This has nothing to do with USD dominance as many are suggesting. Ghana is running out of USD reserves and has to resort to buying with gold. Nothing suggests they wouldn’t use USD if they had it.
It has everything to do with USD dominance. Ghana is shouting out loud I can’t get my hands on USD. They’re echoing what the global market in general has been pricing.
Now true, having your product be a hot commodity everybody wants is good for business but there’s only so much of that before your competitor starts offering a more readily available product.
Pepper that with some morally objectionable stances the US has taken over the past 22 years and suddenly your ultra safe and liquid commodity while still good and desirable for this present crisis might not be as desirable for the post crisis era. Where one crack starts many others can possibly form.
Doesn't help that the US seems set on destroying the world's confidence in the US dollar:
first the 2008 financial crises and monetary creation (I.e. devaluation) in response;
then much more recently they hammered nails in the coffin of Breton Woods 2 (I.e. the post-1971 monetary status quo of floating fiat currencies) by confiscating the Afghan Central Bank's reserves (which included private individuals' deposits, and they gave the money to families of September 11th victims) and by freezing the assets of the Russian Central Bank. inter-Central Bank settlements were supposed to be apolitical.
All that in the context of multiple hot wars (Iran in 2003 and then Libya, perhaps?) and military actions that appear to be in defense of US dollar dominance: https://bitcoinmagazine.com/culture/the-hidden-costs-of-the-....
> Doesn't help that the US seems set on destroying the world's confidence in the US dollar
Over the last 15 years, USD has increased in value against the Ghanaian Cedi by almost 16x. If we're trying to destroy confidence in USD, then Ghana sure makes it seem like we're doing an awful job.
You're correct that the Cedi has lost value compared with the US dollar while existing in a world where USD is one side if nearly every international business transaction.
However, look at the US dollar over longer durations against wheat [1], copper [2],
gold[3], or Bitcoin [4]: the dollar buys significantly less than 10, 15, 40, or 100 years ago.
While the Cedi may be much weaker against the dollar, the dollar is loosing against real commodities/assets that can't simply be created by banker's fiat.
So, the dollar's the cleanest dirty shirt in the room. And Ghana just announced that they'd rather trade oil for a clean shirt (gold) rather than taking a dirty one.
Of course the dollar has devalued. That's the whole idea. It's supposed to. At a modest rate of 2% inflation, $1 should be worth 50 cents after 35 years. That's literally how currency works.
That's a policy choice, one which is non-obvious and requires serious justification. Why should people be incentivized to spend their money, morally? The mandatory inflation basically is saying, "spend your money or we'll spend it for you". How does this robbery encourage social mobility and the building of generational wealth, exactly? It's one thing to give handouts to people, and quite another to rob them. It's most harmful to the poor who generally have less leverage in ensuring that their wages keep up with inflation and they tend to need to spend a high fraction of their wages to live on, so eroding their savings is seriously destructive. The poor also can't as easily access investing advice and methods, to avoid the effects of inflation.
It's important to realize what currency really is at its core, which is not a store of value but an intermediary store of the current value of labor vs the barter value. Todays labor is worth more today than it will be in 10 years, so the dollar value of that labor should fall correspondingly. When we pick an inflation rate, we are more deciding what the time decay of todays labor should be moving forward.
This is not a policy choice. Step outside, touch grass, then open a macro Econ 101 book and understand how and why inflationary economies were created and settled upon as a working model. A non inflationary economy literally cannot expand. You’ll be writing this from a typewriter and posting it from your local post office if inflation didn’t exist.
because it's not the case at all. de-dollarization is picking up rapidly across most neutral/anti-US countries and this is the start of it. China is trading with Russia in yuan and even India has allowed small players to bypass USD and trade in INR directly https://www.reuters.com/world/india/india-allows-internation...
Something I have been shouting hoarse is that this war in Ukraine is going to have multi-generational effect on world order with USD coming under US pressure.
If Saudi drops USD, which now seems extremely unlikely, then it's truly a descent for the US empire.
The Chinese are demanding Russia trade in yuan because the Russian currency has, through a series of impressive self owns, become completely useless. If the Russian position was even a little less weak it wouldn’t fly because Russians don’t want yuan for the same reason Chinese people don’t, it’s an illiberal currency unsuitable for trade. That’s getting worse not better, because there is a moderate chance if China relaxed its currency controls it would crater their economy and bring the ruling class to an end.
Similarly, the INR is being (slightly) liberalized, not because Indians prefer international trade in their local currency but because it costs them so much to have such a bad currency.
There are reasons to think people would prefer a different currency to USD to be the reserve currency but it’s because it’s not liberal enough. Switching to extremely repressive currency regimes like the yuan or the rupee is counterproductive To the people who want a different international trade currency.
It's like company wanting to paying people with scrips redeemable to company-mart ( china market) and that locks you in, BCS it could be worthless if you don't use the money quickly and/or outside company premises
you're talking about the country that's exporting most consumer goods to the world and has positive trade balance with most countries it is trading with. those yuans are useful to any country in the world. nobody needs to hold yuans, they can readily be transformed in physical goods
I don't want Kasey junk bucks. Which is why I'm scratching my head at youre reasoning the largest economy in the world would accept worthless currency.
And if I held a gun to your head and demanded that you accept kasey_junk bucks?
China has some of the strictest currency controls in the world. To the point if you are doing treasury operations for an international business there you can’t use your normal financial rails to accomplish day to day tasks like manage payroll.
No one, including Chinese citizens, want to keep their cash there. For corporations this manifests in added costs, but for individuals (with even moderate means) it becomes a game of hide the assets. So much so that cities in the west are dealing with asset inflation specifically attached to Chinese buyers.
China doesn’t have a problem with western citizens over paying for property there.
Until a currency liberalizes it can’t become a reserve currency for international trade. So for the yuan we have 2 choices, it liberalizes (and perhaps tanks their leadership) or it stays second class. The current Chinese leadership believes the former is worse than the latter.
And if I held a gun to your head and demanded that you accept kasey_junk bucks?
I don't believe that's whats happening though.
The idea that Russia is holding a gun to china's head just doesn't make sense. Russia and China are part of the BRICS economic treaty, and this treaties main purpose is to see the dollar dethroned. I live in China FWIW and I don't see any of what you describe
Sorry, we’ve been talking past each other apparently. I believe China is strong arming Russia into using the yuan when Russia would prefer anything else. My belief is that this is a sign of how weak the Russian economy is, not a sign of yuan strength.
I 100% believe that the BRICS signatories want to see the dollar dethroned. I’m not even stating an opinion on whether it should be or not. My position is simple, illiberal currencies are not a viable alternative for international trade. A prerequisite for the yuan taking over as reserve currency is it becoming more liberal. That’s not currently the trend.
And fwiw I’ve been both a fx trader and worked in treasury operations for an international. I’ve dealt specifically with moving yuan.
You are right about yuan and it's also the reason why USD is hard to dethrone. Russia even made it amply clear that it won't use yuan for the reasons you mentioned. A proposal was to use basket of currency or a new currency backed by precious metals.
Pretty sure one of the above will happen over the next few years
The US is one of the largest global holders of precious metals. You could perhaps replace it with a rare earth basket but that is effectively the yuan…
> The idea that Russia is holding a gun to China's head just doesn't make sense.
You are absolutely right, because it is the other way around. China doesn't want to have problem with US and EU for dealing with Russia in USD or EUR, so it demands Russia to trade in yuans. Russia is therefore forced to sell its' oil and gas for yuans for the price set by China. The only leverage out of that situation is to trade with India and Turkey in rupees and liras, but India and Turkey can't offer lots of goods only China can.
> because the Russian currency has, through a series of impressive self owns, become completely useless.
Huh. Checks forex rates. Not worthless, USD/RUB went from 100 to 60. It's worth 167% what it was before Feb 2022. How do you explain that?
So many people forget that the value of a currency derives from considerations of supply and demand. When Russia said it demands to be paid in Rubles for some commodities, then this created a demand for Rubles. You may not like the demand, but it is a real demand.
A net exporting nation is not going to have a worthless currency, rather it will be able to control the value of its currency by either insisting that a portion of its exports be bought with its own currency, or -- equivalently -- allowing its exports to be bought with a tradeable currency and then selling that for rubles.
So the strength or weakness of the currency is going to be decided by the net export situation, and as Russia's trade surplus is much higher in 2022 than in 2021, earning roughly $330B in energy exports in 2022, a roughly ~40% increase from last year, it's currency is going to appreciate unless Russia takes steps to devalue it. And that's just energy. Russia is also a major global supplier of fertilizer, wheat, diamonds, gold, titanium, etc. That's what makes the ruble valuable, not what you think of Russia's geopolitical strategy. Currency markets don't reflect the moral value of a nation, they don't reflect their foreign policy, they reflect the net supply and demand for the nation's production. The world is hungry for oil, gas, coal, wheat, fertilizer, wood, titanium, potassium, gold, and diamonds. It is the value of these commodities that gives the Ruble its value.
In terms of China, Russia runs large trade surpluses against China because it is a major energy and food supplier to China. It has therefore accumulated a large amount of CNY reserves, just as the record of all those surpluses. It makes sense that it would use some of these reserves to purchase output from CNY or other countries willing to be paid in CNY. That use of foreign reserves does not mean that the Ruble is worthless, it means that Russia is spending some of its foreign reserves. Nothing particularly special going on here - China is more than eager to sell goods to Russia to reduce its trade deficit with that country.
And what are the currency volumes? What mechanisms can you use to turn rubles into other currencies that are legal in Russia? Can a bank or investor trade rubles currently? What are the interest rates charged to loan rubles? Those currency controls have the direct impact of making imports expensive or unattainable.
Russia is now mulling issuing yuan denominated bonds. As if they were a client state of China. That’s not because their economy is strong. Their trade surpluses are largely because their imports have collapsed.
The ruble/yuan pair is quite simply China taking advantage of a Russian economy that is teetering. Extrapolating out anything beyond that about global reserve currencies is folly.
(laughs satanically) Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia.
I am sorry for sounding like a jerk, but you don't understand the current situation in Russia. Country is under heavy sanctions and they are mountaining more and more every month. A good chunk of sovereign reserves are just frozen. Country is net exporting not because it has that much goods to offer, but because it cannot import anything. Yuans and rupees (and YTL) are spent immediately to buy anything from China or India or Turkey. "Anything" like on anything not on US/EU blacklist, because of course China, India and Turkey are more interested in avoiding secondary sanctions than profit from trade with official terrorist-state.
Russia is not officially a terrorist state beyond some symbolical declarations. EU and US still have large imports and also declaring them terrorist would also mean sanctioning secondary buyers like china India turkey.
Also rubles don't have to be exchanged for USD, you can use that to buy Russian gas, oil, arms, nuclear, wheat etc
> Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia.
I am sorry for sounding like a jerk, but you don't understand the current situation in Russia.
I mean, you must live in the U.S., which explains why you think your experience generalizes to the whole world and why you think if something is unavailable in the U.S., then it must be unavailable in the whole world.
But for other readers, consider for a moment that there is a world outside of Europe and North America. Consider for another moment that the vast majority of the planet lives in that world -- the world where Russia isn't being sanctioned, where you can purchase Russian output and sell goods to Russia, and demand for Rubles is high because even in the poorest nation on earth, they still need to buy oil, wheat, and fertilizer. They may not be importing a lot of iPhones, but Russian output they will import. This is why despite the sanctions imposed by a small minority of nations, the majority of nations is still purchasing Russian output, which is why Russia exported more to the rest of the World in 2022 than what was purchased in total in 2021. Shocking, I know.
