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International Is the dollar's "exorbitant privilege" coming to an end?

Kinetic

Vivere est militare!
The U.S. dollar (USD) has been the world’s dominant reserve currency for almost a century. As such, many investors today, even outside the United States, have built and become comfortable with sizable USD overweights in their portfolios. However, we believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.

As such, diversifying dollar exposure by placing a higher weighting on other currencies in developed markets and in Asia, as well as precious metals makes sense today. This diversification can be achieved with a strategy that maintains the underlying assets in an investment portfolio, but changes the mix of currencies within that portfolio. This is a completely bespoke approach that can be customized to meet the unique needs of individual clients.

-snip-



Source: Private Banking division @ JPMorgan

P.S.
 

Polemarchos

Active member
Author
The dollar will probably remain on top for the foreseeable future, the pound and the euro could easily be destabilized if things break down in France should Le Pen or Melechon win the next election and Scotland demands to leave a hard brexit UK. China is currently experimenting with social credit and petrol dollars, which would be subject to party manipulation.
 

Aaron Fox

SB's Minor Junker Descendant and Hunter of Nazis
Author
The dollar will probably remain on top for the foreseeable future, the pound and the euro could easily be destabilized if things break down in France should Le Pen or Melechon win the next election and Scotland demands to leave a hard brexit UK. China is currently experimenting with social credit and petrol dollars, which would be subject to party manipulation.
The thing with the USD is that it is -astonishingly- super stable no matter what. The other currencies tend to be either disingenuous (*cough* China *cough*), not large enough to matter, or too unstable (practically all other currencies).
 

Polemarchos

Active member
Author
The thing with the USD is that it is -astonishingly- super stable no matter what. The other currencies tend to be either disingenuous (*cough* China *cough*), not large enough to matter, or too unstable (practically all other currencies).
To be fair quantitative easing is bullshit on par with what China does.
 

Aaron Fox

SB's Minor Junker Descendant and Hunter of Nazis
Author
To be fair quantitative easing is bullshit on par with what China does.
The thing is quantitative easing is basically giving people money in an attempt to basically stimulate the economy... but it isn't the best option (although, you wouldn't know unless you actually try it). Remember US bonds are basically why the USD is so favored, as they're stable as fuck.
 

Mark Poe

The majestic cock
Author
The dollar will probably remain on top for the foreseeable future, the pound and the euro could easily be destabilized if things break down in France should Le Pen or Melechon win the next election and Scotland demands to leave a hard brexit UK. China is currently experimenting with social credit and petrol dollars, which would be subject to party manipulation.
Joke's on y'all I'm betting on the Venezuelan petro, that's where the future's at.

It's Venezuelan, and it's a cryptocurrency, that's a two for one!
 

Mark Poe

The majestic cock
Author
You might as well get facebook coin. The Zuck likely can headquarter the servers on a private island.
Capitalism is a failed ideology, Chavez Socialism is the future!
 

Polemarchos

Active member
Author
Capitalism is a failed ideology, Chavez Socialism is the future!
Now I know you're a pig, it's called Bolivarianism aka making the socialism in one country people look good by wasting time throwing money at a bunch of neighbors all at once and acting shocked when 87% of them get taken out by corruption scandals and CIA backed coups. Real talk, Venezuela should have focused on Ecuador and Bolivia because of its leftwing indigenous base. Instead the regional blocks they strengthened are now against them.
 

Wakko

Well-known member
JP Morgan is not bullshitting its clients. USD is currently the favoured reserve currency because it's stable and easily used in trade. It will certainly remain the most used means of international trade for the next 10 years, but it's also more than likely that its position will shrink. Its stability is threatened because it is overvalued and thus causing difficulties for US trade balance and thus also its foreign debt. Trump has tried to tackle that problem by basically blackmailing other countries into buying more stuff from the US, but he's not succeeding very much, and the next logical step is to weaken the USD so US exports get cheaper, and imports more expensive. That step may also be not enough, if countries - exporters decide to also devalue their currencies to keep the current state of affairs in international trade with the US. China will certainly do so. Russia is already doing so - after the Ruble strengthened against the USD with USDRUB going below 63, the Russian CB has now twice in the last couple of months lowered its key interest rate. This is keeping USDRUB around 65 (which is great for Russian exports) while at the same time making loans in Russia cheper, which is great for its economic growth. And Russian CB has a lot of room for maneuver, its KIR is still over 7%.

