Dollars are currently only in demand for short-term use in transactions. Most of the world still relies on dollars for transactions, because that is what all the banking and payment infrastructure uses.

But no one wants to hold them because they devalue and will continue to do so at an accelerating rate. It's a game of hot potato where everyone is forced to hold equities, commodities or other assets by default in order to preserve their wealth, and then convert to dollars to transact. The days of savings accounts are over, and everyone should think of their checking account as something that they pay negative real interest on for the privilege of being able to transact with the rest of the world.

Meanwhile, the big players in the current financial system are trying to figure out how to continue playing the current game without resetting everyone's progress. They don't want to lose their hard won position to pay for bad decisions by American voters. It's a coordination problem, and the shelling point looks like it is still gold, same as it has been for thousands of years.

No, this is an artifact of Russian reserves getting frozen in 2022 and autocracies the world round getting more careful about having all their eggs in that basket.

The PRC’s SAFE is selling dollars and buying gold in a very covert but absolutely massive fashion, and most likely, so are many other countries in a smaller way.

The article answers your question:

> The dollar’s share had already been below 50% before, in 1990 and 1991, after a long plunge from the peak in 1977 (share of 85.5%). This plunge accompanied a deep crisis in the US with sky-high inflation and interest rates, and four recessions over those years, including the nasty double-dip recession.

Or, in other words, at 1991 the US started recovering from the Oil Crisis and the subsequent fuckery. There's a dip in that number around the time the USSR felt, but it's just a small acceleration to the trend.

> Makes me wonder: is this just an artifact of the world being relatively "stable" right now?

Do you think the world is relatively "stable" right now?

Oh, and I'd check the data before believing usage in trade debt and crisis funding are going strong. Two of those are constantly making headlines for how they are decreasing, and "crisis funding" is basically another name for "reserve currency".

Early 90’s during the Clinton administration (and the dot com boom) appeared to be the best run US budgeting process I have ever seen.

> reserve share is falling as countries hedge sanctions and geopolitics

We’re importing a bit less [1]. That means fewer dollars being pushed (versus pulled) abroad.

[1] https://tradingeconomics.com/united-states/imports

Something like the brics can challenge that. Having a safe currency vehicle that can sustain itself much like the dollar that the world will trust is all the momentum you need. Much like why the dollar is. You have a big player now like China backed by other large populated countries etc brazil.

No, each pushed alternative is just worser. The euro could take over, but europe just revealed itself as a "lawful" player with no plan and no pants (security-wise) - so the euro is just defacto tied to the dollar value wise. For without the us guarding europe, the euro is just loaded with invisible gigantic security and pension debts.

BRICs is dealing in store credits and raw-materials. Every other empire and kingdom is not to be trusted or only to be trusted as long as the town power-drunk world-police-man does his job. He may be the towns drunk, mumbling "Screw you guys, im going home!" but he is also the only one so far doing a decent job as sheriff.

You can grasp how unreliable the other actors are, by how one of the hostile actors (russia) recently complained about the (world-police) doing what its proxies in yemen and ukraine are constantly doing (piracy) to venezuella. They complained about the break-down of maritime safety- to the us. Yep, its that bad.

Its only really a crisis for people who are dependent on the US for protection. The whole compact is that you use the dollar, and the US will look after you (ie House of Saud, Europe, taiwan, south korea, etc) But that isn't really certain anymore.

You need to make tributes to the suntan king, and he is most capricious and likley to tariff the fuck out of you. So alternative destination for your goods is a necessity

Also the markets are not convinced that the fed is in good hands. The whole point of the fed is that they are far enough away from the meddling in Washington so that you can rely on the dollar. The fed is being steadily erroded, with the new chair being selected soon. The problem is that present administration is hell bent on loyalty over competence.

Printing dollars to get out of domestic budgetary problems was never a thing (excluding QE, but thats different, nominally) was never an option in the US. but that doesn't seem so far fetched now.

