So what could undermine the dollar's position? The BRICS can't just say, "Here's our new currency" and expect anyone to use it — just as they can't order their businesspeople to start talking Esperanto when abroad. 11/
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The idiot says two disparate things at once. The dollar is the almighty strongest currency and also the dollar needs to be weakened, it’s too strong. Pick a lane. Although it’s likely he is terrified the world turns away from the dollar but also wants more exports to appease his base.
The great thing about Crypto - a fiat currency ‘backed’ only by the fuel / energy resources that were physically destroyed in order to make it - is that it’s backed and supported by a lender of last resort and by a credible, economically powerful and extremely stable global power. Oh, wait…
I imagine Trump and his chums are very excited about the crypto possibilities—money laundering, blackmail and bribery, tax evasion. Especially as they expunge agencies and their regulations.
For people holding crypto, if the treasury decides to be the "sucker of last resort" then they can offload their bogus scam to Uncle Sam at their leisure.
Ah, see this is the angle I was wondering about as well, how it relates to value of the dollar, what they're doing and what they think it will accomplish.
Oh dear! That makes so much sense and scares me to death. It’s probably why that bill passed to have the Fed amass one billion bitcoin, too. It will drive up the price of crypto as well.
There isn't a goal. Trump heard something that sounded bad, to his macho sensibilities. He reacted the way he thinks a tough guy would react. Remember, this is a guy who started talking about Hannibal Lector because he didn't know what "asylum" meant in the context of immigration.
Crypto, the criminal currency, out of reach of government control. Vast waste of resources to generate. Ponzi scheme. Playing musical chairs with 800 pound gorillas.
if it’s crypto it definitely can’t be bitcoin. the transaction speed maxes out at something ridiculously slow. sure you can put more layers on top but then you lose the inherent advantages of cryptocurrency and you’ve just replicated fiat, but now you completely lose control over monetary policy.
What if they allow their otherwise sanctioned cos to mutually trade, possibly still using the dollar as unit of account, via a link of their central banks? That's the BRICS proposal.
That would mean a system of managed exchange-rates. Possible, but exceedingly difficult to achieve in so disparate a cluster of nacional economies as BRICS.
I guess the dollar could lose its role if China became really, really dominant — the same conditions under which international businesspeople would feel compelled to learn Mandarin 12/
Arguably, the PRC, since Covid & the Ukraine invasion, has been losing relevancy. Their dream of world domination may dwindle to just some sort of BRICs domination, 2 parallel spheres.
Otherwise, the main threat to the dollar would be America gone wild, abandoning rule of law, seizing foreign assets with little provocation, making wild economic threats unrelated to real issues. But that can't possibly happen here.
Bingo. Although not a common currency situation, aren't more major trading partners entering into direct bilateral exchange agreements which cut the dollar (US banking system & SWIFT) out of the picture?
Yes, the factors you mention are why US Treasuries are in demand globally. Yet some (several?) countries are diversifying their exchange reserves and trimming their holdings of US Treasuries. Change comes slowly but hopefully not like a Hemingway bankruptcy, slowly then quickly.
Seems Donald’s outburst was about telling someone not to do something they were already not going to do and then claiming victory when they didn’t do what they weren’t going to do anyway.
I remember the line in”Too Big to Fail” when Hank Paulson was told politely by the Chinese Finance Secretary that the Russians wanted to coordinate a massive dump of US dollar debt instruments, but the Chinese politely refused. Might be a different story next time because of Trump’s ignorance.
The Donald has maybe not realised that this is not 1950 (in many ways... women's rights etc). Surely the usd dominance is partly predicated on stability and there may be precious little of that. And China would like the world currency mantle
US is dominant country, everyone agrees on that. Not many complain since it's a "fair" country, at least not on the front stage, not trying to be bully.
Acting as Trump seems to plan Countries in the long term will start to search for alternatives in everything.
Also, there’s all the folks on his transition team and in the background that would like to move America off USD and onto BTC. But maybe he doesn’t understand that.
China has been buying gold and silver at huge quantities for well over a decade. I had figured it was building up for war over Taiwan. But if trump and company destroy the American economy and the dollar completely tanks the world will look for a more stable currency.
Ironically, it seems that the creation of a Brics currency would have a much smaller impact in starting to debunk the dollar as universal currency than restricting Brics access to the US economy, like he's proposing.
I fall in the "sneakily" camp. If the actual goal is to push business to the BRICS countries getting the US to use tariffs everyone away while choking itself off from global trade is a solid idea.
Honestly, he probably heard about other countries worrying about the instability caused by his second term. Just a little preemptive threatening via social media costs nothing.
