a strong jab after the great financial crisis but coming into the round 10 it failed to keep the pace.
The euro looked strong, fast, reliable and the same story took place in Round 10.
God knows the underrated dollar has the stamina to punch his foes in the championship rounds.
Thank you so much, Noah! It's so annoying to see people freaking out about shit they don't understand.
No one would ever trust that a floated Yuan would stay that way. China operates at the whim of its current dictator--sometimes stable, sometimes feckless.
Does Australia’s Superannuation system have anything to do with investors diversifying into Australian dollars (9.5% soon rising to 12% of every Aussies gross income is put into legislated retirement savings accounts, we’ve had it since the 90s and it now has 2 Trillion in assets under management, which is a bigger number than others mentioned in this post) or is that irrelevant because the majority of Super is in shares and it’s just that as a stable, law based, growing economy it’s a good choice for the same reason Canada and Sth Korea are?
“Can somebody tell me when the U.s. dollar lost its status as the world’s reserve currency?” -- Jack Dorsey, Block CEO
A $2 trillion loss in cryptocurrency markets and not a ripple in currency markets, stock exchanges, etc. Blockchain has applications, but not in crypto currencies.
Also, "gold-backed" and "stable" are mutually exclusive properties, unless you're one of those morons who insists that if the price of gold in dollars doubles, the value of the dollar has halved, even if the price of a loaf of bread in dollars remains unchanged.
Why is no one making the point that only the Republicans have caused the US Credit Rating to be reduced by S&P? No, the Republicans have not causqed the US to default, but their threat did casue S&P tp remove the US AAA rating.
In the latter part of the 2010s, the BRICS countries were also pushing their own "internet", which basically was having a single ingress/egress to the country which they could turn off, filter, etc (as China/Russia do already). Their argument was "a better faster internet for the next generation", China is still pushing the ITU to accept some of their proposals. It's now on the back burner.
The dollar market is huge, dwarfing all other currencies. As an example, 10-15 years ago a Mexican branch of a non-Mexican bank (sorry, I don’t remember the bank) was sanctioned by U.S. Treasury Department (FINCEN) for facilitating drug cartels’ money laundering. I was curious about why the branch would use U.S. dollars to launder the money if they knew that the U.S. government could go after them? I called an acquaintance at the Fed who was an expert in foreign transactions. He said the branch really had no choice. No other world currency, including the Euro had sufficient financial depth to handle the huge volume of the illegal drug trade. Even if the transactions originate in Europe or Asia, the shear volume of the transactions meant that they would eventually have to use U.S. dollars to clear through one of the New York clearing systems, subjecting the originators to U.S. anti-money laundering laws.
This all raises the question of why there are so much misinformation on currencies out there to begin with. Two reasons:
1) Right-wing retirees paranoid about their wealth are most likely to get invested in this conversation online, and they are neither reliable sources of information not especially discerning consumers of information. This is the engine that drives the bad business/econ content.
2) There is real money to be made manipulating opinion on foreign currencies and inflation. The most obvious is a pump-and-dumps originally at the behest of gold-traders (remember Bush-Obama era cranks) and now at the behest of crypto-traders. Afforementioned right-wing paranoid retirees are often the marks, but are mid-level marketers of the collective pyramid scheme.
Thanks for the post Noah, very timely!
I was wondering if you had any thoughts on Zoltan P’s recent paper “War and Commodity Encumbrance” (blob:https://plus2.credit-suisse.com/91ea57ae-7969-422c-8237-0ffdb1ca18d1)?
In it he talks about “ the idea of “BRICS coin” as a commodity-weighted neutral reserve asset that encourages members to pledge their commodities to the BRICS “cause” “
Might this have more chance of displacing the USD in commodity flows? Despite your fourth point, it seems to me to be very useful for the US to buy commodities in a currency it’s able to print…
One of the things that Saddam Husein was up to, before the Iraq War, besides starting the Intifada in Israel, was a determination to create a basket of currencies in which to accept for his oil. Have contended, that was perhaps the main reason for the war, a desire to maintain the dollar, at all costs to the Iraq's.
I've waited for an explainer like this for so long. Thank you. Makes me laugh at all the anxiety spikes I'd get when reading some dollar doom article on Bloomberg.
This was a great piece that got me thinking - does the US Treasury hold foreign currency reserves? And the answer was easy to find - it does! Mainly in Euro and Yen. The other question is this - why, as the world's fiat currency, would the US hold any foreign currency reserves at all?
Didn't the Swiss do something a few years ago where their currency was appreciating too much because people saw it as a safe haven, so the Swiss bank essentially said 'we will literally do whatever it takes to keep the price of the currency stable,' and that effectively stopped the buying of francs. Am I remembering that right?
I always thought of CHF as being one of those secondary reserve currencies but I see it's way behind the countries you mention. I'm guessing China is also afraid of a scenario like that, where foreign traders have too much influence on the price of the yuan?
Russia and Iran certainly wouldn't use Tether to conduct trade. It's a centrally managed currency with a blacklist that would definitely be invoked if the US government leant on them.
They could try using a decentralised alternative like DAI instead, although I don't know why they would do that instead of just using their own currencies.
And Still; the undisputed and highest liquidity currency out there; The US 'greenback' Dollar.
For what is worth we cannot deny the cable (british pound) had a strong jab after the great financial crisis but coming into the round 10 it failed to keep the pace.
The euro looked strong, fast, reliable and the same story took place in Round 10.
God knows the underrated dollar has the stamina to punch his foes in the championship rounds.
Go Dollar!