Power is a too general a term and is lacking in specificity to be a useful explanation.
USD as world reserve currency coming to an end?
- Thread starter kmiklas
- Start date
Ray Dalio, The Changing World Order.
You MUST read this book now. It explains your thesis (correct but fuzzy) in great detail with deep research.
I doubt it. China is well aware of the downsides to owning Reserve Currency. Good for a while, but turns into a bit of a trap eventually. But maybe they'll go for it. And the Yuan could be big enough to handle the role in a few more years. The chinese economy certainly is.
Downside to being reserve currency? What would that be?
When you've got the reserve currency, you can use it to "influence others". Not only in the "requirement" to do things via the reserve, but power over others... like sanctions.
America's apparent relinquishing reserve currency status is not only STUPID, it's harmful for all people who have their assets denominated in $USD... namely, US citizens!
Well, to be sure the Reserve Currency is a massive power, with phenomenal seignorage opportunities. I would agree that it is the single biggest factor in US dominance.
The downside is expressed in the Triffin Dilemma. It's complicated and I don't entirely get it, but it's an interesting read.
https://en.wikipedia.org/wiki/Triffin_dilemma
Your info is too general. Your reply still lacks useful information.
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Oh ok but water WAS useful. Got it.
Usually they do as a depreciating currency attracts foreign investment and makes goods more competitive in an international market, the increase in consumer prices stems consumption and meanwhile productivity due to foreign investment increases, the US has numerous investment abroad that have been supported by a strong dollar, the US as well as the UK has a net position of $1.5 trillion dollars in Foreign direct investment which brings in a large surplus on the income account to balance the balance of payments, countries with a high valued currency will develop foreign investment positions the others will develop current account surpluses by exporting goods. take an example;
Country A: has a high valued currency which means foreign investment is cheap comparatively so they invest overseas into country B where they start a factory. The factory provides returns and the profits are sent back from country B to country A where that allows for its citizens to consume more than they produce without accumulating debt.
Country B: Has a low valued currency but it receives investment from abroad which boosts employment and productivity they run a current account surplus and an income deficit to country A.
both countries do well and as Country A (America) outsources production and productivity the nation overall will not be affected and consumption and living standards can be maintained, The reserve currencies of the world are not the exporters live china or other developing countries (country B) but the countries that are able to finance their growth and facilitate trade which maintain their position. In short the dollar will not be replaced keep holding dollars.
Country A: has a high valued currency which means foreign investment is cheap comparatively so they invest overseas into country B where they start a factory. The factory provides returns and the profits are sent back from country B to country A where that allows for its citizens to consume more than they produce without accumulating debt.
Country B: Has a low valued currency but it receives investment from abroad which boosts employment and productivity they run a current account surplus and an income deficit to country A.
both countries do well and as Country A (America) outsources production and productivity the nation overall will not be affected and consumption and living standards can be maintained, The reserve currencies of the world are not the exporters live china or other developing countries (country B) but the countries that are able to finance their growth and facilitate trade which maintain their position. In short the dollar will not be replaced keep holding dollars.
A nice post reasonably argued. However it underestimates the rate at which the dollar is losing it's status as the reserve currency. Each year the dollar plays a slightly smaller role in international trade. The dollar is still the major reserve currency, but time is not on it's side. More and more international trade involves pricing in other currencies. This tendency was inevitable in 1944, as Keynes pointed out in 1944. It is still inevitable today. Already the dollar is just one of the "reserve currencies". What comes next? And when?
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