I recall in grad school many years ago taking Business Law with some foreign students. They were amazed that in a lot of the cases that the courts ruled again the big and powerful interest. My guess is the USA isn't were it was back them
Exactly. Look who he’s surrounded himself with, and Bannon has advocated this on his show (reported pre-election) The conversation would help them grab control and inflict pain on the system.
Or when the Idiot-In-Chief discovers that he can order dollars to be printed, without it having a discernable effect on interest rates or fx dollar value.
At least, initially . . .
His sudden interest might be connected to this story from a few days ago, written by fellows of the Foundation for American Innovation, which is an org composed of tech bros. Someone is in his ear.
Perhaps not 100% stuff Putin tells him directly, but the bit at the start of @pkrugman.bsky.social's thread is telling: "I wonder what set it off. Was there a segment on Fox News?" because this was definitely a thing during DJT's first term and especially visible before his Twitter ban. 1/2
So all Putin has to do is (get his oligarch mates to pay to) influence those media DJT is likely to consume most, as this is clearly what leads DJT. 2/2
Massive tariffs on a whim breaking trade agreements, favoring outlaw countries and their dictators, using cryptocurrency to avoid documenting transactions and using it to degrade stable democracies, walking away from security agreements.
All things Trump is planning.
Buy the Euro. The $ is doomed.
That is what I see. Rather than the Yuan becoming the reserve currency the Euro is much more likely.
The EU economy is the 2nd biggest economy, so it makes sense that if the US can no longer be a responsible actor then it falls to them.
Paul,if the Rule of Law continues to be eroded in the USA, I believe the dollar will be abandoned as the world’s currency.That is the most damage MAGA has inflicted. They have created an environment where if you are loyal to the imperial president, you can get away with insurrection. Watch pardons.
As long as countries want to run a trade surplus with the USA, foreign USD stockpiles will grow and the dollar will remain a reserve currency. None of the "de-dollarization" promoters has any idea of how any of this works.
Rome as a superpower died because of it's complexity, constant external and internal pressure and unmanageable size. Empires come and go.
Reserve currencies are very complex to explain, but but but:
Paul Krugman is here.
But no superpower no use of its currency as reserve. That seems to go hand in hand. Whether they want to or not, the Trump folks seem hell bent on reducing US influence around the world.
It's not stupid. Lefty, ideological, yes, but not stupid. Even Mr. Krugman made the point that if the US goes completely over the deep end, the dollar as a benchmark currency is a goner.
I know we're all cranky and punch-drunk from trolls, but we need to be careful who we dismiss.Stronger Together
Mate, I did some contract work in Saudi Arabia a few years ago. The standard currency was USD. Neither the UK nor Saudi have USD have it as a currency. It's used for the reasons Mr Krugman highlighted.
The seizing foreign assets part could happen with trump. I can see him trying this to make another country capitulate to his demands. Though many have similar leverage against US enterprises too.
Why would China need to be more dominant than it is today ?
China covers so many needs in so many countries that, if they want to, they de facto have a worlwide currency anyone would find use for, since everybody trades with China.
or if the whole world decided that America was too nuts to trust anymore and were afraid of tariffs and other actions that might impact them, like having an insane sociopath as president.
Can the Yuan ever be a competitive international currency while China has strict currency controls in place? Would everyone just rely on the offshore market and by how many fold would its volume need to increase?
An example: the earliest , late 1930s Brazilian economic statistics used the pound sterling as a unit of measure. Later, post WWII statistics used US$ - as the pound had ceased to be a generally accepted' currency.
And even if they did, it's hard to see what leverage they would have by it. If it was a source of power, then the US would have used it. Haven't seen it. Can't even imagine a sceanrio in which it could be used.
Thank you.
I keep seeing things about Trump/Musk plans to replace the strategic reserve with Bitcoin, and tank the dollar, and cause a recession/depression so oligarchs can do a 90’s Russia & strip the USA for parts. Which seems nuts.
Seems nuts to us, but so does everything about Daddy Dictator. I truly believe that turning the US into an authoritarian oligarchy is the end game. It happened in Russia, and Hungary, Iran, Slovenia, Kenya...around the world people are ceding power to ridiculously wealthy individuals. Even the UK.
What is stoogy about wage rises for Nurses, Doctors & Train staff; raising legal minimum wage, increasing capital gains tax, inheritance & taxes on the wealthiest, ending non-dom loophole; VAT on private schools, keeping income tax steady (in real terms lowered) for lower-income people...I
???
Kier Starmer (and pretty much all the Labour party) are an extremely long way from being anywhere close to Billionaires.
Rishi Sunak was a GoldmanSachs banker worth £650million (not a HumanRights lawyer); his fatherInLaw £3.9bn.
