Topic: The End of "USD" as the World's Reserve Currency - page 5. (Read 1322 times)

I agree that it comes down to oil settlements. At a minimum, a reserve currency needs to
1. be stable and of relatively high value
2. have enough supply for the entire world
3. have enough liquidity for the entire world

Right now, the US dollar doesn't have enough of any of these things.
1. It hasn't been backed by anything real since 1971. People say the dollar is backed in oil sales, but commodity sales are not legitimate backing for any currency. Backing is like collateral for debt. In fact, one of the reasons the US dropped the gold standard is because lending nations knew the US did not have enough gold to cover its debts after the Vietnam War. Using the dollar to settle oil deals creates ongoing demand for it, but it does not provide real collateral. So the idea to back the dollar in oil sales was never legitimate, especially now that we've seen negative oil prices for the first time. On a side note, I bet the US never does pay the majority of its debt. Several years ago, when Christine LaGarde was still with the IMF, she made a comment (in reference to Greece) to the effect that most of this debt is never going to be repaid. I'm not sure how they intend to settle the massive amounts of sovereign debt out there right now, but I sure hope it doesn't involve the use of militaries.
2. There is a huge supply of dollars, but there are still dollar shortages internationally, right now at least. Smaller currencies are collapsing and need dollars to get them through this period. If nations aren't able to acquire the numbers of dollars they need, they will begin to lose faith in it and try to find something else. If enough of them start trying to find an alternative to the dollar, they will eventually succeed.
3. The current liquidity problems have been going on since about 2007 (maybe a little earlier). If you look at the Fed's Total Assets chart, you'll see that it did not return to normal after the Recession officially ended, and lately it appears to be spinning out of control. Quantitative Easing, in the amounts needed, would diminish the value of the dollar. Too much more liquidity would lead to less stability. I like the Weimar Republic photo in the comment I responded to because it appears to be the path the US is taking, possibly on track for one century later, almost to the day.

Then why is the dollar still the reserve currency? Because there is no alternative. The high demand is keeping it stable for the time being, like a self-fulfilling prophecy. No other nation or entity has a currency that could take the dollar's place. In my personal opinion, the world does not have any real reserve currency right now at all, and they are simply using the dollar as a default for lack of anything more suitable. Interest rates may go negative, or even if they stay where they are, the incentive for nations to use the dollar is already diminishing.

The biggest problem for the US is that it is trying to run a global currency and a domestic currency with both the global and domestic economies hanging from thin threads. And while all of that is going on, it is now subsidizing a collapsed bond market. All the so-called Fallen Angels that have been downgraded to junk are valued in the trillions of dollars. The dollar is also political power as it is used to enforce sanctions. So there is the political facet of the whole thing too. All of this is too much for a central bank to manage. It isn't possible to juggle all of that with the few tools the Fed has. I think the US domestic economy will be the thing that goes into freefall as they try to prop up the others.

Americans participate in crypto quite a lot but the government does not like it. That is why many projects and exchanges often embargo Americans trading or investing in their projects.
Although the Corona virus epidemic is devastating the United States, I still believe that the USD is still at its peak. Everything will soon return to normal, Trump is a very good president of the economy, he will revive the whole economy.

I think it’s a very interesting discussion what the US should do next as to how to stop the USD from going into a free fall.
It’s understandable that they want to print money to help the economy but printing money is never the solution cause it always causes inflation which is a bigger problem in the long run hen the recession will cause if you do nothing. I like to compare it with monopoly when you are playing and you cheat by taking some more money out of the bank at first nobody will notice and the game will continue like normal but later on in the game it will get obvious that there is way to much money in the game cause money keeps being added each time you pass start, I like to see this as the normal inflation, the inflation that everyone can handle and makes it possible for the economy to work but when somebody cheats by stealing some money out of the bank, or in this case by printing a whole bunch of money, it shifts the playing field in favor of the person who cheated. This can cause big problems in the long run as the money from the other players becomes less valuable. What I’d like you to take away from this is if the US government keeps printing money like it has been doing the last couple of months there is a big chance that is following in the footsteps of the Venezuelan economy only this time it’s not just one country which is going down but the world wide economy as economic markets are now so much connected that everything has consequences for everything.