In terms of how you trade fiat currencies, you need to keep in mind that fiat is non-convertible and therefore doesn't leave its own banking system.
All dollars are held in the U.S. system, and for a foreigner in, say, Brazil, to buy dollars, they become a depositor of a bank in Brazil which has a relationship with a bank in the U.S. that is a correspondent bank for the Brazilian bank. The Brazilian bank is a depositor in that U.S. bank, and the U.S. bank buys the dollars and holds them in an account assigned to the Brazilian bank, but which actually exists in the US system. Then the Brazilian bank creates a matching entry in the Brazilian system and assigns ownership of that corresponding account to you. But the dollars stay in the U.S. (here I am ignoring paper money, which can travel, but isn't important for forex rates.). When you decide to sell the dollars, the clearance happens in the U.S., someone else -- either a foreigner with a correspondent bank or a local with a direct domestic bank -- has the money transferred from the correspondent account to their account.
So to buy pounds, you need an account with a bank that has a correspondent account in England, and has reserves in the Bank of England. The pounds never leave England. That is how you buy pounds.
To buy Rubles, you need an account with a bank that has a correspondent account in Russia, and stores reserves with the Russian central bank. The largest correspondent bank is Sberbank. I am sorry that your local bank doesn't have a correspondent relationship with a Moscow bank, but there are plenty of other banks that do outside of that walled garden. This is how Japan and China buy oil and gas from Russia, for example.
So that is how you -- or rather, someone who has escaped the walls of the garden -- can own foreign fiat currencies. In terms of how you trade them, well, dollars are traded in US exchanges, CNY is traded in Chinese exchanges (there is a parallel currency for Hong Kong traded in HK exchanges) and rubles are traded in Russian exchanges. I understand you think the US exchanges are the entire world of forex exchange - perhaps you think they are the entire world of investment -- and that only a black void exists outside of that, but really there are currency exchanges all over the world. The forex rate I cited was from Moex (which is the largest), the Moscow exchange. The volume of forex transactions in Moex is about 18 Trillion rubles a month. After the Western sanctions, there was a decline in volume of about 30% as the Western customers exited the exchange, severing their correspondent relationship, so it would be about 25 Trillion forex transactions per month before the sanctions. Nations outside the West -- primarily in Asia -- account for that remaining 70% of Moex flow, 18 Trillion rubles a month is plenty of flow to support a net trade surplus of 330 Billion a year.
> you must live in the U.S., which explains why you think your experience generalizes to the whole world
On the contrary, I live in Serbia, but 45 years before that I lived in Russia and USSR. So I have a first hand experience with currrent Russia's situation and all the events led it here.
For now, you either cannot have an account on Russian exchange if you are non-resident, or even if you do - you just cannot do any trade. If you have an account with the bank which has connection to sanctioned Russian banks - you will be presented with the rate far different than that you see on Forex. And you have to trade not USD or EUR or other credible currency, but in yuan, which is cursed by CCP (even Chinese people don't want to keep their savings in yuan) or, even better, turkish lira, which is cursed by Erdogan and has tremendous inflation of 10-15% per year for last 5 years. Good luck exctracting you arbitraged value from those.
I also see a visible volume of rupee/ruble on MICEX, but I don't think the rupee is a viable alternative to yuan or TRY for that matter.
This is like the stupidest voluminous comment written by someone who has never observed a market for any length of time. Just the first paragraph is enough to dismiss the rest of this, even if it is accurate lol
It’s so interesting to me that people see the dollar at a long term high, a proxy war in which the US is kicking ass (we don’t even need to send troops, our old equipment is enough) and their takeaway is that the US is in decline.
The US is incredibly strong. That does not mean the dollar is in good shape. Too much strength for your currency of exchange / account is a bad thing. It is why crypto cannot be a currency even if the blockchain was rock solid tech. Nobody in their right mind will use a currency that is that volatile. You cannot price anything properly or run a business. Same with usd. Sure the guy above is exaggerating and he probably knows that, but dollar strength is a bad thing beyond a point. People in finance already understand this very well.
Not very volatile but the USD/Euro parity changed lot during the last five years. The BCE is obsessed with the stability of the currency, but I find that the FED is doing a much better job with the USD or maybe it's also the US economy being more resilient.
I think it’s the US economy being more resilient. Here in Europe things started falling apart when the interest rate went up to 1.75%. The US seems fine with double that.
I think the over regulating of the labor market and Ponzi style pensions are the two major factors. But it is hard to understand how they can be so different. I’d love to read something on the subject if anybody has any recommendations.
US definitely has declined from its peak position of '90-'00. By the end of the last century, even allies were openly voicing concerns over US being a hyperpower and not just a mere superpower. [They are calling us a superpower again.]
9/11 is the inflection point (and subsequent matter is my opinion) and regrettably for us Americans, the store was in the hands of neocons, who stupidly (they wrote in late 90s a document announcing to the rest of the world that ~'US will never permit anyone reaching parity to challenge', shit like that) misused our global position, and give motivation for various powers, including w/o a doubt ~Western allies, to review Swift's Gulliver's Travels ..
We pissed away blood, treasure, and reputation during the regime of the neocons (which spans D and R presidents, btw).
Do you think the laughably comical criticism of "world order" by the "mutlipolarity" gang, the likes of RF or CPC and junior friends, would be taken seriously by other world leaders/nations if US had not acted like a bully these past 2 decades?
We absolutely must re-examine our stewardship performance vis-à-vis the tacit acceptance of other major powers for this arrangement under sane leadership of US of A.
Second, Putin's adventure would not have happened in an environment of robust US prestige and power, but you appear to forget just how oddly our nation has been acting (at least as viewed from an external lens) in terms of our domestic politics. We've lost prestige on that end as well. What made this little man so confident? Why is he still hanging on? It should have been well over by now.
Finally, RF appears to have forced US to use mechanisms -- confiscation of sovereign reserves, etc. -- that I assure you must have scared the living light from all spectators with treasure trusted to the "international order". They are all saying 'but by the grace of god of mamon there go I'!
So we need to get our act together as a nation, if we intend to continue to insist that we are the responsible steward of the Global order.
> We absolutely must re-examine our stewardship performance vis-à-vis the tacit acceptance of other major powers for this arrangement under sane leadership of US of A.
I would much prefer a unipolar world with a benevolent US in the driver’s seat. I think the war in Ukraine shows that that is where we are right now. The idea that authoritarian regimes with a disdain for human rights (like China and Russia) should be allowed anywhere near an equal say in the future of this world is scary to me.
I agree though that this requires more restraint on the use of force than the “neocons” showed. Hopefully US leadership has learnt its lesson over the past two decades: the fact that you have the power to utterly destroy a country does not mean that you have the power to build one.
I will add that there is a legitimate concern, internal and external to the West that so far, given that this issue of ideological extremists (such as neocons) getting their hands on some elements of policy and executive arms of the West did not get a public accounting and redress -- how did it happen and what is to prevent it from happening again -- leaves open the possibility that the unipolar world may very well become uniformly fascist. This remains to be effectively addressed.
>US definitely has declined from its peak position of '90-'00. By the end of the last century, even allies were openly voicing concerns over US being a hyperpower and not just a mere superpower. [They are calling us a superpower again.]
People in the '90's would have bemoaned that the US was well down from its peak in The 40's (you know, when we had nuclear superiority for c. 5 years). But in neither era would an average Congolese citizen use a US-developed product for most of the day (though now they sure as hell use Android and Google). Soft influence is a thing too.
>9/11 is the inflection point
George Bush et al really wanted Americans to believe that, but why? It's not like Iraq is that much different from Vietnam. Both were ill-fated wars we mostly lost, but not in a way that makes our enemies see us as weak (Iraq, particularly its leaders, got annihilated, The US just failed at rebuilding)
>Second, Putin's adventure would not have happened in an environment of robust US prestige and power
Yeah, the Soviet Union never invaded bordering nations during the 20th century.
>We've lost prestige on that end as well. What made this little man so confident? Why is he still hanging on? It should have been well over by now.
You really weren't alive during the Cold War, huh? Remember Chernenko? The one that invaded Afghanistan? He held on just fine.
>Finally, RF appears to have forced US to use mechanisms -- confiscation of sovereign reserves, etc. -- that I assure you must have scared the living light from all spectators with treasure trusted to the "international order". They are all saying 'but by the grace of god of mamon there go I'!
Or they are saying 'better to be a friend of the US vs. an enemy!" It's not like we are picky in who we like (cough MBS cough), we just are opportunists who will welcome anyone who plays along.
> People in the '90's would have bemoaned that the US was well down from its peak in The 40's
>>9/11 is the inflection point
>George Bush et al really wanted Americans to believe that, but why? It's not like Iraq is that much different from Vietnam.
This to me fails to note the categorical difference between the US's role before and after the fall of the Soviet Union.
Before '90 US was representative of one of the candidate systems. After '90, "new world order" of George Bush (the elder). UN was supposed to be the mechanism for unleashing violent force. So Vietnam and Afghanistan may look the same on paper (superficially imo), but they are two entirely different matters as far as the "international community" is concerned. This was the sin of the neocons -- shattering that implicit accord among the powers.
> Second, Putin's adventure would not have happened in an environment of robust US prestige and power, but you appear to forget just how oddly our nation has been acting (at least as viewed from an external lens) in terms of our domestic politics.
I believe Putin perceived Biden as weak. Big mistake. Both of his more recent adventures were during Democrat administrations. The 2008 Russo-Georgian war was during the GW Bush administration, when the US was busy in Iraq and Afghanistan.
That’s like saying “cryptocurrency trades 7 zillion dollars of value per day but only $3M per day of actual business occurs, so actual business considerations can’t possibly affect the price of cryptocurrency”.
There is a whole lot of money moving around via forex transactions, but that doesn’t control the value of the dollar.
Not completely true. The current crisis is driven by foreign buyers not being enthusiastic about buying more US debt. The current inflation crisis is directly related to the large amount of price support for US debt provided by the US Fed in 2020-21.
US govt is essentially holding foreign creditors hostage. If you try to move away from US debt, they will just print more dollars and devalue all your (and everyone else's) assets. So the non-Western world (90% of humans) very strongly wants to dedollarize as smoothly as possible. US debt is extremely toxic, which isn't an obvious fact if you look at the surface only.
> US debt is extremely toxic, which isn't an obvious fact if you look at the surface only.
Is it? Why do you think so?
I’d say it’s the safest asset in the world. Sure, if you buy a 10y US bond you risk having some of the value eaten by inflation. But that’s a relatively “soft” risk in that hyperinflation is unlikely. Default I think is extremely unlikely.
US treasuries are sometimes called "return-free risk". It seems pretty clear that the US government is borrowing unsustainably high amounts. We can't keep this pace of borrowing up for very long. So either the government starts being financially responsible (how likely do you think that is?), or by the time those 10y bonds mature you'll either get highly devalued dollars or just nothing at all.
"The current crisis is driven by foreign buyers not being enthusiastic about buying more US debt."
That is largely irrelevant. As the world's reserve currency, the Federal Reserve could buy up Treasuries as needed. The domestic inflation problem is another matter.
Generally speaking yes. If from your question I deduce that you’re worried about how much we already “printed” then do some googling over why the common citing of growth of M2 chart is interpreted wrong.
Spoiler - we didn’t print nearly as much as you think we did. And we generally haven’t even scratched the surface of how much more a normal growth of the currency since 2008 was needed.
