Highly unpopular opinion here and I'm going to get downvoted into the ground (who cares), but ... this has been a very long time coming and has very much been a self-inflicted change.
My bet is that it will end up being a very good thing for the world at large.
China has recently started to buy Arabian oil and paying with yuan.
Major countries (India, China) are starting to buy Russian raw materials and paying directly using rubles.
In both cases, trade is happening and completely bypassing the once unavoidable USD.
The US choosing to weaponize the USD for geopolitical purposes has finally made the world realize the immense loss of sovereignty they had allowed themselves to be subjected to by making the USD the global trading currency.
This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status.
The golden triangle of Russia (raw materials), India (highly educated workforce, strong demography), China (industrial powerhouse, stole the bulk of Western IP, is now producing more cutting-edge research than the west) finally free of the shackles of the USD and establishing direct overland trade routes that 100% avoid the seas (thereby 100% avoiding potential US embargoes, both financially and militarily enforced) ... the world is going to change in a rather profound way, finally relegating the US to being a simple country instead of the has-been empire it currently is.
Every time I hear people claiming India and China now not using dollar and the end of dollar’s dominance, I feel it’s coming from mostly clickbait headlines, not data. From a global payments share, dollar is still the single largest currency from a percentage standpoint, and is at historically highest share of global trade. Any changes to currency share are coming from lower volume from the Euro. On top of that, if you look at foreign reserves, yes there has been a recent selloff from the peak, but we are still at 60% of global reserves and its still kind of around the same historical average for the last 30+ years.
Edit: I also want to add, that while having the international trade entirely in dollar sounds very appealing, it can actually destroy US exports and damage the trade balance. This can have massive impact on domestic as well as global economies. What you want is a strong enough dollar.
I think youre conflating 2 different things, share as a payment currency and share as reserve.
Share as a payment/trade currency is not going away though it will be greatly reduced especially with CIPS that bypasses SWIFT.Andmost data showing no change is usually from SWIFT - with zero visibility to the volumes in CIPS.
Share as reserve is more visibly viz central banks stacking gold and hedging on treasuries , with most tresurie bids coming in from offshore financial hubs likethe Caymans.So could be a whole shellgame there to inflate the volumes.
So yeah the $ isnt going away anytime soon (cross border trade still requires it in many places),the exorbitant privilege it enjoyed is.
> Every time I hear people claiming India and China now not using dollar and the end of dollar’s dominance, I feel it’s coming from mostly clickbait headlines
I would encourage you to actually take a gander at the history of reserve currencies, how long they last, how they lose their reserve status, and what the current state of thinking around where the dollar is headed.
Unless you would classify the IMF as a clickbait farm, of course.
Start with the brit. pound and what led its downfall to the niche financial instrument it is today.
But the pound is just the latest, and by no mean the only one.
> get the bloody USD printing machine under control
The amount the US government spends on debt service is already unreasonable. If the US dollar lost reserve status, the first thing that would happen is that the Fed would have to buy the debt with newly created money to prevent bond rates from causing interest payments to explode. Meanwhile the act of other countries unloading US dollar reserves would cause significant inflation in itself.
Basically, loss of reserve status = hyperinflation. At least at the outset.
On the plus side, that would pretty much wipe out the excessive amount of US consumer debt as long as wages stay consistent with the value of the dollar.
Russia is a joke, India is somewhat irrelevant and doesn't seem like that will change soon, China is a different story, although they also have their share of demographic and economic issues.
And Putin and Xi are 73 & 72, and I doubt they will give up power as long as they're living which may result in significant turnmoil for both countries.
> US to being a simple country instead of the has-been empire it currently is.
The US isn't going anywhere for now, although it is trending in the wrong direction, but it's not yet a lost cause, not to mention that its still basically a fortress with endless natural resources and relatively good climate.
And then you also have the AI race which might be a dud or might be a winner takes all scenario. So gonna be an interesting next decade.
> My bet is that it will end up being a very good thing for the world at large.
I generally agree with pretty much all your points other than this one.
While it will be good for other countries to regain sovereignty - and the weaponization of the US dollar for trivial reasons will be the biggest self-own perhaps in history - I do not think the world is going to be a better more peaceful place in 50 years.
It might be more free in a certain sense though, which may or may not end up long-term (over multiple generations) being better overall for humanity. Time will tell.
Certainly though, the average quality of life in the US is about to plummet.
Agree it will land more stable for most parties but it will be turbulent getting there. Global free trade under the USD has created many structural fragilities. Principally that we have global overproduction outside the USA.
Frankly, this will be good for the world if it happens. The U.S. War Industry will for the first time after Bretton-Woods be deprived of a bottomless piggy-bank.
Lot of emotion in this comment; not a lot of substance. I think you're misunderstanding how some of these systems work.