USD's position in iternational trade is also threatened by dedollarisation. This is a very slow, but also a very irreversible process. It is difficult to move to trade in local currencies (you need agreements between central banks on exchange rate frames, currency swaps, some form of trade deficit compensation and of course tools - actual systems for payments) but it is a great means of strengthening one's own currency and every such move is easier than the one before that, so basically dedollarisation fuels further dedollarisation. IMO using USD as a means of economic warfare (sanctions on USD transactions) was the single most stupid thing the US could have done. Everybody was happy with using USD in international trade (heck, EU companies were and still are using it in trade among themselves, even though they're in the Eurozone) even though everybody knew that they're practically paying taxes to the US with it. Forcing whole countries to seek other means of payment undermines the one real superpower the US has. The US is killing its golden goose.

EDIT: And just now I'm reading that FED will lower its KIR: Fed Is Poised to Cut Rates for First Time in a Decade - The New York Times in order to stimulate the US economy (but also making USD weaker).
 
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Wakko

Well-known member
Now even Bloomberg noticed what's happening: Putin’s Pledge to Ditch the Dollar Is Slowly Becoming a Reality - Bloomberg
Apart from all the nice graphs showing that somehow the government has actually been able to force the companies to start taking dedollarisation seriously, I think this part is very important:
“The trend is likely to continue because the infrastructure for transactions in alternative currencies is improving,” Renaissance Capital’s Donets said.
As the infrastructure for non-dollar transactions improves, and there is more and more experience in establishing inter-CB agreements, currency swap frames etc, it's becoming easier and easier to do this thing, and more and more countries will join in (because using one's own currency in foreign trade increases its stability and resilience towards speculation). And the really dangerous part: it's a slow process in which consequences are separated from actions by years. By the time enough people notice that this is a serious problem for the US, it will be all done and finished, and all they'll be able to do is to wait for the fallout.

Concerning the energy trade, Russia and China already do settle it in Ruble and Yuan. As Power of Siberia is going to start working at the end of this year, the amounts will go up (it's over 40 bln cubic meters of gas per year). In the last year there have been several stories about Russian energy exporters pushing to switch to trade in local currencies (apart from Yuan that's mainly Ruble and Euro) as well as EU trying to start non-dollar energy imports, so EU-Russia energy trade with non-dollar settlements seems to be a matter of time. The amount of that trade in 2018 was about $230 bln.
This is basically watching a train wreck in slow motion. It will take a lot of time, but once the momentum has been built up, there's no way avoiding it.
 

Lerticus

Senile Old Coot
Communism
The Trump administration imposed a total economic embargo against the government of Venezuela, a significant escalation of pressure against the regime of President Nicolás Maduro and countries including Russia and China that continue to support him, a senior administration official said.

President Trump late Monday signed an executive order freezing all government assets and prohibiting transactions with it, unless specifically exempted, the first action of its kind against a government in the Western Hemisphere in more than 30 years. The move places Venezuela on a par with North Korea, Iran, Syria and Cuba, the only other countries currently under such stringent U.S. measures.
Start an embargo and freeze government assets. Combine it with trade wars and Mr"if I wanted to devalue the dollar to make it more fair I could do it", and other currencies suddenly look more attractive.

The US has been pissing away their soft power. Sure, they had a lot of control of the world economy, but it was allowed not because of the American strength, but on their stability. Other countries were willing to give away their sovereign control because there was a trust that the US economy would remain stable and follow a discreet path. The US held back from outright bullying and considered their trade partners and political allies as trusted. They had the most power, but by giving away some concessions others were willing to trade their financial markets.

Now there is no iron fist in a velvet glove, just a constant beating with the proud expectation that no one will ever walk away from their abuser. Except it is becoming easier and easier for countries to trade in other currencies, and the dollar's advantage is waning (or even becoming a liability). I think that some places are hoping for a decisive end to Trumpy and his clown car, that everyone can just pretend that the last few years never happened, but the trust that the US once had is badly eroded, and plenty of places are willing to loosen ties with a rogue 'Murica since their interests aren't being even lightly considered any more.
 

Polemarchos

Active member
Author


Start an embargo and freeze government assets. Combine it with trade wars and Mr"if I wanted to devalue the dollar to make it more fair I could do it", and other currencies suddenly look more attractive.

The US has been pissing away their soft power. Sure, they had a lot of control of the world economy, but it was allowed not because of the American strength, but on their stability. Other countries were willing to give away their sovereign control because there was a trust that the US economy would remain stable and follow a discreet path. The US held back from outright bullying and considered their trade partners and political allies as trusted. They had the most power, but by giving away some concessions others were willing to trade their financial markets.

Now there is no iron fist in a velvet glove, just a constant beating with the proud expectation that no one will ever walk away from their abuser. Except it is becoming easier and easier for countries to trade in other currencies, and the dollar's advantage is waning (or even becoming a liability). I think that some places are hoping for a decisive end to Trumpy and his clown car, that everyone can just pretend that the last few years never happened, but the trust that the US once had is badly eroded, and plenty of places are willing to loosen ties with a rogue 'Murica since their interests aren't being even lightly considered any more.

