To the rest of the world - Nothing. Trade works just fine without a reserve currency.
For the USA - massive inflation. All of those dollars are coming back home, which will weaken the dollar.
Plus, there's the second-order effects from a president taking control of the fed by trumping up charges on its members. So high inflation + low/zero/negative interest rates.
The USD has already been in decline as a reserve currency. The only thing that is happening is the decline is accelerating.
It is not necessarily a question of "takes its place", but more about being more serious about diversification. Or to paraphrase the old IBM saying "nobody got fired for buying USD" is no longer the case.
In terms of options you have JPY, EUR and CNY as the big-three and maybe tag AUD on top.
Fair question. And in some circles people would substitute AUD for CHF, and SGD is essentially in the same position as CHF (small, stable, well-connected country).
But AUD mostly because Australia is commodity-rich and so AUD has a naturally high exposure to international trade especially in Asia-Pacific region. Its a bit like CAD but the problem with CAD is its neighbour. ;)
Look up something called "dedollarization," it's been talked about in academic circles for quite some time and now more mainstream institutions are discussing it more too.
Yes, in my undergrad government policy classes twenty years ago, we were talking about a "basket of currencies" that would replace the USD as the global reserve.
IMF has this, intra-countries, with their SDR ("Special Drawing Rights"). China was added in the 2010s, and USD has slowly been losing its percentage of the SDR's overall-makeup.
SDR's are a type of Keynes' "Bancor" concept, but only transactable between countries. Citizens may resort to the commoner's bancor, e.g. bitcoin (but also gold, silver &c).
The share of the USD as a reserve currency has already been slowly declining over the last decade, although it is all but dramatic. The reduction is not in favour of another particular currency. Instead, the proportion of minor currencies is increasing. Here is a diagram for the years 2016 to 2023: https://de.statista.com/statistik/daten/studie/232562/umfrag...
Anybody who can (EU, Yuan) does not want to. Primairly because as export based economies, they want a weak currency in relation to a strong reserve (dollar) so they can make their goods more competitive, and also because surplus naturally appreciates a currency without central bank intervention via buying US treasuries to offset the appreciation. And for China, they're not going to accept the liberalized capital controls neede for it either.
So the answer is if the US dollars fail it would be global economic collapse and then chaos, but contrary to the rhetoric the rest of the world's economic systems are too uniquely vested in the USD to see it fail. As for gold, well we come to the same problem as noted above but worse, and in that situation the US actually holds the highest gold reserves so they still benefit the most out of it.
I doubt it would be replaced by a single global reserve currency. More likely there would be a handful of currencies that perform a similar role (USD, EUR, CNY, maybe some others) and which you primarily use depends on whose sphere of influence you are in.
It's easier if contracts run on the same currency I think, your suppliers price in USD, you sell your products in USD, it's easier for a whole supply chain that way. I can imagine that fracturing or switching to Euro for things like manufacturing and semiconductors.
My guess would be EUR takes its place, gold will also be used more. I guess what happens is USD gets much weaker and US buying power goes down. Maybe destroying the USD will eventually cause the boost to domestic manufacturing that Trump wanted, since foreign goods will be out of reach. Cut down the forest to kill a squirrel. I'm no expert though
There will never be a boost to domestic manufacturing without some kind of investment. The booms of the 1950's and 1960's were a result of massive government spending in the 1930's and 1940's building a bunch of capacity and researching novel manufacturing techniques and building new tools. If we don't have the morale for that we will simply stop having as many things.
It also included a bunch of women joining the workforce, an enormous baby-boom and brown people acquiring the freedom and prosperity necessary to become consumers. Demographics are always the fundamental driver of economic movements.
Domestic manufacturing isn’t coming back without a thoughtful investment program. A lot of older people still think of China like in the 1980s where it was mostly low-wage, low-quality products but that’s nothing like true now and they have entire clusters of world-class product pipelines with long supply chains which would take a long time to bring back in stages.
