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Another De-Dollarization Reality Check
It's not just your imagination, even if the narrative is (mostly) imaginary: De-dollarization is a trending topic.
You can take that both figuratively and literally. The market discussion and attendant tsunami of financial media coverage kicked into high gear early last year, when Russia's reserves were frozen, and the social media cacophony, particularly on Elon Musk's Twitter, took off in earnest starting in 2023.
Most recently, soundbites from Lula's state visit to China were tailor-made fo
Case in point, Dr H:
https://research.eurizonslj.com/linkapp/cmaview.aspx?LinkID=pageid100414858nqn~xx9xjt9~tntr~qrzfn9~z~x~f~f~n&mc_cid=d707ec64aa&mc_eid=61dce99756
Frankly, that just isn’t very good in my opinion. And I’m not alone. Several people have taken issue with that this week. Using the share of reserves to make the point is very misleading — seems almost purposefully naive. There’s a devastating critique of it here:
https://twitter.com/Brad_Setser/status/1648740426956800032
That’s not the only one.
Very good post. Can’t be said often enough.
My work colleague actually brought this topic up (we generally talk about equities). He was sane about it (because he’s older than I am), but it goes to show how much the narrative is being spun.
Thank you for pointing out realities amidst trending narratives.
I apologize for the source (BI) but I do believe Chamath (from All-In) helpfully points out the absurd: the Yuan is (effectively) pegged to the Dollar:
https://markets.businessinsider.com/news/currencies/chamath-palihapitiya-de-dollarization-dollar-vs-yuan-china-renminbi-nothingburger-2023-4
Just like trying to be “the one who called the Black Swan” by crying out every month, “de-dollarization” fits someone’s ideological narrative (at a guess, autocrats who are pissed the Dollar can be used as a tool to punish them).
I will buy some Chicom CDs right after I buy Egyptian, Angolan, Uzbek and Serbian Dinars or whatever……….
“Follow the money,” not the memes or search results, seems an appropriate stance amid a largely otherwise academic debate or mental exercise. SCOTUS notwithstanding, money may be speech when it comes to our elections, but speech is still not money when it comes to global financial markets. Having said that, I am very interested in all the scuttlebutt I am hearing about non-fungible oil.
re: “money equals speech” – for better or worse, this is a big reason why the dollar will remain king. Even if the US government weaponizes the dollar, truly wealthy people know they can deploy resources to get the political outcomes they desire even if they aren’t citizens. That’s not the case with authoritarian governments. I’d say ask Jack Ma which he’d prefer, but his hands (and money) may be tied.
In the age of the internet and its related information flood, it seems that increasingly Americans are easily bored. Most don’t really know anything important. History for too many starts no earlier than 2008. In 2016 when we were first listening to what the donald was spinning, I saw a clip of a guy doing interviews with folks on the street. The question was: “Hillary Clinton has suggested we get rid of the Bill of Rights and the Constitution and do something else (a lie), what do you think?” The hair stood up on the back of my neck when I heard person after person aver that this sounded like a good idea to them, after all that stuff was really old we need to replace it with new stuff. … Somehow all this reserve currency blather doesn’t seem to serve a purpose the terminally bored can relate to. This is so scary to me, at least. In 1968, I got to spend three hours with a few class mates listening to Ohio State’s senior psych prof, a pure behaviorist who had spent his career studying the question of whether or not all living things are adaptive systems who would always adjust to change to maintain their lives. The result of his quest was a resounding no, they wouldn’t. All creatures he found were guided by an indefinite series of responses to immediate stimuli at a rate as fast as two responses per second. Any thought of the future was simply a myth. In one of his experiments he trained lab rats to respond to certain stimuli and get food in return. He then changed their maze so that eventually, the number of calories required for the rats to go get their food was larger than the number of calories they would receive from eating it. He effectively trained them to kill themselves. It doesn’t take much intelligence to see we do the same thing, acting against our own best interest constantly for a very short -term reward — addicts who kill themselves for pleasure are common. The prof said planning, something which should prevent such problems, is just a myth. The only benefit of the process for most, people or firms, lies in the quick reward gained from the process. This is only anecdotal, but I worked with fifty organizations, large and small, profit and non-profit, to help them create effective strategic plans. Of the 50, only 3 ever actually used the plan to enhance performance and reach any long-term goals. Is it possible the US will destroy its only real source of competitive advantage? Sure.