This is more of a go out with a whimper rather than a bang type thing. Being the world reserve currency (as well as the largest consumer market in the world) previously enabled the US to do things like relatively easily export inflation in spite of relatively reckless monetary policy. Now that inflation is sticking around far more persistently, even long term bonds have gone from 1-2% to 4%+, and so on. Stagflation is a conceivable longer term outcome.

The replacement will probably be a multinational currency with strictly controlled quantity tied to some sort of physical asset(s). Basically Bretton Woods 2.0, except with the learned experience of not just granting a single country immense power and having them pinky swear not to default on their obligations and then abuse that granted power. China's probably betting that that asset will be gold.

US Treasuries have terms, if you aren’t refreshing your treasury buys, it is the same as selling them. US treasuries and by extension USD was useful because it could soak up billions of dollars of savings (debt for America) without taking a huge inflation hit (treasury rates were often less than inflation, so you still take some hit).

As for where that money is going now? Other currencies and saving instruments probably..

In some ways, this effect can have a positive impact on US citizens; demand for the US dollar requires supply to satisfy the demand. Where does that supply come from? Oftentimes: Printing. The US generally does not make a habit of telling US dollar buyers "no, we don't have any US dollars to sell you", so less demand on the dollar for reserve holdings can have a deflationary impact on its value. This can be combined with lowering interest rates, which creates more domestic demand for dollars, to help balance out the inflationary impacts from that.

Many economists take the stance that being the world's reserve currency is something of a two-edged sword; a curse that does come with geopolitical advantages, but bundles those advantages with significantly more difficult global financial responsibilities.

> What could replace it?

It doesn't necessarily have to be one thing. We've had multi-currency regimes in the past (before one generally took over). See How global currencies work past, present, and future by Barry Eichengreen, Arnaud Mehl, and Livia Chitu:

* https://press.princeton.edu/books/hardcover/9780691177007/ho...

Treasuries are not some kind of artifacts that can be stored indefinitely, they are bonds with maturity dates. As they mature they turn into cash automatically and that cash used to come from selling new treasuries. As the demand dwindles the US has to sell its bonds cheaper thus borrowing at higher interest and that interest will have to be paid by selling even more treasuries at even higher interest so it's already a feedback loop.

Not buying is same as selling with debt. On long enough time horizon. If the debt is not rolled over anymore eventually you run out of lenders.

There’s nothing fundamentally stopping all currencies from floating against gold and gold being the base asset

If they stop buying treasuries, that's still a big problem, because the US continues to run a deficit, and therefore continues to need to sell treasuries.

The British pound was displaced by the US dollar. Currently, the US dollar just doesn't have a proper rival. The euro, yuan and rupee are considered politically suspect (each for its own unique reasons); the pound and yen have too small a base. Without further transformation of the global financial system, the only alternative is for banks to hold a basket of currencies, and in such a basket the dollar would likely still play a significant, if reduced, role. This is a slow process because it means changing the nature of currency reserves from a single safe haven to a "nest". What this means for USG spending power is not immediately clear.

> countries (emerging markets / BRI recipients) who would have borrowed USD from FED (or US influenced IMF/WB) now borrow from USD from PRC -> reduce US treasuries demand

This makes no sense. If the PRC is lending U.S. dollars, that doesn’t reduce Treasury demand. It increases demand for dollar-denominated assets, goods and service providers. The borrowing country has to spend those lent dollars after all.

Trend has been negative since 1999 so as much as I like to poke the tango doll, this can not be the reason or only reason.

My understanding is that it has happened. The oil market was tied to the USD. The BRICS have now implemented a payment system as robust as SWIFT system. Oil is now being paid for using that system.

Are you trying to project this unto Trump when the Fed is doing everything it can to oppose his measures?

I'm only the crypto weirdo guy asking.

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.

https://www.federalreserve.gov/econres/notes/feds-notes/the-...

> 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.

<https://news.ycombinator.com/item?id=9160121>

Just so you know India buys USD equivalent middle eastern currency to pay for Russian oil.

> 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.

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.

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.

Not. Cryptocurrency is just nonsense.