The other problem seems even bigger: we don’t have many high-skill workers available, but our wages are high enough that anyone bringing manufacturing back is going to try to automate it as much as possible. That seems like a real bind for the Republicans’ isolationist strategy: exports will be down due to a trade war and a difficult price/value ratio in the areas other countries currently dominate, and if we’re heading into a more automated economy we’re going to have a growing number of people who won’t be able to afford to buy much. This seems like a vicious self-inflicted cycle if it gets rolling.
The US starts more wars until its eventual complete collapse. See The Rise and Fall of the Roman Empire. We're operating out of a playbook for imperial destruction word for word.
What are some better parallels? Seriously, no snark, please throw out some suggestions for reading. I can't think of any other country that has done this to itself.
Qing suffered a century of unequal treaties before they fell, they were the bullied and not the bully. (They were also medieval and isolationist which further hurts the comparison IMO).
The petrodollar (a product of Kissinger) has been in collapse since Saudi Arabia began divesting from it.
We've been printing pretend money for quite some time, and supressing the value of precious metals (which is why you're now seeing silver bullion sell for $100+ an ounce). Copper is also selling out now.
These precious metals are extremely valuable because they're used to manufacture all of the technology consumers and nation states rely on daily. We're going to see a regression towards mercantilism and commodity hoarding. Most likely fiat will be abandoned in favor of crypto as we enter a new era of hyperinflation.
I didn't say the US has been suppressing them. The international banking cartel along with the US Federal Reserve have, in order to prop up the value of federal reserve notes.
Gotta love HN - getting downvoted with no explanation, but most likely because the truth is uncomfortable and people would rather press the downvote button than face facts.
Except governments around the world have been talking about a digital dollar / digital currencies for years now. I'm not sure exactly what is so outlandish about it. The fiat system is collapsing, and the signs are quite plain to see. Can't print fake money forever...
There's a large difference between fiat currency and what you're calling fiat tokens. One is extremely difficult to trace - the other is extremely easy and allows the nation states that are "minting" them to track every transaction being made with them.
They are nothing like paper currency outside of being another abstraction of actual value and being issued / controlled by the banking cartel.
Probably some type of balanced trade. Holding each trade partners currency and balancing it at times. Or even between multiple holders and currency pairs.
If there is need you can now build very complicated systems as everything is digital anyway.
Maybe stable coins would be finally useful. Each currency has own stable coin and then they are automatically traded in massive market... /s
I would say the same on my old accounts too. I rotate accounts annually (it is january). I'm not anyone note worthy or famous, this account and my others are just as generic as any other HN commoner.
What is the theory of how the US Navy keeps the dollar the reserve currency, when the US has made itself a pariah state? What mechanism? Would the US Navy be doing piracy and demand protection money in dollars? Piracy payoffs would be a far far lower demand for dollars than there currently is and, and also greatly reduce all other trade with the US, further reducing demand for US dollars.
I think it works as a statement right up until you start an actual war, then the threat is gone. No point worrying US will invade if you don't support it economically, if it already invaded
If the US pisses enough countries off with this Greenland stuff that they shut down US bases around the world, that substantially curtails the US Navy's ability to be effective globally.
The argument made like that is an original argument bent backwards. The argument was that the US Navy guaranteed open shipping lanes and kept Pax Americana. Now we get closed shipping lanes and Bellum Americanum.
Navies appear to be obsolete (edit: I'll exempt ballistic missile subs from this statement, though.) You don't even need a navy of your own to sink another country's navy these days.
When $100M in armaments can take out a $10000M carrier, it's time to rethink things.
We finally realise there is no such thing as a “reserve currency” in the floating exchange rate era and that the concept is a long dead hangover from fixed exchange rates.
And that’s definitely going to upset the gold bugs.
(In reality lots of things are held in reserve)
USD is a routing currency that is used because it is cheaper than the mesh alternative. When it stops being cheaper whoever is then cheapest will get the routing transactions.