The question that needs to be asked is more political and societal than monetary. Does the US want to lead the world by resuming at marketing a more true and secular beacon of hope and freedom or does it want to become isolationist and toe the line of each dog to its own. If we choose the former the question than arises if that’s even still possible and if we ever were true to it or were we just lucky enough to enjoy the arbitrage of developing countries not having developed yet.
I personally don’t have all the answers but it seems to me that combined with our questionable moral standing in the last 22 years and our secular stagnation the latter is the path we’re choosing to follow.
>we didn’t print nearly as much as you think we did
You do realize that it's not actually just printed and given to people right? The fed buys government bonds, the people through taxes pay the interests on this loaned printed money.
So, the money is printed and loaned to the government, the government uses this printed money to make the rich richer (supporting big companies so the economy doesn't crash, through Blackrock who gets to decide who gets what based on ..weird values), inflation is a tax on the people already, and they're the ones paying back that loan, and the poor countries get poorer because their dollar reserves aren't enough to buy things from the US and other countries who trade in USD.
So thinking QE on that scale is good is either being a contrarian for the sake of ego or believing everything you hear on CNBC.
Spoiler - we didn’t print nearly as much as you think we did. And we generally haven’t even scratched the surface of how much more a normal growth of the currency since 2008 was needed.
What are you talking about? Aside from the indoctrinated belief that money printing is good and normal, in the past 2 years alone the US has printed nearly 80% of USD in existence. Our debt to GDP is over 130%.
If by “normal” you mean debasing and destroying the government money just like every empire before, sure.
This is incorrect. The usd in existence are just reserves. They are not actual spendable money beyond circulating somewhere inside the plumbings of global banking. Said plumbings are things even experts do not fully grasp so I’ll assume no one on this forum has read and understood it. Money did not enter the economy at the same rate it was printed. This is why all the money velocity charts are only shared by charlatans on finance twitter who mostly haven’t spent more than a few years at a serious desk before thinking they understood everything and took off. If you remained inside a high earning position with that level of knowledge, they’d get rid of you really fucking quickly.
> in the past 2 years alone the US has printed nearly 80% of USD in existence
Often cited and incorrect metric. The fed changed how the count M2 I believe because they started paying interest on reserves during their response to the COVID crisis. Either way the chart often cited showing an increase in M2 is not telling the whole story, namely that not nearly enough USD has been “printed” to satisfy world hunger and needs. (Think, if dollar was a plenty then why is DXY at the close to the second highest in history. Demand outpaces supply.)
You can Google it. Have fun! While you’re at it also Google Triffin Paradox. Read about trade deficits as they relate to a country who’s currency is a global reserve currency.
I am no money master but I’ll take a shallow stab at it.
Triffin explains the trade deficit perfectly. I’ll quote from Wikipedia:
“…that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfil world demand for these foreign exchange reserves, leading to a trade deficit.”
We basically have to keep feeding the world with dollars. Or at least collateral that can be trusted to be turned into dollars so that banks around the world can create those dollars. How? Create more government debt.
The part about debt to GDP growth is I think exactly that problem of balancing your domestic short term needs vs the long term needs of the currency on a global scale.
When the world is starved for dollars and the dollar becomes stronger this isn’t a measure of US economic strength it’s a measure of how much the system is choked. Less dollars to go around less global trade is able to function less goods and services produced all around.
In a globalized system if one country isn’t able to produce as much (think China), the effects ripple to all countries like dominos. Causing secondary and tertiary effects further down the chain.
People outside the US love it, so no issue with devaluing the USD if we print an extra couple of trillions.
The main issue is that the global supply chain cannot literally serve richer American consumers, so the cost of supply increases and everyone (in the US and out) faces inflation pressure.
People outside the US loved it. Recent moves by Japan, Switzerland and some others in the (quickly-losing-liquidity) Treasury Market suggest that era is coming to a close.
True, but if you ask a genuine question and get downvotes, what are you supposed to infer from that?
Yes it may be bad form to mention your own score, but it's equally bad form to downvote for asking a question, or read into a question something that wasn't said which may require a down vote.
Why don't you take the time to answer the parents question rather than downvote them for querying why their question got downvotes?
If there's anywhere that appreciates the gaining of knowledge on the internet, surely hn must be one of the top candidates. So why downvote questions? And yes it's happened to me multiple times, and it's bloody annoying. Doubly so because you know if you try to clarify you'll get someone downvoting you because why? I don't know. Because that would be 'bad form'? BS.
Often I think it means that you asked a painful question. Don't think that downvotes are always bad, they merely just tell what is popular, just like in reddit.
Because the world has an anemic shortage of dollars.
The reason for that is post 2008 banks have become much more risk averse (seeing what happened to Lehman et al) and they are mostly the conduit through which broad currency is generated. That mechanism is mostly broken unless you’re an ultra rich company like Apple or Google.
So today to make a bank create USD for you you’d be required to have the best of the best collateral namely sovereign bonds. As it stands the US hasn’t taken even close to enough debt and thus issued Treasuries to even come close to the shortage in dollars that banks’ risk aversion has created since 2008.
Typically exports are used to gather USD. It sounds like Ghana has gold. Presumably people want their gold? They could sell the gold for USD, then use that to purchase the oil.
But using the gold for currency does sound like it could be more efficient, cutting out the middleman.
Note: normally countries maitain a float of foreign reserves for this, and I'm guessing this stash of economic lubrication has run a business dry for Ghana and they don't have the luxury of rebuilding their reserves, and hoping to use gold as a more immediate solution.
If you’re referring to the paper USD is printed on, it’s cotton rather than paper.
But even if there was a shortage, I doubt that on a country level USD (or any currency, for that matter) is bought in physical form - it’s just credited to the country’s bank account.
Linen comes from the flax plant and cotton comes from the cotton plant.
Linen versus cotton have a great history. Linen was used on WW1 era airplanes as outer skins because it didn’t run like cotton canvas when the material was shot through.
This sibling comment has the answer to that: it helps disguise the margin the government makes on gold it compulsory purchases from local miners in local currency
https://news.ycombinator.com/item?id=33742853
Also helps to look like you're doing something about a debt crisis even if the net effect is minimal or negative...
It shouldn't be hard for the miners to guess that margin, given that the market price of gold can be looked up.
Gold is, for all intents and purposes, usable as money, at least between sophisticated parties such as governments. It lacks some of the features of USD, but if Ghana is out of USD, then those features don't matter to them.
Oh, the mining company management will know what the spot price in dollars is and if the spot price offered in cedis doesn't seem fair. But "we've found a cunning new way to exploit our gold reserves" is a better PR line to the general public than "we're fudging the figures a bit in our favoir*
Look at HN's somewhat sophisticated audience heralding it as a power move against the dollar rather than a country scrabbling around for ways to dig itself out of a financial hole caused in part because the dollar holds value much better than their own currency.
> Necessity will force countries to find USD alternatives.
You're misunderstanding the fundamental problem. It's not about a "shortage" of USD for Ghana, where they ran out of USD suppliers and no one is willing to sell them USD so they will need to switch to RUB.
You get USD by exporting stuff and you can import stuff when you spend USD. The fundamental problem for Ghana is that they need to import valuable stuff but they are running out of valuable stuff to export in exchange, hence their USD reserves are dwindling. You can't solve that problem by changing the currency. If someone is to give you their RUB, they'll still want valuable stuff in exchange.
I'm not intimately familiar with Ghana's economy. I was just pointing out that this is a trade balance problem not a "we can't get our hands on USD" problem. Maybe they haven't exported gold before and now, by exporting, they'll be able to fill in the gap. Or maybe the gap is so big they'll eventually run out of gold AND USD. Either way, it has nothing to do with the USD status as a reserve currency.
Add to this that the US Federal government has conducted numerous hot wars to protect USD dominance. Remember when Saddam Hussain and then Kadafi in Libya each started selling dollars for euros? War.
https://bitcoinmagazine.com/markets/petrodollar-deep-dive-wi...
But now the US is even destroying confidence in the dollar, through its confiscation of the Afgan central bank reserves (which included private citizens' deposit accounts) and distributing the money to families of Sept 11th victims; or freezing the Russian central bank reserves, even though the international settlement system was meant to be apolitical.
> even though the international settlement system was meant to be apolitical
“Apolitical” does not mean “usable by any party for any transaction.” SWIFT policy prohibits using its system in support of illegal activity [0], and the settlement system has been denied to sanctioned countries before [1].
Per the linked document: “SWIFT has a history of cooperating in good faith with authorities such as central banks, treasury departments, law enforcement agencies and appropriate international organisations, such as the Financial Action Task Force ( FATF*), in their efforts to combat abuse of the financial system for illegal activities.”
You are being heavily downvoted and you are closer to truth than anyone else. The afghan and russia fiasco has proven that USD floor can be yanked at anytime and most countries are desperate to get out of USD trades.
If BRICS launches their own basket of currency that will be the first major salvo at USD.
The further a society drifts from truth, the more they will hate those who speak it.
> Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017
This seems like the core of the story. Nearly 6 years after that incident, Ghana has been unable to repair the factory and refine it's own oil. My assumption is the tale behind that is tragic and timeless corruption.
Honest question: Can someone explain me why using gold instead of dollars to buy oil isn't the same as sell gold for dollars and use those dollars to buy oil?
Only half of the story is quoted here. The other half is Ghana is forcing gold refiners to sell 20% to the Ghanan central bank in “cedis at spot prices with no discounts”[1]. So they are minting cedis to buy gold, then trade that gold for oil instead of dollars. If the trade was instead to sell for dollars, it’s more politically obvious that the policy is a tax on gold miners and refiners.
1. Because, realistically, you have to hold relatively large amounts of USD. Transactions take time, they cost money, they're volatile, US currency markets might be 12 time zones away -> Reserves aren't just economic insurance for bad weather, they're also buffers.
The big difference:
2. Since you need large reserves (see 1), why hold USD and see it inflate away? No one holds USD. What they hold and trade are treasuries. The return is small, but if you have 10 billion in reserves, 100 million isn't spare change This is the real lynchpin:
- the massive market for treasuries significantly lowers the cost of the US' deficit. The US can debt finance itself artificially lowering taxes or inflation.
- To maintain this position, "dollars" have to available -> the US must run a deficit. If there were no more deficits, the debt would wither, there would be a global monetary contraction.
- Effectively this is a way of exporting inflation: the treasury issues debt -to finance government -> the t-bills are treated as equal to USD -> the excess currency is soaked up by 8 billion people instead of 330 million
- unlike cash, the treasury can wake up one day and wipe (I mean "freeze") your account if you've been naughty. Imagine PayPal writ large.
In the short run it works great for the US, but in the long run it makes exports more expensive therefore eroding US industry. Short term gain for long term pain? Politicians love it!
Because there are no dollars involved. If they do as you suggest, at the start:
A holds gold.
B holds dollars.
C holds oil.
A trades B, gold for dollars. A holds dollars, B holds gold.
A trades C, dollars for oil. A holds oil, C holds dollars.
After your suggested trade result:
A holds oil.
B holds gold.
C holds dollars.
If there is no "middle man", party A gets oil, party C gets gold. Party B keeps their dollars. End result:
A holds oil.
B holds dollars.
C holds gold.
Assuming "B" is USA, USA doesn't get to export its inflation/funding for stimulus checks/student debt/pension crisis/(or in trump era - a wall that does nothing) away to "C", whoever that ends up being, meanwhile, Ghana gets the oil it wants, and "C" gets currency without having to pay for the choices of politicians they have no control over.
The US export of inflation via engineered demand for petrodollars (and one could say enforcement via aircraft carrier groups) is an under appreciated effect.