A few Billionaires backed Labour; but barely any vs those backing Cons
On a personal level, I save into Bitcoin. It's a great hedge against the inflationary dollar.
Nationally, the US hedging against its own currency just weakens the USD.
For any other country, Bitcoin may make sense.
But why would you intentionally gamble against your place as the dominant currency?
To go off at a tangent, Paul, what's the likelihood the BRICS issue a new currency? Bloc currencies seem difficult to manage (e.g. Greece v Germany on monetary policy). Globally with such markedly different economies and approaches?
They still need to mine their gold because it's still in the ground. Ours is already mined, smelted, and sitting in the form of nice shiny gold bars at Fort Knox. China is trying to build their own massive reserve though. The whole thing is kind of ridiculous when you really think about it.
How about in outer space 🤷♂️
Of course, supply and demand might alter valuation. Not being argumentative, just wrapping my head around valuation and what creates value. Maybe that the operative word 🤷♂️ https://www.newsweek.com/nasa-mission-psyche-asteroid-space-1917235
Thank you for sharing this, but I have questions….
If US no longer the reserve currency
Value of the dollar fall? = Deflation?
401k less valuable?
Bonds?
Stocks?
If the value of the US$ falls that would be inflationary. Your 401-k might go up or down depending on where it is invested. Some investments might actually benefit from a weaker dollar. Bonds would be worth less and interest rates would rise to compete with the losses to inflation.
Great post. The biggest thing Trump could do to undermine the dollar’s position is attack the independence of the Federal Reserve. Or threaten to default on some portion of outstanding notes. But let’s not give him any real bad ideas. He seems to come up with enough on his own.
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Basically, the crypto scam is convincing other people that it will be more valuable in the future and then selling it to them.
It relies on an ever increasing number of "suckers" and when you run out, you get a bust.
And because crypto-bros are so economically illiterate, they view that nominal increase as an increase in value.
https://www.lowyinstitute.org/the-interpreter/brics-pay-challenge-swift-network
Oh, wait. 13/
Relies on trust, stability & relative transparency
Which means running trade deficits
Although China is giving tons of loans. So now those countries must export to try to get Chinese currency to pay
Dude’s a flimflam man.
US is dominant country, everyone agrees on that. Not many complain since it's a "fair" country, at least not on the front stage, not trying to be bully.
Acting as Trump seems to plan Countries in the long term will start to search for alternatives in everything.
Like if China started writing the English dictionaries.
Just go for it !!!!!
Americans want to get their hands on a 💵 because they need a 💵 to pay tax & court judgements
UK needs pounds, Jalen needs ten, etc.
And reserve currency = Desire to get a 💵 to buy a U.S. bond & have a safe savings account in the U.S.
But you keep saying they’re correct
Just say it more clearly so folks understand
But arguably just as consequential: Two Democrat POTUS did not respond forcefully enough to his illegal invasion of Ukraine.
At least, initially . . .
All things Trump is planning.
Buy the Euro. The $ is doomed.
The EU economy is the 2nd biggest economy, so it makes sense that if the US can no longer be a responsible actor then it falls to them.
Roman Denari
Venetian Ducat
Florentine Florin
Spanish Dollar
Dutch Guilder
British Pound
All thought that can't happen here.
Yet here we are.
Reserve currencies are very complex to explain, but but but:
Paul Krugman is here.
It was more "here's what would have to happen first"
It *could* happen and the MAGA madness makes it more likely (though still unlikely).
I know we're all cranky and punch-drunk from trolls, but we need to be careful who we dismiss.Stronger Together
If I blocked all the people who sometimes say something stupid there would literally be nobody to talk with
Everything - he does not understand a damn thing about anything.
China covers so many needs in so many countries that, if they want to, they de facto have a worlwide currency anyone would find use for, since everybody trades with China.
I keep seeing things about Trump/Musk plans to replace the strategic reserve with Bitcoin, and tank the dollar, and cause a recession/depression so oligarchs can do a 90’s Russia & strip the USA for parts. Which seems nuts.
???
Rishi Sunak was a GoldmanSachs banker worth £650million (not a HumanRights lawyer); his fatherInLaw £3.9bn.
A few Billionaires backed Labour; but barely any vs those backing Cons
Nationally, the US hedging against its own currency just weakens the USD.
For any other country, Bitcoin may make sense.
But why would you intentionally gamble against your place as the dominant currency?
….for anything.
Of course, supply and demand might alter valuation. Not being argumentative, just wrapping my head around valuation and what creates value. Maybe that the operative word 🤷♂️ https://www.newsweek.com/nasa-mission-psyche-asteroid-space-1917235
If US no longer the reserve currency
Value of the dollar fall? = Deflation?
401k less valuable?
Bonds?
Stocks?