This is mostly Venezuela's fault, they're entire ideology was built around America being crazy and evil, yet they didn't see this coming even after multiple attempted coups.
 

Lerticus

Senile Old Coot
Communism
This is mostly Venezuela's fault, they're entire ideology was built around America being crazy and evil, yet they didn't see this coming even after multiple attempted coups.
Except that these trade wars are not working. These embargoes on Iran, and Cuba, and North Korea are not working.

The US had the opportunity to gain a degree of control with Iran. So long as there was a thread of contact they could pull on the thread and change policy. Then they pulled out of the deal and now all they can do is point fingers and trade barbs. Hot air will not change Iranian policy.

Same will happen with Venezuela. Cut off all contact and the country will not just give up. They will instead find new partners, even if some of the costs end up being higher and trade a bit more inconvenient. All routes of American control are completely lost, and it ends up strengthening the economies of the countries who will still work with Venezuela, like China and Russia.

It doesn't really matter whose fault it is (though if it were actually a conscience reason the US would not be trading with Saudi Arabia and such countries). What matters is that the US gains nothing, loses any power in the country, and actually strengthens their economic opponents. Instead of one currency leader the US is actively splitting the global economy by forcing other nations into trade partnerships with an alliance that would just love to take a share of that kind of soft power.
 

Polemarchos

Active member
Author
Except that these trade wars are not working. These embargoes on Iran, and Cuba, and North Korea are not working.

The US had the opportunity to gain a degree of control with Iran. So long as there was a thread of contact they could pull on the thread and change policy. Then they pulled out of the deal and now all they can do is point fingers and trade barbs. Hot air will not change Iranian policy.

Same will happen with Venezuela. Cut off all contact and the country will not just give up. They will instead find new partners, even if some of the costs end up being higher and trade a bit more inconvenient. All routes of American control are completely lost, and it ends up strengthening the economies of the countries who will still work with Venezuela, like China and Russia.

It doesn't really matter whose fault it is (though if it were actually a conscience reason the US would not be trading with Saudi Arabia and such countries). What matters is that the US gains nothing, loses any power in the country, and actually strengthens their economic opponents. Instead of one currency leader the US is actively splitting the global economy by forcing other nations into trade partnerships with an alliance that would just love to take a share of that kind of soft power.
Sure they're working, America must kill any nation in Latin America and the Middle East that does not serve its empire. Ironically it'd be much easier to kill socialism with McDonald's and cheap jeans, but we'd much rather strengthen oligarchs, bankers and American oil companies.
 

Wakko

Well-known member
Same will happen with Venezuela. Cut off all contact and the country will not just give up. They will instead find new partners, even if some of the costs end up being higher and trade a bit more inconvenient. All routes of American control are completely lost, and it ends up strengthening the economies of the countries who will still work with Venezuela, like China and Russia.
I find it especially hilarious how, once they try to isolate a country, and that country inevitably deepens economic connections with any country that is not afraid of the US (usually Iran, Russia, China), the US then goes hysterical about this. What do they expect? That people will just lay down and die, as ordered by the mighty US? This is practically negative soft power - Washington's own actions strengthen the situation of their main geopolitical rivals. The level of exceptionalism delusion in Washington has to be through the roof. Or, alternatively, they (the people in Washington) know what they're doing but don't care, because their actions are aimed solely at creating the right perception in the internal political fight, and they're simply sacrificing the international standing of the US in that fight.
Or perhaps it's a mix of both, 'we know it's bad what we're doing, but the US is so mighty and exceptional that nothing can hurt us and the USD is eternal; there's no such thing as history and nothing ever changes.' That's what I'm seeing in discussions with many US posters on SB.

EDIT: Thank you US Congress for a nice example: The law says Trump must punish Turkey. Congress may force him to follow through. - The Washington Post
They have already made it very likely that Turkey will buy Russian fighter jets by blocking F-35 sales. Especially since the Russian jets integrate nicely with the S-400 into a unified A2/AD system (after some upgrades to the S-400 bought by Turkey since it's unlikely those systems were included in the original deal). There may be even an investment by Turkey into the Su-57 program, in exchange for some technology transfer. And somehow that's not enough for Congress. The situation is very delicate but these people see only 'bad Turkey' not doing what they want it to do. If they push further, Erdogan has a clear counter-measure - attack on the Kurds in Northern Syria. If the US stands by its allies, it's very likely that NATO loses Turkey, and that's a catastrophe for NATO. If it doesn't stand by its allies, they will get a clear military defeat (and lose the allies). Either way, US loses a lot.
 