It is literally the most controversial concept in today's geopolitics. Study politics science in Dover - it is a conspiracy theory. Study PS in Calais - it is the exorbitant privilege and a cornerstone of global injustice. And it is not like France and the empire are rivals.
Regarding France, actually they play this game too. Check out the West/Central African CFA franc [2]. These currencies are pegged to 1/100 French franc, which currently about 1/656 euros. Many former French colonies are required to use the CFA franc, minted by France, and required to keep 85% in reserve in French banks, including during times of hardship, but they can always barrow against their reserve and pay France the interest if they need to. In 2019 France has promised to drop it and let the africans have their own called eco [2] by 2027, but, also it keeps getting postponed and was supposed to already happen by 2020, so who knows. Trying to go against france can result in an assassination or coup, or other creative acts by france (see Opération Persil [3]).
For two parties to transact in dollars they need either to physically hold large amounts of dollars. Or have access to some shared ledger that is accounting system where transactions can happen.
Say A, B, C account. A sells gold and get dollars from account B to account A. And now they can buy oil from owner of account C.
But who owns and runs these accounts or the transactions between them? One option is SWIFT system. Which Russia got excluded in some capacity from. As such it is clear that system cannot be trusted. Value of dollars there are very unlikely to be good for long term. And same applies to any accounts in banks in western influence sphere.
Thus directly transacting is better option in long run. For any country that wants to keep their economy stable.
> One option is SWIFT system. Which Russia got excluded in some capacity from. As such it is clear that system cannot be trusted.
That is quite a leap. Russia was also excluded from the NY stock exchange due to the ongoing sanctions; does that mean we can no longer trust stocks bought and sold there?
Yes, it does at least for those of us who are not US citizens. You can never be sure that one day the US won't sanction your home country in the same way, for some weird reason. Of course for some countries the risk is greater than for others, but still, it's a good reason to avoid US financial markets.
All financial markets participate in sanctions, so taking this absolute stance would limit the negotiable instruments available to you to briefcases full of gold or cryptocurrency.
You're using the law of averages. Not all financial markets participate in the same sanctions to the same extent at the same time, which means that the decision about where to invest can be important.
> taking this absolute stance
You're the one characterizing this as an absolute stance, rather than a practical stance related to the current condition of the markets of the most powerful country that demands the most sanctions.
No, GP claimed that enforcement of any sanctions in international transfers means that the whole system can’t be trusted.
> You're the one characterizing this as an absolute stance, rather than a practical stance related to the current condition of the markets of the most powerful country that demands the most sanctions.
The original argument I was responding to claimed that one could not use financial institutions that participate in SWIFT. If you want to claim that’s a moderate, reasoned position, then ¯\_(ツ)_/¯
Putting your entire economy at risk of being turned off advisory due to unknown future political disputes is a risk to the sovereignty of nearly every country in the world. Many countries are now looking for alternatives after the neutrality of swift/the dollar was eliminated.
I don't think it is different, apart from any issues with timing of the buying and selling and price changes in between. I think this is more a question that the government doesn't have the gold and buying it from the miners is how they will get it. I don't think they are giving the miners a bad deal, other than forcing them to accept Cedis. I believe the net effect is that fewer Cedis are put on the market for dollars and this prevents a price drop in Cedis.
I'm not sure why this was downvoted. I did leave out one thing - I think the Ghana government is making a statement that they don't want to transact in dollars. That is an important difference, but it is not related to the monetary dynamics.
Because of changes of the relative values between gold, dollars and oil over time has implications. If they have a more reliable source of gold than of dollars then it may make sense from their point of view. It is of course up to the oil producers if they want to be on the other side of that risk.
Decoupling from the western financial system and having a higher level of resilience from sanctions. You never know if the US will decide tomorrow you're not behaving as expected under the internal rules-based order.
Countries don't buy oil (or anything else) with a suitcase or few stuffed with $100 bills.* Instead, they have a really big bank move US dollars through the international banking system electronically.
Any really big bank that wants to keep its US-issued "Allowed to Handle US Dollars Electronically" License has got to follow a bunch of US-made rules. Which rules doubtless permit the US to make & enforce a very long blacklist, of various countries / organizations / people who the US doesn't want banks to work with.
(That said, I see no reason to suspect that Ghana has any interest in "Decoupling from the western financial system", as elzbardico put it. Though obviously the subjects of oil, gold, dollars, etc. are pushing a whole lotta people's emotional buttons in this item.)
*Yes, there are exceptions - usually involving sanctions-busting by folks who don't care about drawing hostile attention from the US.
The permission to use SWIFT, which has been recently revoked for Russia. And contagious sanctions designed to make it difficult to trade with non-sanctioned companies and countries.
bell-cot is simplifying but is basically describing correspondent banking. Banks in other countries need correspondent banking relationships with US banks in order to work with dollars. Banks in countries on the OFAC list can't get these relationships. Even banks in "high risk" areas like the Caribbean are getting their correspondent relationships cut off because US banks are worried about getting fined if the banks they correspond with doesn't have strict AML procedures. See https://www.atlanticcouncil.org/wp-content/uploads/2022/02/F...
I don't think banks need a correspondent bank in the US to work with US dollars. There are clearing houses, such as USD-CHATS in Hong Kong, that will settle transactions in US dollars.
There is of course no US-issued license to handle dollars as such, but the US has several levers that they can use to make it as difficult as possible. SWIFT is a Belgian company, but it can and has been successfully pressured by the US and its allies to disconnect users from the network. SWIFT is of course just a messaging system, but those users now have to use other means to transfer money, which is likely slower and more expensive for everyone involved.
Because any international bank that has business in the US or does business with other banks who have business in the US would avoid dealing with a sanctioned entity as they could become "impure" too, in sort of a Leviticusian sense of the world.
Do you mean this in some metaphysical sense? Because you can exchange USD for gods or services outside the US without the US government getting involved.
There is essentially loans of USD that happen on balance sheets that is paper between institutions outside of USA. So such trading and settlement is possible. But if there is block of actually getting this money in real dollars, that is rather pointless even more monopoly money.
This is absolute nonsense. International trade is predominantly conducted in US dollars, therefore it's patently obvious that it must possible to transfer dollars abroad.
Transactions in Ghana cannot directly be in dollars, so when a USD price is quoted for a foreign sale behind the scenes what happens is cedis are brought in, converted to dollars, then given to the foreign party.
This creates a demand for dollars in Ghana, that puts downward pressure on the cedis.
The first is a direct transaction, the other props up the US economy by creating demand for dollars and a taxable point for US companies. Ghana should only trade in gold...adding useless American middlemen to these transactions is idiotic.
For folks getting really excited here about the US, the US Dollar, etc. - imagine that, for some weird reason, the world's reserve currency was the Tongan paʻanga ( https://en.wikipedia.org/wiki/Tongan_pa%CA%BBanga ). And that (similar to what the the story notes, for USD) Ghana's reserve of paʻanga was running low, so they were looking to buy oil with gold instead of paʻanga, to (as others have noted) put a smokescreen in front of a big new tax on local gold producers in Ghana. (Gold was ~50% of Ghana's exports in 2019, so there's plenty of income to tax there.)
How differently would you view this situation and story, if "US" and "USD" were replaced with (presumably emotionally neutral) "Tonga" and "paʻanga"?
For people saying that this is a sign of the dollar dominance ending consider this.
Gold is valued in dollars.
Oil is valued in dollars.
Any gold for oil exchange will be decided by the going dollar rate of each.
Counter parties and middlemen assisting this trade will be hedging their positions with dollar settled derivatives traded on deep and liquid dollar markets.
Gold isn’t valued in dollars. You can sell gold for any currency.
Oil is primarily transacted with dollars because it’s the worlds reserve currency. But if that were to change to whatever, you can still sell your oil and gold for whatever the new dominant currency is. Meanwhile your dollar is (presumably in this case) worth way less in terms of buying power than when you first bought it.
You can always barter anything for anything else, but how do you decide the rate to barter at? It’s determined by the rate for the most liquid markets for the two sides, because the price of an asset in the most liquid market is the price all other markets will follow. There just aren’t gold based markets that are even remotely comparable to usd ones, so the ratio of gold to oil is set by their respective rates in usd.
To see an actual switch from usd to gold for valuing oil, you’d need to see the market liquidity migrate from usd/oil pairs to gold/oil pairs. Ghana making a political statement isn’t that.
>> Gold is valued in dollars. Oil is valued in dollars.
If a long term contract is signed it protects you from dollar's inflation/volatility as the contract used gold as currency. I think this is important as tomorrow Fed's decision is no longer that important for your energy costs.
The more important part is that if enough contracts are signed in gold(highly unlikely given U.S's oil exports) then the dollar is no longer relevant to the oil price.
Most dollars are created by offshore banks and are not backed by deposits at the federal reserve. The federal reserve only indirectly affects the value of dollars through manipulating inflation expectations. If people think the fed is easing, they buy assets which pumps the collateral of offshore banks which then have larger balance sheet capacity to issue new dollars backed by that collateral.
So even if you are signing contracts in gold/oil pairs, effects of fed decisions can impact your trade in ways that you are protected from in usd/oil pairs as gold is usually viewed as a safety asset - so when animal spirits take off due to fed statements gold can go down while oil takes off. This has in fact happened several times over the last decades.
> I think this is important as tomorrow Fed's decision is no longer that important for your energy costs.
The Fed decision wasn't important to energy costs anyway, though. Oil is priced in dollars, but the price changes minute-to-minute. Whatever the Fed decides about the value of a dollar, the oil price will reflect that.
If you're involved in a long-term contract involving the exchange of oil for dollars, then the Fed's decision can have a big impact on you. But that's true of all long-term contracts involving dollars; there's nothing special about the other side of the contract being oil.
>> The Fed decision wasn't important to energy costs anyway, though.
Of course it was. Rate hiking makes the dollar more expensive for anyone buying dollars(to pay for the oil). Were they dealing with gold they would not have this issue. Not to mention if the buyer is a gold producer.
The Fed has a huge influence of course, since they are the largest issuer and politically close to the authority that determines what a dollar is. But Dollars are also created by other banks on their balance sheets, many of them outside the US.
What are you saying? Does that have anything to do with the decision on interest rates? How does the interest rate decision affect the real price of oil?
Exactly... People confuse eurodollar market with dollars...
What Ghana is doing is a symptom of global liquidity crisis not a dollar crisis... Ghana cannot print dollars... It is short dollars and would rather have more then less of dollars. So this situation makes dollar more wanted not less.
Michaell Howell is an expert on Global Liquidity and does good job at explaing it.
You're indeed 100% right. I think a lot of HN programmer bros miss this point ... that being forced to settle in dollars is not a formality ... it's the whole point!
It's obviously possible to buy gold in non-USD currencies. So I think the gist of your comment applies to the dominance the US has over oil markets. So while the "petrodollar" era is still ongoing but its day seem numbered, e.g. by pushing Russia to seek other export markets besides the West, by the increasingly cool perception of the US by OPEC nations [1], etc.
Not just oil markets- usd dominates gold markets as well. Russia will be selling oil to other countries at a “discount” but to what? The price of oil in usd which is why some counterparties consider the trade. If usd was losing dominance, countries would be offering a premium to purchase oil for something other than usd.
Interesting the pressure is increasing.
More and more countries questioning why they need to base their foreign transaction on the US Dollar.
Could this mounting unrest be as a result of the seeming inability of the US Federal bank in checking inflation of the US Dollar.
Also, some of these Nations can no longer determine what benefit it is to them is using the US Dollar as their reserve currency and trading currency.
Some nations might have alternative properties/currencies that would favour their external trade but yet they are stock with the Dollar and must defer to the US in all that concerns it.