There is indeed not a better alternative but gold standard isn't making a comeback neither.

If we go back to the gold standard these are the possibilities:

1-They'll refuse to audit their assets. > instant red flag

2- They'll let it to be audited but they'll cheat by hiring their own guys. You won't be able to see the gold yourself. > may go smooth for a while. tether is doing it already with btc/usd
(Seeing don't mean shit anyway, you need random samples from the bars)

3- Everything will go smoothly but then, gold will be banned completely except for the industrial usage. > didn't work before

USA already went with the 3rd option before and it didn't work.

Why did they choose the 3rd? Because they knew the first 2 options were straight outta dumb.

The current financial system demonstrated its inefficiency in 2008, but USD is still a reserve currency. Why should Covid-crisis be much different? The entire world is entering the recession too. It isn't the  dollar apologetic polemic, it's a fact that there isn't a worthy alternative to replace it.
I've also read some analytics about the possibility of returning to the gold standard. If it actually happens, it will stop the dollar from free fall and made it the better reserve currency.

Unfortunately for US haters, this scenario is happening only in their head!
Even Coronavirus Couldn’t Stop the 2nd US Carrier Visit to Vietnam


And, they opened and? They are manufacturing stuff for?
For Europe and the US who are still almost closed down and don't want anything?

This is the same bs the communist were feeding us before in the 80s, we were producing tons of things, every factory was breaking records after records, but nobody was buying our crap and we were dirt poor but we were producing things.
China’s manufacturing weaker in April as virus hurts exports


You don't have to be a genius to understand that you can produce 2000 pairs of socks next month, that doesn't mean you're a successful business until you manage to find somebody to sell to at a profit! You've opened your hotel, does it mean you will get $ as you used to? No, you need to have the same number of guests as before first!
The global economy is not as simple as that, lower demand in economies worth 30 trillion a year might hammer manufacturers in east Asia to bankruptcy, there is no winner here.

Confidence in fiat money (not necessarily third party trust) would collapse. Physical gold is obviously out of the question, but gold-backed or silver-backed notes are not. I don't see gold (or BTC) becoming global reserve currencies, but I do seem them potentially becoming global reserve assets.

While I don't think we'll see a return to an actual gold standard for sovereign currencies, it's possible we'll see a hybrid system develop where currencies are linked to baskets of assets held in central bank reserves. That seems like the most obvious knee jerk response to a collapse of free floating fiat.

BTC is quickly becoming accepted as a legitimate asset class alongside gold. It could someday fit into the above paradigm. Whether it does largely depends on when such a collapse occurs. Tomorrow vs. 20 years from now would make a world of difference.


In the immediate term, that's what will probably happen. It would be chaotic and the market would primarily be concerned with basic needs. Eventually a new monetary system would rise from the ashes though.

Exactly this.

The part with China is true too.

China needs USD more than their native currency CNY. The truth is everybody needs USD. Everything is being priced with USD. Countries borrow USD, loan USD. All books are kept in USD.

And people say USD will collapse. Sure thing.

It is not impossible but like I said, USD collapsing means we all are going down with it. Nobody can survive a mess like this.

As long as USA still stands as world's biggest power even against China, we are not going to have anything like this at all. USA is just too powerful and I feel like there is really nothing we could do to make them stop being this powerful neither, only they can drop from that position, we can't make them drop from their position. They have way too many companies that have too much power all around the world.

You would think having trillions of dollars in debt to whole world would mean the end of dollars but the reality is they also have trillions of dollars investment all around the world as well, so when other nations even try to get better, that equals USA making more profit from those nations as well, so they can never be done by other countries getting better.