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Polemarchos

Active member
Author
I find it especially hilarious how, once they try to isolate a country, and that country inevitably deepens economic connections with any country that is not afraid of the US (usually Iran, Russia, China), the US then goes hysterical about this. What do they expect? That people will just lay down and die, as ordered by the mighty US? This is practically negative soft power - Washington's own actions strengthen the situation of their main geopolitical rivals. The level of exceptionalism delusion in Washington has to be through the roof. Or, alternatively, they (the people in Washington) know what they're doing but don't care, because their actions are aimed solely at creating the right perception in the internal political fight, and they're simply sacrificing the international standing of the US in that fight.
Or perhaps it's a mix of both, 'we know it's bad what we're doing, but the US is so mighty and exceptional that nothing can hurt us and the USD is eternal; there's no such thing as history and nothing ever changes.' That's what I'm seeing in discussions with many US posters on SB.

EDIT: Thank you US Congress for a nice example: The law says Trump must punish Turkey. Congress may force him to follow through. - The Washington Post
They have already made it very likely that Turkey will buy Russian fighter jets by blocking F-35 sales. Especially since the Russian jets integrate nicely with the S-400 into a unified A2/AD system (after some upgrades to the S-400 bought by Turkey since it's unlikely those systems were included in the original deal). There may be even an investment by Turkey into the Su-57 program, in exchange for some technology transfer. And somehow that's not enough for Congress. The situation is very delicate but these people see only 'bad Turkey' not doing what they want it to do. If they push further, Erdogan has a clear counter-measure - attack on the Kurds in Northern Syria. If the US stands by its allies, it's very likely that NATO loses Turkey, and that's a catastrophe for NATO. If it doesn't stand by its allies, they will get a clear military defeat (and lose the allies). Either way, US loses a lot.
Turkey is going to attack the kurds either way, history will look back on our relationship with Erdogan like it does our relationship with Saddam.
 

Kinetic

Vivere est militare!
Not necessarily. If the Astana process manages to produce a constitution, the Kurds will be OK.
I find your baseless optimism vaguelly disturbing, for...


You're forgetting that the entire power structure of the hypothetical 'Kurdland the Autonomous' is riddled with people for whom all this 'freedom fighting' circuzoo is an occupation or moneymaking enterprise with everything this usually entails.

Put simply, want Kurds to be OK? Present your spectacular bribes for immediate inspection and get ready, astrologists proclaim a week of Ramzan Kadyrov, widespread enthusiastic pacifisting and Battalion 'Vostok'.
 

Wakko

Well-known member
I find your baseless optimism vaguelly disturbing, for...


You're forgetting that the entire power structure of the hypothetical 'Kurdland the Autonomous' is riddled with people for whom all this 'freedom fighting' circuzoo is an occupation or moneymaking enterprise with everything this usually entails.

Put simply, want Kurds to be OK? Present your spectacular bribes for immediate inspection and get ready, astrologists proclaim a week of Ramzan Kadyrov, widespread enthusiastic pacifisting and Battalion 'Vostok'.
I know, the road is long, with many a winding turn. Otherwise all would be done already. My logic is that Darwin, guiding Sultan's hand, will take care of those who don't want peace that much - and the rest will then be able to agree to it. Anyway, the current situation in the North of Syria is not tenable without external support, and that support will not last forever (as others have found out - Saddam for example).
 

Polemarchos

Active member
Author
I know, the road is long, with many a winding turn. Otherwise all would be done already. My logic is that Darwin, guiding Sultan's hand, will take care of those who don't want peace that much - and the rest will then be able to agree to it. Anyway, the current situation in the North of Syria is not tenable without external support, and that support will not last forever (as others have found out - Saddam for example).
So genocide of everyone except collaborators willing to throw away their culture and language in order to please imperialist salafis.
 

Wakko

Well-known member
So genocide of everyone except collaborators willing to throw away their culture and language in order to please imperialist salafis.
Uhm... that's not like I see the situation. Like at all. I think that most Kurds want just to finally live in peace, and these won't have a problem agreeing to an acceptable new constitution. No need to throw anything away. There are some warlords who profit from the current lack of higher authority, these may disagree...
 

Polemarchos

Active member
Author
Uhm... that's not like I see the situation. Like at all. I think that most Kurds want just to finally live in peace, and these won't have a problem agreeing to an acceptable new constitution. No need to throw anything away. There are some warlords who profit from the current lack of higher authority, these may disagree...
Warlords my ass, Erdogan bombed urban centers in order to get more votes and let jihadis take over Afrin because strong Kurds make him look bad.
 

Wakko

Well-known member
Warlords my ass, Erdogan bombed urban centers in order to get more votes and let jihadis take over Afrin because strong Kurds make him look bad.
And the really, really best protection the Kurds in Syria could get, is a stable Syria with a new, working constitution and with its borders under government control. That will cut off Erdogan from any reason to attack the Kurds there.
 

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