I would really love someone more knowledgeable to make a prediction as to where all these could be going.
Do you see a country like Saudi going off the USD?
Do you think the West-African countries relying on CFA will turn away from that any time soon?
Is there a case to be made why these nations should maintain the status quo?
> Could this mounting unrest be as a result of the seeming inability of the US Federal bank in checking inflation of the US Dollar.
This is completely backwards. The problem right now is that the dollar is too strong, meaning expensive wrt other currencies. In this context, inflation of the USD supply, leading to devaluation of the USD would actually help other countries that are suffering from the strong dollar.
I'm not saying it would be good for the US, but it certainly would be good for pretty much everybody else.
And there in lies the rub. To keep countries placated we need to create more debt, a metric ton of more debt and hence more broad currency. But doing so at the moment is political suicide as is proven by the left's efforts (deficit spending blah blah etc).
Triffin paradox predicted in the 60s at it's full glory.
It's also worth noting that at the moment both the Fed and the Treasury (obv) are mandated to be operating with an inward looking view only. Meaning we run a global reserve currency with no 'department' in charge of the global part.
I don't think this should be downvoted. I believe this is all 100% correct.
Maybe because of the "left's deficit spending" part, which is not wrong, but ignores the right's historical deficit spending (e.g. TCJA). Or perhaps the "political suicide" part is misinterpreted: It would be political suicide for a politician to interfere with Fed policy and undercut their blunt force effort to reduce domestic inflation.
But any way you slice it, right now the Triffin dilemma is indeed exactly what we're experiencing.
Why? The eurozone can’t hold itself together, China is a house of cards with bad planned economy failures, the uk isn’t worth mentioning any more, and everywhere else either has unstable economies or economies based on volatile or limited lifetime commodities.
The dollar is the global reserve currency because the US has centuries of reasonable behavior and military and natural resources that guarantee long term stability. There isn’t a better option unless you’re playing temporary political games or if your macroeconomic situation is so bad you can’t play the game normally.
I think this take is somewhat over-reacting. I'm pretty sure you'll find that the price they agreed is really in USD, and only the medium of exchange is gold (even if the paperwork or agreement doesn't even reference USD). So really they are paying X USD's worth of gold - with both oil and gold price being fixed in USD somewhere abroad. USD is so incredibly ubiquitous, it won't easily go away.
Reserves are a little different, but even then, whenever something bad happens, the dollar strengthens as investors flock to it. When the 2008 crisis happened (and it was US-centric!) US and the dollar were still the safe haven everyone escaped to. Not the Rouble, not the Yuan, not so much EUR or CHF or, from memory, gold.
So we'll see people avoid the USD as a medium of exchange, maybe, even if the prices are fixed on USD-denominated prices. But also remember, gold is not a great medium of exchange. Will Ghana ship physical gold around the world (risky and expensive)? Or will they sign a piece of paper saying "gold held by in a safe by someone else and owned by me is now owned by someone else" - in which case there is similar counterparty risk, except perhaps not against the US government. But if you think the US is an evil octopus with long tentacles, surely they could get their hands on this gold. Where will this haven safe from US interference be?
If anything, I can more easily believe an alternative economy based on crypto. It's actually happening and working well, for all sorts of shady or illicit activity.
> Or will they sign a piece of paper saying "gold held by in a safe by someone else and owned by me is now owned by someone else" - in which case there is similar counterparty risk, except perhaps not against the US government.
The US holds a quarter of all the known gold reserves in the world, and has more gold than the next three countries combined, so there's a decent chance that Ghana's gold is already in the US.
I think it’s more an issue of other countries seeing that the U.S. can just confiscate their dollar reserves if the US doesn’t agree with their sovereign actions. Those countries are choosing to divest from the mono world order which is crumbling. For a long but instructive discussion on current economic events check out this interview.
“Mono world order” is the appropriate term when the US can go around conquering other people in their perceived self interest (Iraq, Afghanistan) but says nobody else can.
If you want the real-politick answer then “yeah, absolutely”. What’s your point?
But the U.S empire has been pretty amazing for a pretty amazing number of people across the globe, and it is shockingly easy to stay on the good side of U.S. foreign policy.
Be reasonably democratic, don’t genocide undesirable elements of your population, don’t pick on other reasonably democratic countries, don’t threaten world trade and resources, don’t steal all the Americans’ stuff by suddenly socializing industries in your country, don’t fund terrorist activity against them.
Yeah you can find exceptions to every one of those listed items - welcome to global politics.
> But the U.S empire has been pretty amazing for a pretty amazing number of people across the globe, and it is shockingly easy to stay on the good side of U.S. foreign policy.
Hell no
> Be reasonably democratic, don’t genocide undesirable elements of your population, don’t pick on other reasonably democratic countries, don’t threaten world trade and resources, don’t steal all the Americans’ stuff by suddenly socializing industries in your country, don’t fund terrorist activity against them.
I'm sure Iraq and Palestine would agree.
And of course the country that did very well to the world, also wanted to illegally control the worlds population for its own interest.
Russia went from being the “evil empire” to having Starbucks and McDonalds within ten years of ticking just a couple of those boxes. If your nation is still on the international naughty list it’s because of your behavior.
Americans would much rather be selling you cheeseburgers and blue jeans and Avengers movies than fighting with you.
Yes, it’s true Americans are very easy to get along with. All you have to do is depose your leaders, change your entire economic system and dismantle your military capacity for force projection just like the USSR did as it broke down.
US can confiscate your dollar reserves if you keep those dollars in the US, just as they can confiscate your gold reserves if you keep them in the Fort Knox.
No, I'm refering to only country in XXI century that literally decided to annex other country's territory - two times. All that while losing war, and deciding to unleash hell on civilians they claim to be "their kin".
At least we can cheer our hearts looking at fields littered with dead russian soldiers and see that there are countries of the world that won't leave those who need help alone.
There are two fundamental differences. One is that Russian invasion and genocide is happening now, not couple of decades ago. Second is that the fact we can’t punish US doesn’t mean we shouldn’t punish other offenders.
I predict we'll see blocks forming up again, something like:
- West (US+EU)
- East (China+Russia)
- India (India, Sri Lanka, Himalayan States, South China states)
- Middle (Middle East+North Africa)
- Latam (Central + South American States)
One wild card IMO would be the rise of the Indian sphere of influence. I'll leave some room for India's remarkable ability to snatch defeat form the jaws of victory. If they don't f this up, they have UUUGE tailwinds going for them.
Middle east is overrated IMO, its like an oasis with oil instead of water. When the oil money runs out, not gonna be fun any more.
Latam is probs the biggest wildcard, even bigger than India. They don't need a lot of things to be right to wildly outperform as a block. Just like the US, they are protected by two oceans so they can choose to not involve themselves in stuff.
Africa is highly overrated IMO, the entire continent is cursed in multiple ways. If u compare africa to another post colonial continent like Latam, africa is in a place where they need to get so many things right to just survive, let alone to catch up.
I agree with the general premise of your comment, that this is a small sign of the deglobalization which is _already_ under way.
But, what are the UUUGE tailwinds benefiting India? India, even more so than China, seems likely to "get old before it gets rich." Its TFR is already below replacement and falling rapidly.
I strongly disagree with on demographics, it looks really good for most of the century. Everything including TFR, young population, working population and even elderly populations looks REALLY good. Especially relative to China.
Demographics aside, India is a perfect replacement for China in high tech manufacturing. Stability is a huge factor here giving India a massive edge compared to south east asian alternatives.
On top of that, you have young highly skilled & literate workforce. A largely discounted wealthy diaspora investing back into the motherland. Huge pool of software talent.
IMO it makes for a huge Shenzhen like moment for India. Again, I leave a massive amount of room for India to duck this up but it is India's opportunity to fuck up. The winds have shifted heavily in their favour.
If PRC's official population is as low as Yi thinks, then her per capita GDP is already "secretly" high income at ~14000 USD. She would technically already have gotten rich before old. CCP has incentive to overreport population / underreport GDP to keep "developing" country status.
>India ones are still over replaceability
Indian overall TFR this year is ~2.0, but more important to break down Indian TFR by state, which will reveal all the high HDI/developmed/educated regions are ~1.6 and trending down, while the underdeveloped and poorly educated regions are still >2. The TLDR is India's demographic divident in her high potential regions is basically over, while low potential regions are generating excess bodies that will have little opportunity develop. Recipe for disaster in democracy, and hence:
> India, even more so than China, seems likely to "get old before it gets rich."
Of course India is going to grow, by a lot, but much of her high potential demographic divident is already tapped out while stuck in low middle income unless the system get it's shit together.
People that keep bunching Russia with China are deluding themselves that Russia is anywhere on China's radar except as a source of cheap resources (gas, oil, wood)
Russia is a UUUUGE strategic geopolitical ally for China.
In a de-globilised world split into spheres of influence, Russia would be a foothold into Europe.
Cheap resources cant be discounted, China has duck all for resources. It imports everything (raw nat resources) and its current source Australia is not an ally.
Unlikely. Ghana happens to be a gold producer; they may see this as a better deal for them, and may get some other benefit from a country like China for rattling the cage.
What’s more likely is that Ghana is using monetary policy as a cover for acquiring locally produced gold at a lower price and selling it abroad for resources to make up for trade deficits.
If you look at the actual numbers, you'll find that USD dominance is still unchallenged.
BUT, there is definitely way more chatter about alternative payment options, including from well-placed government sources and central banks in important non-west allied countries.
It's now a matter of "when", not "if" when an alternative currency pops up, maybe a BRICS currency.
I believe the war in Ukraine has permanently damaged the USD's dominance in the medium to long term.
The use of a supposedly neutral financial network (SWIFT) as a sanction weapon will make other nations who aren't on good terms with the U.S. and the West (and not just the "usual suspects" but many nations in Africa and South America too) seeking alternatives.
As previously mentioned, Bitcoin is a viable alternative. But there may be others. In any case I see nations ganging up to create an alternative to the SWIFT network, potentially undermining its usefulness.
The SWIFT network has been used that way against Iran in 2012 though. These sanctions have been lifted in 2016 and this usage has probably disappeared from popular awareness because of that.
Why would countries that don't plan to commit genocide need to be bothered by SWIFT cutting off countries that commit genocide? In fact, this is a good thing for countries that don't want to be genocided as it provides an additional incentive against genocide.
Because who knows what’s on the list of excommunicatable offenses. Today it’s war of aggression, 40 years later on not enough diversity and inclusion could qualify, or the eagle knows what else. Hope for the best prepare for the worst.
> "No one knows with certainty how many people have been killed and wounded in Iraq since the 2003 United States invasion. However, we know that between 184,382 and 207,156 civilians have died from direct war related violence caused by the U.S" [0]
Is it only a genocide if a non-western ally does it?
I'm sure you were outside the embassy calling for Indonesia to be added to the OFAC list when they started massacring East Timorans. Or when Turkey invaded North Cyprus.
> More and more countries questioning why they need to base their foreign transaction on the US Dollar.
For spot transactions, it doesn't really matter beyond giving the buyer and seller a common language to negotiate in. For contracts sometime in the future, if you're Argentina, no one wants to bet on where the Peso will be in 6 months.
Saudi Arabia isn't going off the USD. That would seriously undermine their relation with the U.S. and could even have them branded an antagonistic nation.
The dominance of the USD is EXTREMELY important to the U.S. and I can assure you that Washington is even willing to wage war over it.
But I believe the ball has already started rolling with Bitcoin and Russia's demand for payment in Rubles.
