
SCMP: US Dollar Risk of a Sudden Collapse - jules-jules
https://www.scmp.com/economy/china-economy/article/3094416/us-dollar-risk-sudden-collapse-ex-imf-official-warns-blow
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codeddesign
Just FYI: SCMP stands for “South China Morning Post” and is owned by Alibaba.
It has been known to be very favorable to Chinese propaganda over the years.

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wenc
I'm not educated in the economics of reserve currencies [1] so would be
interested to hear what informed minds think. If we look at the top 5 reserve
currencies in the world today (USD 62%, EUR 20%, JPY 6%, GBP 4%, CNY 2%), the
USD is entirely dominant but it also means that any perturbations to it might
destabilize the global economy.

What is the alternative?

[1]
[https://en.wikipedia.org/wiki/Reserve_currency](https://en.wikipedia.org/wiki/Reserve_currency)

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nine_zeros
There is none and that's the only reason the dollar is still a reserve.

The only two competing currencies who have large enough economies are Euro and
Yuan.

Euro can't be reserve because they are not an industrial powerhouse any longer
and also a vessel of US for the most part.

Yuan can't be reserve because of lack of faith in Chinese government and
currency controls.

The yuan still has the best shot though as many developing countries are in
agony and the US has decidedly receded from the world stage, which means it's
status as reserve currency is questionable at best.

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aNoob7000
I keep hearing people mention the Yuan as a reserve currency, but why would
any country do that? China's economic and financial data reporting seems to be
spotty at best.

Also would you put your faith in the rule of law in a communist country? I'm
not saying the United States or European Union are perfect, but I think their
courts are more balanced and independent than in China.

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nine_zeros
> I keep hearing people mention the Yuan as a reserve currency, but why would
> any country do that? China's economic and financial data reporting seems to
> be spotty at best.

Good question. And the answer to that is no serious country accepts Yuan as a
reserve even after 10 years of China's GDP being number 2 in the world. People
really don't trust Chinese government and it shows.

The only reason the Yuan has a chance is because America chooses to not be a
world leader in matters that affect the world (Paris agreement, UN, WHO etc).
This leaves a power and money vacuum which disproportionately affects poorer
countries. Think Sri Lanka or poorer African countries or sanctioned countries
like Iran, Russia.

These countries have only one country offering them development or aid or
help. And that country's currency is Yuan and are happy to trade in Yuan. So
slowly and steadily, yuan gets a place in their reserve mix and then becomes
dominant because that's the only major country trading anything with them.

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alexitorg
The Yuan has got quite a few reasons why it isn't a great reserve currency.
The main one to my thinking is it is hard to get hold of. This is due to China
running a trade surplus and having restrictive currency controls. This doesn't
create a stock of freely tradeable currency to trade.

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huy-nguyen
The argument seems to be that the Fed's massive QE and Congress' large deficit
spending will lead to instability but other candidates for the reserve
currency status have their own problems too. The euro zone just announced a
large stimulus program for the whole continent. China's monetary system is
opaque and is not run according to the rule of law. With a new Biden
administration, we probably will return to a more sane decision making
process. Probably won't be as China friendly as before but rational thinking
will prevail.

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bobthepanda
Even more basic than Chinese rule of law, CNY is not easy to get ahold of
outside of China because of capital controls. If you can’t get ahold of it
easily, or move it around easily, it’s not very useful as a reserve currency.

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sschueller
Why can't the reserve currency be a crypto one? One that has a very clean
genisis and is not controlled by any single entity.

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thephyber
What military will go to war to maintain stability of this non-existant
mythical cryptocurrency that you just created?

Reserve currencies are not _just_ a currency that has a large volume and
plentiful liquidity (so the value doesn't swing significantly when demand
changes). They are backed by trusted and stable institutions. In the USA, that
includes the banking system, the legal system, the political system, and even
the military.

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blacksqr
According to former deputy managing director of IMF.

