Comment by budsniffer952
5 hours ago
Losing the reserve currency doesn't happen in a vacuum. It happened to the British and Dutch because their empires were dismantled.
So, yeah, it could happen to the US, slowly, over time (it already is). But nobody wakes up tomorrow and says they no longer want USD. Where are you parking the money, yuan?
It seems that people forecasting the collapse of the dollar are mostly doing it from a social perspective i.e. "America is collapsing under the weight of private healthcare, anti-immigration, tariffs, and the erosion of our allies; the dollar is done for"
But the reality is that financial markets don't really have a soul, and just care about economics. By all accounts, the American economy is doing excellent right now and dollars are still in heavy demand.
Its international strength is collapsing due to weight of Iran war, being untrustworthy partner, rupture from allies who supported it before and China going up. That means countries doing different long term strategic decisions, because they have no other reasonable choice.
Overall and overtime, that will weaken demand for dollar and what kind of trades other countries are willing to enter.
> nobody wakes up tomorrow and says they no longer want USD
Depends what happens tomorrow
This is why people, organizations, and nations really should be holding multiple currencies.
Holding only Yuan isn't necessarily going to save you from what's coming.
I completely understand the growing need to reduce the US dollar dependency. But these drawdowns should happen in an orderly fashion, with due consideration to addressing issues inherent in the old global financial order.
Clearly, in hindsight, being completely dependent on a single currency was one of those issues. It would be folly to replicate that environment with a different currency.
Deutche Bank I imagine is doing this because a significant fraction of their customers literally want to park their money in yuan?
If it was some rounding error they wouldn’t have bothered spending money to set it up and get all the clearances.
It seems worth mentioning that this allows DB to allow Yuan transactions to happen, bypassing any US sanctions. Since DB is not doing this without agreement from the German government and the ECB, this can be taken as an indication that they intend to do business with China the US does not approve of. At least, they want the option.
(and yes, it does not mean that the US is entirely without options to hinder China trade, just makes things harder. In this case, a lot harder)
> this can be taken as an indication that they intend to do business with China the US does not approve of. At least, they want the option.
Indeed, it also acts as a counter balance/hedge against the US's demands in the future.
The problem for Europe is simply that we need to trade with both sides fairly openly or our entire economic model collapses - We are massively dependent on US technology and Chinese industrial capacity - too dependent frankly.
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I'm less familiar with Dutch history - but that happened to the British Empire because its situation went from being the world's obvious #1, to barely avoiding national bankruptcy, due to the staggering costs of WWI and WWII.
The bailout, July '46 - https://en.wikipedia.org/wiki/Anglo-American_loan
Loss of India (the empire's real money tree), August '47 - https://en.wikipedia.org/wiki/Partition_of_India
FWIW, "dismantled" generally implies a personal outside actor, with the intention and power to take things apart. Vs. the British Empire crumbled mostly because Britain's & Europe's relative power / prestige / image, post-WWII, were just smouldering ashes of what they'd been before WWI. That had obvious feedback loops with ambitious "native" leaders, nationalistic memes, and the just-won "moral crusade" to liberate Europe from evil Fascist occupation.
EDIT: The post-WWII revelations & condemnations of Nazi atrocities, plus how well the "yellow" Japanese had done against European/"white" powers, were pretty much fatal to (then prevalent) meme of white people enjoying "natural" moral and military superiority over non-whites. Which meme was an important foundation stone of most of the Empires which crumbled in the decades after WWII.