FTX's collapse has left its mark, but this will only be temporary.
Bitcoin is already demonstrating its usefulness by helping countries evade economic sanctions. There are a truckload of nations who're fed up with the West's financial dominance and are actively seeking alternatives.
> FTX's collapse has left its mark, but this will only be temporary
Bitcoin was down well in advance of the FTX collapse. The reason it is down is because it's a Ponzi scheme, and an unconscionable waste of resources so that cryptobros can LARP at being a libertarian.
If by "stonks" you mean meme stocks and SPACs, then practically yes. They both rely on the people coming afterwards being a bigger idiot onto whom poor value instruments can be offloaded.
Common ETFs usually trade at 20x+ their actual output. When people ask me for investment advice, I tell them that I am good at predicting this fiction and no I won't subject anyone else to it because the whole thing is 50% a complete insider trading scam. My point is to call one thing a scam and pretend the other thing is legit is a joke.
To me "stonks" is a name to belittle stocks. Disclosure: I am heavily invested in both space cash and stonks.
And it is going to fall more after the rug pull about to happen.
Still, even in its worst, it is doing well against TRL, ARP, etc. And those are currencies used by many tens of millions.
Its definitely not a lack of confidence in USD or the feds. Relative to pretty much every noteworthy alternative, the feds have handled things a lot better.
- EU royally f'd with their stimulus & rates. Mind you, they were in a very precarious position to start with.
- China has proven themselves to be a house of cards with zero covid, massive public/corporate debt bubbles and Ji becoming god emperor.
- Russia is a glorified gas station with an economy the size of florida.
The reason for Ghana's action, Saudi looking to end petro dollar, China+Russia looking to form a block etc: US deep state ducking up big time.
The weaponised the dollar.. They've been ramping this up big time during the past few decades but the Ukraine War was a UUUUGE reveal the cards moment.
During the last 2 years, Russia was filling up their coffers with high oil prices. The US turned these foreign reserves into worthless numbers on a screen overnight with the press of a few buttons.
Now pretty much every country is looking at each other like "oh shit".
The petrodollar is a really weird thing. According to its critics, it is a global monopoly on violence and pure extortion, to its implementors - merely a conspiracy theory. Please, before you clinge to the conspiracy theory label, check how many great people such as de Gaulle have whined against it and what is Privilege l'exorbitant in French political science.
In reality, global trade is not in USD purely because it is backed by carriers and they can invade anyone, but because this navy also protects shipping lanes and offers international rule of law. Remember when the US took a break in the gulf of Aden and it took us Europeans (+Russia and token help from US!!) years to agree and secure it. So, things are not black and white.
Anyway, this system is collapsing from within and will be replacing. The success of the S.Arabia pivot is going to merely decide if it happens in 10 or 20 years time. Btw does anyone know how did the MBS-Xi meating go?
> Petrodollar
Is rather remnant of the past. FYI I think half of world forex reserve is held in the 5 entities in East Asia (CN, JP,KR,TW,HK). Whatever dollar the Petrostate get (sans Russia) they recycled
it to various goods and services mostly sourced from East Asia.
> Btw does anyone know how did the MBS-Xi meating go?
Will commence in December, previously rumored didn't happen
The exorbitant privilege thing is kind of strange when countries voluntarily demand more dollars or even borrow dollars. The "privilege" is only exorbitant if you are the only survivor of a world war.
I'm only at the level of guessing for topics like this, but my guess is that a chain reaction is more likely to see a switch from USD to Renminbi than a switch to gold (or Euros).
China because of the potential assuming similar GDP/capita as the current USA.
Not soon because I expect as a prerequisite for change being the new winner's GDP to be dominant rather than just joint top 3 in a ranking system that changes their ordering depending on what you value most.
Not gold because the justifications given for why we all stopped using the gold standard in the fist place, still seem to apply.
China might be able to force a switch to the Renminbi simply by virtue of their GDP. First as a medium of exchange (which they're doing), then as a reserve currency.
But having people willingly adopt it?
If people are unsatisfied with the USD in specific ways, how would those specific ways be better using the RMB?
It'd be pretty shortsighted to complain about US financial manipulation or use of currency to further political goals... and then jump in mainland China's pool!
Do you think GDP is the critical factor for determining a global reserve currency?
IMO, respect for property ownership rights, legal/judicial recourse, ubiquity of US banks, and political stability are large contributing factors that few other countries can compete with. China has a pretty checkered past regarding ownership rights for citizens who are critical of its leadership.
Property rights and such are secondary. The primary issue is: who has the power? Right now the answer to that question is "US", but since China is catching up on GDP, and, unlike US, actually manufactures things. If China decides that they want payments for all the goods that they export to be in RMB then there's nothing the rest of the world can do about it, except stop all the imports from China (which would take decades, because they have to learn to manufacture all those goods themselves). Once most of your imports come from China instead of the US it does make sense to use Chinese currency as the reserve currency, since you are going to need a lot of RMB to pay for your imports anyway.
China can't tank imports until they finish pivoting to their own internal, consumptive middle class. And probably not even then.
The plan the international community hoped for is actually somewhat working, the timeline for China's giant population to metabolize it was just wrong.
Large Chinese middle class = power = political risk to disrupting the economy = incentive not to rock the international trade boat's status quo.
The CCP is already seeing with the anger over zero-COVID that {middle class life} >> {good of the Party} for most of the population.
Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent. Which doesn't bode well for Chinese citizens...
>"Unfortunately, China probably also learned from the USSR that the entire charade only collapses when you blink and refrain from using the military to crush civilian dissent."
Baloney. USSR did not crush because of "civilian dissent". All the changes were driven from the top.
Berlin Wall did not cause the collapse of the USSR, it was one of the results of generally declining empire and change of it policies that again came from the top. Gorby and Reagan had decided to be "friends"
Saudi Arabia (to pick a major oil exporter) imports about 20% of its goods from China. But it also imports vastly more from regional partners and the US and Europe, not to mention that it depends on the US to secure all of its oil exports to China across thousands of miles of vulnerable ocean routes.
I suspect it's a prerequisite, though perhaps not the only one.
I also suspect that political stability is more likely to favour China than the USA over the next few decades — it is very human for success to be followed by the assumption of indefatigability and that to be followed by fighting over who leads the nation, rather than continuing to focus on what actually made a nation dominant and how to keep it that way. The UK lost its literal empire that way; the Soviet Union took 50 years to go from agrarian to space, but by the end they had become at least as out of touch with their own people as the last Tsar had been; I think the US may lose its metaphorical empire similarly to the UK's actual empire, though the group deciding to call itself "The Tea Party" at least implies the possibility of it failing, with analogy to the USSR, in the same way it was formed.
The US may have backslid a bit, but it still leads the world in property ownership rights and fairness of the legal system. When a foreign corporation takes a domestic corporation to court, which jurisdiction will they get the fairest shake? What happens to billionaires when they speak critically of the Chinese government? Despite claims to the contrary, freedom of speech and rights of the property ownership are still vigilantly protected in the US.
Certainly; this is a hypothetical about a future where both China improves and the USA continues downhill. But even then, don't image a static world, imagine the difference (on the world stage, not in absolute terms) between the UK in 1922 and 1950, and assume the USA might fall proportionally as far by 2050. Or the growth of the Soviet Union in the same period, and apply that to China by 2050.
The UK lost its literal empire because of the costs of two wars that devastated the continent - not domestic politics. On the other hand, the PRC is turning back on itself. It has been unable to produce a successor to Xi - making it very hard to change direction. Under Xi, it has actively cultivated hostility against itself and only manages to exercise influence others through force. It also has much less stable demographics. It is not reasonable to expect China to collapse and it would be fearful if they did, but they are likely to have a much less stable period ahead as they come to terms with their situation.
As for the US, they're not alone in this but they are now in a situation where younger voters with a longer time horizon are able to win majorities against older voters with shorter time horizons. This means they're entering into a period of creativity. It is not clear what the outcome will be. But it is clear that we cannot take for granted that pursuit of an unreformed ideology will distract them from the compromise and teamwork that brought them to strength.
In both cases, I think you're extrapolating from recent politics. But both countries are in different turns of the demographic wheel, and have different ways of dealing with that. Democracy also tends to make turmoil more obvious to external observers, so it's easy to accidentally compare apples to oranges when you're looking at a democracy and an autocracy.
> The UK lost its literal empire because of the costs of two wars that devastated the continent - not domestic politics.
That’s the story the British like to tell themselves.
I don’t think it fits the counterexample that Germany was able to rebuild itself enough after the first to be a world-scale threat by the second (and might have won the second in the alternative timeline where they had not been so anti-communist to attempt to conquer the USSR before the UK, and possibly also in the hypothetical alternative timeline if they had not been anti-Semitic — even before all the horrors of Holocaust became known, they were bad enough to make a significant number of Jewish scientists run away, in particular the ones went to the USA and helped with the Manhattan Project); and again after WW2 and being divided by the Allies, that Germany went from having their industrial base punitively dismantled in 1949 to The Times referring to the its reconstruction as a Wirtschaftswunder by 1959. (Yes I do know they got help, but it’s important to also know why the UK didn’t get that help, and I think part of that is the USA while part is internal domestic UK politics).
It also doesn’t fit that the observation that empire, which was worldwide, had been bringing riches to the UK before the war. One thing that might have changed the cost/benefit ratios was all the locals finally getting their hands on sufficient firearms to make it expensive to suppress independence movements. Given what else the British government was busy doing with local industrial policy at that point, and the honours granted to those directly involved in war crimes during the Mau Mau uprising, I don’t think they were that self-aware. (Could also be that the USA was putting pressure on the old powers to drop their imperialism, but I don’t feel confident about the dynamic there given British cultural attitudes to the USA vary from it being “one of us, even if they don’t realise it” (no, I don’t get it either, but I’ve seen it) to “if they say jump, we ask how high”).
It also doesn’t fit that the Commonwealth’s GDP is now about $11 trillion, about 3 times the UK itself; although I would regard the end of Imperialism as a morally good thing and correct all by itself, I don’t think “money” is a reasonable justification for giving up on that potential. Morally, sure. Politically, it is “gave up an empire to gain a continent… hang on, why isn’t the continent doing what we say? That must mean they are dictating to us!”
Your argument leaves aside the fact that Germany lost the second world war and was absolutely devastated by it, and that a lot of their military power in that war came about at the expense of their citizens. It's also way too narrow: the resources the UK devoted to controlling its empire, couldn't be devoted to holding Germany down. The UK was never the sort of monopolar superpower that the US was 1989-2008 (the US very much learnt from the UK's more primitive form of partial dominance).
Moreover, even if any of your claims are true, it still doesn't show that they collapsed due to domestic politics. If they didn't have a goal of maintaining their global empire - and you seem to argue that they didn't - then it's not domestic politics but rather public opinion that led to the end of the empire. That is to say, it offers no real lessons for a country that wants to remain dominant. Maybe the US wants to leave its empire behind it, but if so you can only learn that if a country wants to leave its empire behind it, then it might succeed. So what? The British example in your presentation doesn't say anything about a country that wants to remain dominant. And it is completely one-sided, failing to account for domestic politics in China, which is in a far far worse situation than the US in terms of being able to gain/retain the (international) support needed for a dominant position.
> Politically, it is “gave up an empire to gain a continent… hang on, why isn’t the continent doing what we say? That must mean they are dictating to us!”