> This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status.
It is not the case that the US didn't "need" to get the USD printing machine under control because of the reserve status; it is the case that the US
"could not" get the USD printing machine under control, because of the reserve status. When there is demand for US dollars, domestic or foreign, US dollars sometimes needed to be printed to satisfy that demand. If the US decides to not print those dollars; this is literally "defaulting on the debt", and would be bad-bad.
This gets at where you're misunderstanding how these systems work, because I think you're imagining that US debt is, like, an account in your Chase app that goes up, then you pay it down. US debt are, obviously, bonds. The USG says "we've got bonds to sell, they're at N year M% interest". Buyers say "we want those bonds we'll buy them". The USG is now in debt, and is obligated to repay those bonds; and sometimes has to print money to do so. This gets at the previous paragraph; money, broadly, is printed to satisfy debt obligations, not directly to service the deficit (proceeds from the initial bond sale are what could be said to directly service the deficit, but that's pennies compared to the size of the overall market).
Extending the Chase app analogy, you have it internalized that if we just get the deficit under control, then we could start "paying down the debt". In fact, probably, even our President understands it like this. But this isn't how it works. To "pay down the debt" would require two things to happen: We stop issuing new treasury bonds, and we pay off the already issued ones over 20/30/etc years as they mature.
The general professional sentiment on what would happen if the US even communicated it wanted to, in totally good faith, begin doing this at some point in the future, is basically armageddon. You have it in your head that, because Dave Ramsey says debt bad, the US should have no debt; but the world wants our debt; it has an insatiable (though, decreasing) appetite for it. Depriving the world of this debt would leave trillions of dollar-equivalents without anywhere to park safe from inflation, which would descend global financial markets into chaos. Tens of millions of people would starve in the first three months, among other undesirable outcomes. Some actively make the argument that the USG refusing to take on new debt would be net-worse for the world than the US defaulting on their existing debt, though its an interesting space to game out; a little game of global-cataclysm worst-thing-to-ever-happen-to-humanity olympics you can play.
But, debt servicing is becoming unmanageable for the US budget; so the best case for the United States is that USG debt demand from the rest of the world drops slowly and naturally, so we can naturally slow the issuance of new debt; and over 100 or so more years let managed inflation catch us up to recover from the utter shitshows that was 2001, 2008, and 2020. Everything I've seen, and I do mean everything, suggests that this is what is happening; but we'll know for sure in 90 more years.
Your entire wall of text has conveniently and completely omitted the hard fact that the U.S. Treasury has borrowed to pay for its defense (oops, sorry, I meant "war") budget for many, many years now. The war budget (~$850B) has been larger than the deficit in many years.
No other nation except the U.S. can sustain this without running into hyperinflation and consequent national rioting.
Ooooh that must've struck a nerve. Seems we can't post that here without massive loss of reputation. Progressivism != liberalism. That stuff just doesn't fare well, even as sarcasm.
Dude is giving what many have wanted for years, the largest of which is a massive reduction in US hegemony. Restarted militarization of Europe, accelerated the expansion of China into Africa. Causing Five Eyes to curtail the flow of intel.
But at the same time, utterly burning US soft power with the shuttering of USAID and most likely causing 14M excess child deaths world wide. Shutting down USAID was a bigger "mistake" than the invasion of Iraq and the blowback will be even larger.
Bro just drove the US empire off a cliff. Manufacturing will have to come back if they succeed in burning US currency. Good thing the rich have so much of it, Elon at 1/10th is still 40-70B.
In the process of burning down democracy, Trump has brought about changes that progressives have wanted for decades, namely a vast reduction in US hegemony. He has also caused massive suffering, inflation and will lead to the deaths of millions of people.
My bet is that it will end up being a very good thing for the world at large.
China has recently started to buy Arabian oil and paying with yuan.
Major countries (India, China) are starting to buy Russian raw materials and paying directly using rubles.
In both cases, trade is happening and completely bypassing the once unavoidable USD.
The US choosing to weaponize the USD for geopolitical purposes has finally made the world realize the immense loss of sovereignty they had allowed themselves to be subjected to by making the USD the global trading currency.
This change will also force the US to finally get fiscally responsible and get the bloody USD printing machine under control, something they never had to do because of the USD reserve currency status.
The golden triangle of Russia (raw materials), India (highly educated workforce, strong demography), China (industrial powerhouse, stole the bulk of Western IP, is now producing more cutting-edge research than the west) finally free of the shackles of the USD and establishing direct overland trade routes that 100% avoid the seas (thereby 100% avoiding potential US embargoes, both financially and militarily enforced) ... the world is going to change in a rather profound way, finally relegating the US to being a simple country instead of the has-been empire it currently is.