Comment by esalman
10 hours ago
I don't think numbers matter here.
Bond prices shooting up is a result of market losing trust in US, or it's ability to not default.
Dollar is famous backed by $700T military. But the world has seen how it failed to secure a strait.
The current US government has broken all kind of promises. I want to highlight two in particular - free trade and immigration.
World economy has benefited for decades on the promises of free trade. The tariffs have eroded the promise and trust.
The government is also openly supporting elements who are hostile to immigrants. Immigrants are the backbone of US economy, has been for over hundred years. Immigrating to the US requires years of preparation, long term planning, and giving up on other luxuries and opportunities. When the government starts breaking promises by changing rules and moving the goalposts overnight, it discourages participation.
The dollar is not "backed" by a military. China has a huge military and no one uses the Yuan for third party trade. Why not? Because China does not run trade deficits that allow third parties to acquire the Yuan in the first place, it does not have open capital markets that allow third parties to store their surpluses in Yuan, and it does not have the investor protections that give investors confidence that they can pull their savings out whenever they want.
You know a nation that does have those things other than the US? Switzerland, which is why a lot of people use swiss Francs, even though Switzerland does not have a huge military. People need to stop reading Graber and others who have no economic training and don't understand global balance of payment accounting. Having a large military does not translate into people wanting your currency, otherwise China, North Korea, and Russia would have well used international currencies, rather than being forced to use the currency of their rivals.
Your points are valid. But there's a reason why dollar is "petrodollar" - when we say it's backed by US military it's really the axis of US-Israel-Saudi Arabia which control military as well as resources. People use US dollar not necessarily because they want, but because they have to. I also do not know who Graber is but I'll look it up.