This is chronologically wrong. The British had already lost almost every bit of their empire, and certainly their imperial standing, before they tried to join the EEC. It cannot be maintained by anyone with even a milligram of dedication to the truth that they "gave up an empire to gain a continent". It's true that the price they had to join the EEC was to end the imperial preference, but they were poor, the sick man of Europe, and their ability to conduct internal imperial trade was dependent on the United States. Even their very best colonies in Australia and New Zealand, although still dependent on imperial trade, had turned and saw their future as key allies of the US - not dominions of the British Empire.
So while it might be the case that more lately, some British politicians have sought to build domestic support by lying to their constituents and claiming they "gave up an empire to gain a continent" only to be surprised that it was a partnership, they didn't lose their empire to join the EU/EEC. Your false-quote has resonance in the context of the Brexit debate, but it has no meaning in the original circumstance.
I can certainly believe they're like that today, given how inept they obviously are in every aspect of the Ukraine war. So much so, I will take that at face value without even bothering to google it even though it would've seemed like a surprising and unbelievable claim this time last year.
That doesn't mean they didn't go to space, nor does it mean they didn't industrialise, nor does it mean they weren't a significant word power and viable threat to the USA during the Cold War.
That continued after WW2. Russia was dependant on western trucks, a lot of which they gained via Land-Lease. So, they literally bought truck factory from the western companies - Kamaz - that they obviously branded as their great achievement.
Wouldn’t a switch to Renminbi as a global reserve currency be fundamentally incompatible with China’s currency control regime? This has always been the explanation I’ve been given for why such a switchover is improbable.
There's also a lot less in circulation. The US Dollar has by far the largest volume out of any currency, which helps other central banks manage their holdings. This is something that holds back for instance the euro to be used for reserve banking.
Could be; I don't even understand British economic policies, despite my nationality, Chinese economic policies are completely outside my domain of knowledge.
Could this lead to a chain reactions, were countries abandon the dollar and the dollar looses in value, in return leading to more countries abandon it? A world were the most stabilizing region and its currency become temporary hegemon?
Ghana's GDP is flow while Twitter's valuation is stock.[1] Given that Twitter's EBITDA was $211mn, it is more accurate to say that Ghana's GDP is 368 Twitters.
I'm not going to say that I have strong views on this right now. But the reason I used EBITDA is that GDP is the total value added of the economy. EBITDA is the total value added of the company.
I don't think that's quite the right interpretation. EBIDTA is the value added of the company net its employees (and I'd quibble over depreciation and taxes), whereas GDP includes the labour share.
Imagine we had a single-company country, where every worker was also a customer, all costs were internalized, and capital did not depreciate. The GDP of the country would be equal to the profit of the company plus the wages of the employees.
Using the EBITDA equivalence, however, the GDP of the one-company country would be more (possibly far more) than "the one company's earnings."
In principle, Twitter’s market value is the net present value of its future profits, which excludes input costs. So the closest concept to parent’s comparison (GDP vs. market value) is GDP vs. profits.
> The GDP of the country would be equal to the profit of the company plus the wages of the employees.
Also plus any other input costs, like rent, electricity, loans, etc., right?
So GDP vs. revenue would be the comparison that would include both profits and input costs.
You ultimately need to pay in some common currency so which common currency do you trust to be secure from inflationary pressures or government interference? Do you trust the Euro to not implode? Do you trust the Chinese Communists with their Yen manipulation? The US dollar is the last currency standing after all others are disqualified.
Somewhere in my comment history I made the prediction "It will be possible to buy large amounts of oil without USD by 2024" - so I think I've got a decent track record on this subject.
I'm much less confident in these predictions than that one, but I'll predict Saudi Arabia won't go off the USD because they depend on US military support in a pretty warlike part of the world and the CFA will be replaced by 2027 as currently planned without any major interference from the European powers.
As for a case for maintaining the status quo - The example made of Ghaddafi comes to mind.
The reason US$ denominate most trade is that without what is broadly referred to as "The West" global trade would not move. Trade would not be protected by a web of alliances among developed nations. If that goes away, ships would not be insured. Uninsured ships would be lost to pirates and rogue nations. Prices would jump sharply. Supply chains would have to go back to warehousing enough supply to withstand disruptions. Warehoused parts would become stranded assets when products change. Growth would be choked off.
This is not an excuse for imperialism and crony capitalism that exploits developing nations. Especially in how multinational oil companies corrupt entire nations. Working toward the end of fossil fuels will hasten them losing their power. But the lesson of this year is that those dull bureaucratic things like NATO and the EU are what keeps fascistic autocrats contained and gives aggressor nations the thrashing they deserve.
Even the Tories are realizing they got played by Putin's plan to divide the nations that could hold him back.
>Do you see a country like Saudi going off the USD?
Going off, certainly not (why would they?)
But exchanging their oil for other currencies, absolutely.
What will be interesting is how long the Sauds will remain in power once they agree to exchange their oil against other currencies.
Historically, all regimes that made that decision were or are in the process of being taken down either directly by the US or a combo of their close allies (see: Khadafi, Saddam Hussein, Vlad Putin, etc...)
Russia's sanctions were as a result of their invasion of Ukraine and they'd still be a part of the normal financial system otherwise. It's nothing to do with petrodollars.
Apologies, but your reading of the situation is shallow.
What do you think led Vlad to invade?
The US has been mounting a proxy war against Russia in Ukraine for the past 20 years, one they're ready - barring political upheaval in the US - to fight down to the last European.
To a certain extent this is true, but the Ukranians have been very keen on it as they've benefited from not being a puppet state run by a corrupt president who built himself a huge palace. And Russia has no right to be "in" Ukraine in the first place.
Much more knowledgeable people than I am suggest that the reasons include nostalgia for empire, and the acute fear that near-Russia is not defensible if states like Ukraine are not controlled up to the nearest natural defensible barrier. Modern Russia appears to have a mortal fear of being invaded that is a little perplexing to the modern European.
>Modern Russia appears to have a mortal fear of being invaded that is a little perplexing to the modern European.
This is a media deflection. They massively blow this up with Ukraine but literally do nothing when Sweden and Finland joins.
What putin really fears, is free, rich and democratic country in which large parts of population speak russian language. The masses can't be placated if "the same people" live better lives than under mafia regime. That's why russia spend last 30 years undermining free Ukraine and ensuring their hold on Belarus.
Polish and Ukrainian economies were exactly the same size in 1991 after collapse of the Soviet Union.
In 2021 Polish economy was 3 times bigger than Ukrainian and almost 2 millions of Ukrainians emigrated to Poland for work.
Very clearly Poland done some things right, while Ukraine did not.
The one important thing that we have done right appears to be immediate turning towards West after collapsing communist regime in 1989. Joining NATO and EU.
Poland never wanted to be in the Russian sphere of influence. We have spilled rivers of blood in countless wars, uprisings and protests against Russian imperialism in past 300 years.
Ukraine means "borderland". Historically Ukraine was in a constant state of wars between Polish-Lithuanian Commonwealth, Swedish Empire and Russian Empire since before USA even existed.
So, historically Ukraine was always split between West and East. All regions of Ukraine very clearly wanted independence in 1991. But modern Western Ukraine wanted to join EU and follow Polish path to prosperity. That's why Maidan protests started in late 2013.
Putin invaded Ukraine because he believed in a false story that Ukrainians wanted to be Little-Russians fed to him by FSB agents (KGB successor). And in order to keep Ukrainians from the Western path to prosperity. Ukraine as prosperous as Poland, meaning more prosperous than Russia, would threaten his regime and Russian idea of greatness.
But Russian speaking Ukrainians sympathetic to Russia never asked for their whole lives to be upended and to be bombed by Russia into oblivion. Ukraine is no longer split. This war is their war of independence, true nation forming event. Their new found hatred towards Russia and Russians is enormous and that leaves them with the only other direction - towards West.
> Ukraine means "borderland". Historically Ukraine was in a constant state of wars between Polish-Lithuanian Commonwealth, Swedish Empire and Russian Empire since before USA even existed.
Don't forget Turkey. Ukraine was also invaded by Turks and Tatars many times.
>Putin invaded Ukraine because he believed in a false story that Ukrainians
wanted to be Little-Russians fed to him by FSB agents (KGB successor).
I don't think he really believed in an real enthusiasm, but rather passiveness and complacency that characterized "Great-Russians" under his regime.
>But Russian speaking Ukrainians sympathetic to Russia never asked for their whole lives to be upended and to be bombed by Russia into oblivion.
That's a giant point not even touched once by trolls that love to share 2012 Ukraine election results. There's massive difference between believing that Ukraine needs to ally with Russia, there are cultural ties and similar points, and wishing for literal invasion of your country by foreign empire.
saudi? no. they are the only elites not tied to petrodollar by force but by financial incentives.
all the others probably no as they will see the new gana embargo :(
the terms first world and second world were originally coined to means country under petrodollar and countries under ussr. third world was a term that meant free for all to the to two powers.
It is really interesting that the folks running the show in the USA are able to export a lot of the problems with the $ to the rest of the world. Caribbean nations know this first hand, and have given in to the peg.
I worked in oil, and now work in an industry where I sell parts worldwide. I'm not a trained economist, but deal with currency and transfer pricing with labor and goods.
Couple things: what a lot of people don't know or understand is that pretty much all transactions worldwide are intermediate by USD. Meaning, if a company in Sweden wants to buy something in Cameroon, the banks don't swap currency. They buy dollars with krona and then buy francs with the dollar.
This may seem "academic" on paper, but the world essentially has to deal with the dollar and the USA fed and its people with every transaction countries do! They're getting taxes each time they want to trade. Switzerland has purposely devalued its currency because the opposite happened: people were buying Swiss francs as a "safe" investment and not trading or circulating them. I digress ...
The only country I see that could actually disrupt the petro dollar is Russia. Russia is doing this on a small scale by forcing Europe to purchase energy in rubbles. Ghana? They may be seeing a three letter agency from the USA very soon ...
China? They do too much contract manufacturing for America, and no one wants yen or a currency from a dictatorship. Europe? Too much debt, and they would have to centralize spending (trying to do this with EU commission).
Ghana? They may be seeing a three letter agency from the USA very soon
This is sad precisely because it's so true. I wish poor countries were free to make trades on terms that were more fair. But that's not the world we live in.
In any case, I applaud Ghana for trying.
I really do wish them luck, but I'd advise them to ready their internal security services. (I suspect there will be a lot of unrest there in the very near future.) And I'd also advise beefing up the quality of their healthcare facilities. Because I think they may see a rise in cancer diagnoses among leaders in their steward classes over the next few years.
I'm kind of confused by his comment. Isn't it common knowledge (and even admitted) that American three letter agencies protect their interests at almost full cost?
The fbi had plans to assassinate MLK, and the cia led how many revolutions.
You can see that because you’re knee deep in conspiracy theories. I’m not in denial I’m just informed on foreign policy and know that these agencies don’t just overthrow governments because they make financial decisions like this. That’s an ignorant meme that lacks any real analysis of foreign policy.
It's just history(i.e [1] )not conspiracy theories. We are past that. Same thing about surveillance. It used to be "conspiracy theories" but wikileaks and Snowden showed us that the truth is even worse.
How about “America invades nation because it moves away from the dollar” is a complete bunk conspiracy theory and I was calling it out. It has 0 basis in reality and is peddled by anti-America types.
It’s common knowledge to the unknowledgeable, which was my point about credibility. it’s a meme and that’s it.
Not what I said. Petrodollar conspiracies are not that, plenty of nations move away from the dollar without “3 letter agencies” and only the uninformed are unaware of this.
1) Please keep this site as a place for discussion and throw information rather than insults.
2) A three letter agency seems believable to me. Do you remember what happened in Libya 2011? It is believed this was in a large part due to their planned move to an afro dollar.
