Honestly, I think a new reserve currency is inevitable. And I’m betting on it happening next year after the US has its first default.
I think it’s more likely to be some type of Central Bank Digital Currency (CBDC) which might be claimed to be backed by something tangible to enable global buy in but won’t really be.
I find it hard to believe USD to be switched for another fiat currency after its failure, but it would be cheaper than having a currency backed by gold and easier to control. I guess at the end of the day if one currency is more trusted that is enough to make the switch.
Not sure digital currency could perform all the functions of being a reserve currency, such as being readily fungible, untracked, and easily physically transported. I mean, two people bribing their way out of a war zone, or just a widely recognized currency sitting in a go-bag, these were some of the usages the USD took up, due to people knowing it was widely accepted.
Also, I don’t know if defaults would be enough to stop that, as the currency is usually backed by the US giving a black eye to anyone small enough who tries to trade oil in something else.
But I accept that these days these are marginal circumstances, trade and oil deals are done in other currencies in some places.
My thinking on this is probably out of date. I guess we’ll just have to wait and see.
I think your definition of a global reserve currency is a bit out of touch. I would argue that there is no requirement for a global reserve currency to be untraceable but even if there was.
There are other assets that are untraceable and could still perform that function if it was a need.
As far as being fungible, and easy to transport, any digital currency would meet these requirements. It’s not like banks are physically shipping USD bills to anyone.
Right now, the US government is struggling to pay troops during the shutdown. And even if there were no shutdown, we are paying more in interest on the national debt then we do for the entire military industrial complex. So I don’t think the claim that the USD is backed by it’s military is a strong argument anymore, especially not if things continue on their current course or if any thing negative happens.
Honestly, I think a new reserve currency is inevitable. And I’m betting on it happening next year after the US has its first default.
I think it’s more likely to be some type of Central Bank Digital Currency (CBDC) which might be claimed to be backed by something tangible to enable global buy in but won’t really be.
I find it hard to believe USD to be switched for another fiat currency after its failure, but it would be cheaper than having a currency backed by gold and easier to control. I guess at the end of the day if one currency is more trusted that is enough to make the switch.
US debt is in US dollars and the US is not constrained on the issuance of dollars. There will be no default. Inflation, yes. Default, no.
Not sure digital currency could perform all the functions of being a reserve currency, such as being readily fungible, untracked, and easily physically transported. I mean, two people bribing their way out of a war zone, or just a widely recognized currency sitting in a go-bag, these were some of the usages the USD took up, due to people knowing it was widely accepted.
Also, I don’t know if defaults would be enough to stop that, as the currency is usually backed by the US giving a black eye to anyone small enough who tries to trade oil in something else.
But I accept that these days these are marginal circumstances, trade and oil deals are done in other currencies in some places.
My thinking on this is probably out of date. I guess we’ll just have to wait and see.
I think your definition of a global reserve currency is a bit out of touch. I would argue that there is no requirement for a global reserve currency to be untraceable but even if there was.
There are other assets that are untraceable and could still perform that function if it was a need.
As far as being fungible, and easy to transport, any digital currency would meet these requirements. It’s not like banks are physically shipping USD bills to anyone.
Right now, the US government is struggling to pay troops during the shutdown. And even if there were no shutdown, we are paying more in interest on the national debt then we do for the entire military industrial complex. So I don’t think the claim that the USD is backed by it’s military is a strong argument anymore, especially not if things continue on their current course or if any thing negative happens.