Those who love a good “dethroning King Dollar” story will be excited to know that the latest data from SWIFT shows the euro grabbed the top spot for global payments in October.
It was the first time the single currency topped the dollar in nearly eight years.
Next on the list, in order, were the pound, the yen, and the loonie.
The data is released by SWIFT as part of a monthly report that tracks the Chinese yuan’s progress on the path to becoming an international currency.
That raises the question: How is the yuan progressing on the path to internationalization?
Well, based on the same report from SWIFT, the RMB fell one spot to the sixth most active currency for global payments by value.
We are, of course, a long way from a scenario where the dollar is supplanted as the world’s reserve currency.
If you’re wondering where things stand in terms of other measures of USD dominance, the BIS reminds you that “about half of all cross-border loans and international debt securities [are] denominated in US dollars.”
The same July report from the BIS notes that “85% of all foreign exchange transactions occur against the US dollar” and it accounts for 61% of official FX reserves.
Fully half of all global trade and commerce is invoiced in US dollars, which underscores points made in “Bitcoin Is Nothing.” The dollar isn’t just a “currency” — it’s a reference point. There’s a very real sense in which no one would know what to do if it suddenly ceased to exist.
Sure, we (and by “we” I just mean the international community) would figure it out. But it would take a while.
And that speaks to the philosophical character of the de-dollarization story. The current system is self-referential: The framework is built on, and around, the dollar, but the dollar is itself the frame of reference.
It’s thus not clear what happens if you remove it.
Ultimately the dollar isn’t really just a currency, it’s a tribute system to the global hegemon who insures global trade is possible. What is completely clear is that if the dollar failed, if the US became a failed state, if the world ceased tribute… well then global trade becomes nonviable rapidly and piracy flourishes. There simply is no country or group of countries capable of maintaining anything near present geopolitical stability.
I would still argue bitcoin isn’t nothing but I certainly see it is absolutely zero threat to the dollar. You could just as easily call casino chips a threat to the dollar, but again, casino chips still aren’t nothing. Ultimately though this is why I see the idea of the US government in fear banning crypto as nonsensical. They may ban it for many reasons including that they just don’t want to deal with regulating it, but never because it is any sort of threat.
The Euro is certainly capable of functioning as a useful dollar proxy though as does basically every other currency in the current paradigm including bitcoin and casino chips.
+1 on the fact that Bitcoin is no threat to the USD. It’s like saying collectible baseball cards or precious stamps are a threat to the USD. That’s nonsense.
The crypto community does not see Bitcoin competing with the USD reserve currency status.
I saw an article this morning about the Euro on SWIFT and had to rub my eyes about this exchange in positions between the Euro and the USD.
Glad to see this post. Helps me put the article I read into context and to understand the bigger picture.
Not to show my biases but I think that, if suddenly/magically, the USD was taken out of the equation (without massive destruction, global war, the Rapture of all Americans as the new Chosen or something of the sort), the Euro would be the stop gap by default until we figure something out.
The weakness of the Euro compared to the USD is that it’s not backed by a central government albeit a federal one but a coalition of nations. That means it’s less stable, politically. But, if push come to shove, we could certainly use it ’till we figure something out.
There needs to be a new theme here on the H Report. The theme needs to be what the next phase of the world’s monetary system might look like. There is a theme on the H Report of why the USD will not fall any time soon. And, it’s a good theme. Maybe just expand it to be more forward looking.
The next phase/era is not that Bitcoin is going to take over the role of the USD. This is nonsense and people in the crypto community moved on from this position a long time ago. Bashing Bitcoin over the perceived threat to the USD any longer is not moving our community’s understanding forward on what is coming and why.
The “Dominance” chart tells the story of why the USD status, though not currently challenged, is going to have to change for the good of the global economy. As the chart shows, the US economy any longer is about 20% of global GDP while the US share of global trade is about 10%. All the while, the USD share of other markets is in the range of 60 to 70%. It doesn’t make sense any longer for the USD to carry this role. What comes next?
The IMF, BIS, central banks, and others, to be sure, have been publishing papers about the motivations for a post-USD centric monetary system. They are telegraphing what it might look like. We might not like what the new regime looks like, but it’s coming.
While I understand and agree with the basic thrust of this article, I think the conclusion is at least partially misplaced.
No expectation for the displacement of the dollar as the world’s reserve currency revolves around the dollar suddenly ceasing to exist.
The dollar became the world’s reserve currency as the U.S. became the guarantor and hegemon of the global (free) trade system established after World War II.
It is therefore hardly surprising that as U.S. commitment to the maintenance of the existing world order wanes question arise regarding the continued dominance of the American dollar.
Seen in this light, speculation as to which currency could realistically be projected as a viable replacement for the American dollar as the global reserve is pointless. The answer depends on how global trade changes and evolves and who can step up to lead whatever system emerges if and when the U.S. is no longer willing or capable of maintaining the current world order.
Love the dialogue in the comments section here gents, very refreshing