You want me to keep it safe for discussion, while downvoting me for calling out easily disproved conspiracies?
I think your priorities are out of whack here. There’s lots of complaints about Us policy: that they overthrow nations to uphold the petrodollar is not one of them.
How about reading an actual analysis instead of continuing a meme that was never true
This. People seem very exercised about using the dollar specifically to buy oil, but .. currencies are fungible? You can trade them on international markets? Also, where does the gold come from? Is it just their central bank reserve?
No, it seems that Ghana is experiencing the classic forex problem of not being able to export enough valuable production in order to afford its imports, and it's very hard to reduce imports of fuel without drastic drops in either lifestyle or production capacity. And if you can't afford fuel to produce exports, then you have a death spiral.
They don't want to avoid the dollar, far from it, they want to keep the few dollars they still have and pay with something else instead.
Now, if I were the Chinese with an overabundance of dollars (or worse, US Treasury bonds), I'd be trying to convert them into something else ASAP. They tried to buy companies, agricultural land and other things with intrinsic value, but were blocked by CFIUS and the EU is setting up its equivalent.
All the mechanics in the world won't help you if the fundamentals are broken.
At some point, when push comes to shove, someone has to take delivery of something. This comes down to a matter of efficiency and faith. Who do you have more faith in? A random bank claiming to having a certain amount of gold on deposit? Your own central bank taking in tons of gold for delivery of a good?
This is silliness. If the USD is inflating too much (or if you perceive American sanctions as too onerous) then use a different currency like the Swiss Franc or the Euro.
None of this really matters. What matters is international settlements, agreements, and force. If you're on the wrong side of the WTO your economy is cooked anyway. Besides, if Ghana were some stalwart of anti-corruption then this may mean something, but it isn't. It's middle of the pack. Well behind Canada, Europe, Japan, and The United States; all countries or blocks that are perfectly fine selling and buying in USD.
Small reminder: ghana's consumption of oil is 0.1% of the worlds total oil consumption (Source: https://www.worldometers.info/oil/ghana-oil/), essentially a rounding error. Take this into account before making any statements about the ending dominance of the dollar.
Ahh yes, small changes never preclude larger shifts in large geopolitical entities.
But also if anyone tells you they know the future, they're probably trying to sell you something. If I were in charge of Ghana's finances, I'd be pretty cautious of standing in front of any windows for the next few years.
Small changes preclude absolutely nothing happening far more often, and the imminent demise of the petrodollar has been forecast for fifty years involving some much more seismic events than a country with gold mines and a severe dollar reserve shortage and debt problem proposing that gold might solve their problem.
At least the half dozen "gold dinar" projects had a bit of global ambition and a theoretical rationale for the religion of much of the world's oil exporting economies to participate.
I know a lot of people dislike bitcoin here but I'm wondering (with the huge assumption that its value stabilises over time) would it not actually be a better solution? Not just from an obvious logistical but also from an environmental perspective? I'd imagine gold mining to be much more destructive (both to nature and to human life).
I wonder if they can use it? As a noob I see that crypto value is very volatile and don't have intrinsic value, unlike gold that somehow is accepted universally as valuable.
2) just because it’s strong now doesn’t mean it cannot ever fail. Ray Dalio’s new book might interest you as he breaks down past world powers and how their currencies (which were global reserve currencies at the time) collapsed
The world needs to get off the blood currency that is the U.S Dollar.
But I hope the U.S doesn't do to Ghana what they did to Libya, the last country to try something along those lines: forment revolt and overthrow the government, then literally sack the country and leave with billions in gold bars, and say they gave the country freedom and democracy.
"tehran oil bourse" is one of the older kooky internet theories about how the whole US dollar system is supported by oil. I honestly don't know why these kinds of stories and theories are so appealing to a certain kind of internet guy.
This is great news for the people of Ghana .. and I hope it serves as an example for many other nations to come. The era of enslavement to the petrodollar is over.
The hegemony of the dollar as a reserve currency is finally coming to an end, and while many will disagree with my opinion, I believe it's a very good thing for the world.
The US has been allowed by the rest of the world to use the dollar as a weapon since the end of WWII, specifically using it to impose unilateral economic sanctions on anyone they don't like, thereby flouting or downright ignoring other countries sovereignty in the process.
The have also used the privileged status of the dollar to gain systematic, unfair and generally undeserved economic advantage in international markets.
They have also used this advantage to create a completely unsustainable amount of debt which the US will never be able to repay now that the dollar is becoming just another currency.
Picasso was famous for writing checks, knowing fully well that they would never get cashed out because, bearing his signature, there was an intrinsic demand for them and the thing would be kept as is by the owner.
US dollars are very similar to Picasso's checks in the sense that foreign country all keep large amounts of US currency reserve and debt instrument, but they never "cash them out" (exchange them for US-based hard assets such as land and businesses).
The world has allowed this to happen for near 70-ish years because the for the longest time, the US was perceived by a large part of the world as a force for good.
That ship has sailed though, and in 2022 it's getting pretty hard to find folks outside of the US that view it as a force for good anymore (or just don't downright hate their guts with a passion).
To be a useful tool, a currency should be, among other things:
a) managed in a sane manner (as in: the amount issued should be on a fixed schedule, as per Milton Friedman)
b) not used to tilt the playing field
c) essentially politically neutral, and in particular managed by an entity not in any way controllable by the government.
The US dollar doesn't meet any of these criteria, and the chicken are now coming home to roost and the dollar will slowly lose it's privileged status among world currencies, slowly being replaced by a bunch of other.
> The hegemony of the dollar as a reserve currency is finally coming to an end, and while many will disagree with my opinion, I believe it's a very good thing for the world.
Yeah ideally, I agree that some competition might be good to keep US in check. Chinese Yuan seems most likely at this point.
But I think the world would be in a “worse” place when the break happens. Purely due to geopolitical instability and all the second order effects that is bound to happen when US hegemony ends.
Wondering what will replace it, maybe the Brics coin a basket of currencies and commodities. A bit like Keynes Bancor concept if i'm not mistaken time will tell what sort of currencies the Russians and Chinese will introduce for BRICS, SCO and BRI nations.
The Chinese Renminbi (Yuan) is a good candidate to quickly get on par with the USD.
If they manage it properly that is, as in: not print mountains of it, and not using it to enforce their political aims.
They're currently actively busy making the Renminbi reserve and default trading currency in much of Asia.
And, as a last resort, there's always Bitcoin and gold, although, as Ghana will discover (unless they make the mistake of using a 3rd-party custodian) gold is very tricky to move about.
RMB is a terrible candidate for a reserve currency. If you are concerned about the US meddling with their currency, you will not pick a historically manipulated currency like the RMB. Moreover, in China transactions over 8k USD have to be reported and there is a 50k USD currency exchange limit. The governments managing of outflows hardly gives confidence that the currency is one people want to hold.
Asia does seem to move more and more into the renminbi sphere. It would makes sense if China starts exporting more RMB over the next couple of years to facilitate trade in the region and get the USD financial hooks out of the region. For now i'm mostly waiting on South china sea code of conduct being finalised. Seems Vietnam is now willing to cooperate with China on their South China sea issues and resources/border disputes.
You also have Xi next month meeting Arab leaders in Saudi Arabia, a lot of people are expecting a PetroYuan announcement or at the very least the foundation of such an agreement. I think after those two events are handled and closed, China should be in an excellent position to become Asia's major energy hub. They can get Russian, Qatari, Central Asian stans and Saudi energy products without having to use Western financial institutions or services.
I think the Russian and Arab leaders want a bigger share of the Chinese bonds and financial markets so they can grow their RMB reserves like they are already doing with their dollars.
Ghana going with gold for energy imports seems smart for now but yeah moving gold isn't easy, also verifying the gold is also not easy. That's why i think BRICS+, SCO and BRI nations will create a block chain with a digital currency(Central Banks digital Currency) backed by a basket of currencies and commodities to facilitate import and export and government to government financial transactions.
We'll see the dominance of the USD erode in the next three decades is my prediction.
Look at how successful Putin was in demanding payment for Russian oil in Rubles. It has propped up the Ruble enormously and its predicted collapse hasn't occurred. In fact it has rallied.
I assure you that other nations have taken note and will take similar steps in the future. Other commodities may well be priced in local currencies of the producing nations. Think gold, diamond, gas, oil, timber, wheat.
Russia had to raise interest rates to 20% to achieve the recent appreciation. Russia is giving up economic growth for the foreseeable future to prop up its currency. I doubt many countries are eyeing a similar move
They raised them to 20% for one month in the face of a nuclear economic strike. Their rates are down to 7.5% which are close to nominal for them. Remaining effects are a 3% GDP decline and a 12% inflation rate trending downward from a peak of 18% following the attack.
The overall impact seems to be fading to zero relatively quickly, excepting a much stronger ruble. Future growth numbers will be interesting to follow. Much could shift radically one way or the other depending on oil prices, but the US seems to have a declining level of influence with OPEC+.
The Russian central bank expects a rate of 3-3.5%, the Ministry of Economic Development expects a decline of 2.9%. [1] Your numbers may be dated, as the expected figures keep improving. Some time back they were expecting double digit declines.
The "prop up the ruble" effect was negative to russia. It happened because export to russia totally stalled. So, russia still exported oil and gas, but could not buy anything for earned currency. For example, in August German export to russia dropped 45.8%, while imports dropped only 6.7% - and that only due to gas price increase. Now they import 0 gas.
>I assure you that other nations have taken note and will take similar steps in the future.
Why would any country do that if they don't plan similar genocidal war?
Most countries and business want to do something with their earnings. If you get paid in rubles for your oil, then you can only buy things denominated in rubles. If your general trade is collapsing, this isn't such a bad thing - you need to make an increasing proportion of your consumption. But if you retain an economy that wants to do general trade, you will probably want something other countries accept.
So although it is possible that "we'll see the dominance of the USD erode in the next three decades", it is much less likely that "commodities [in general would] be priced in local currencies of the producing nations [following the example of Putin's Russia]". The problem with your prediction though is that it's boring - it's too easy to be true as phrased. For instance, if we see a new cold war divide into a China-focused world and a US-focused world, then the growth of whatever currency the China-focused world uses will necessarily result in decreased USD dominance. Or if not China, then India. Or who knows who. Or maybe the US will descend into civil war and someone else will pick up the mantle of world hegemon. Or the US will amicably divorce, and the Floridollar will dominate international trades.
So it's more likely that you'll be right for the wrong reason, than that you'll be right for the reasoning established in your post.
Libya moved away from the USD and got destroyed. Ghadaffi wanted the African countries to unite and get away from the standard. The American imperialists shut that down fast.
Note is was USD and potentially more importantly French African Franc under threat, as Europe was very involved in this.
And this likely one of several other reasons like ensuing oil/gas flowed to west. And his history of supporting terrorism. Wider arab spring and hope to remove dictatorships.
Yes exactly. Europe, specifically france, were spearheading the libyan intervention. The US was a major player too, but mostly to support their european allies. Europe still thinks of africa as its backyard, and France has an extremely neocolonial attitude in the region and openly so. They put the US to shame when it comes to unashamed imperialist interventionism in the politics of their former colonies.
I'm not sure this is true and sound's more like wokism than reality.
Absolutly in the running example like French currency. While at the same time France do huge amounts of aid, peace keeping and anti terrorism.
I think its fairer to say most of Europe has abandoned Africa from old. And for france its kinda a dammed if you do/don't problem like with Mali recently. Some people say the french peace keepers are continuing colonialism while others complain that when they leave it makes things worse and they shouldn't.... what is right?
