Comment by flumpcakes
12 days ago
USD is about 2/3 of foreign exchange reserves. Which definitely is the lion's share. However, the more the US prattles about, the lower that ratio will become, the less soft power the US has.
12 days ago
USD is about 2/3 of foreign exchange reserves. Which definitely is the lion's share. However, the more the US prattles about, the lower that ratio will become, the less soft power the US has.
It’s rapidly declining as the world reserve. Thats part of the over 10% decline in the value of the dollar last year (it still amazes me that those prattling on about the rise in the S&P last year dont realize that of the 16% increase, over 10% was eaten up by the USD falling, so the real increase was closer to 6% which is remarkably average if not below average, when considering higher than normal inflation).
The other part that Americans aren’t seeing coming is a reduction in the reduced willingness of the rest of rhe world to finance American debt. The last few rounds have seen a much higher percentage of corporate debt purchases as opposed to sovereign purchases. Which is fine for now, but if a slowdown hits, corporate purchases of U.S. debt will reduce in a way sovereign purchases never did (in fact those tend to increase).
That would severely impact the ability of the Fed to goose a slowing economy by lowering interest rates.