Still More Fairy Tales Of US Dollar Demise That Didn't Happen

More Stories of the Dollar's Demise

"Strategists Joana Freire and Stephen Jen calculated that the greenback accounted for about two-thirds of total global reserves in 2003, then 55% by 2021, and 47% last year.”

Here's another take.

Setser "The dollar's share of reserves didn't actually change at all in 2022."

What About China?

Setser "And looking at reserves without also looking at the foreign assets of state banks and SWFs is so ... 2012."

China masks its reserves in SOEs, something I have commented on many times. 

And Look at Agencies (Mortgage Backed Securities)

What About Japan?

Japan sold US dollar reserves to prop up the Yen. That's hardly a measure of dollar reserve weakness.

Deceleration in Global Reserve Growth 

What About Russia?

The US weaponized the dollar against Russia. 

Dollar Appreciation

Michael Pettis Chimes In

That's a new thread with a spotlight on China. 

Brazil’s President Calls for End to US Dollar Trade Dominance

Despite the alleged success in ending the dollar's dominance, please note Brazil’s President Calls for End to US Dollar Trade Dominance

Brazil's president, Luiz Inácio Lula da Silva, wonders: “Every night I ask myself why all countries are forced to do their trade backed by the dollar. Why can’t we do trade based on our own currencies? Who was it that decided that the dollar was the currency after the disappearance of the gold standard?

This is more than a bit amusing. No one is forcing Brazil, Russia, India, and China (the BRICs) to do trade in dollars.

Trade Example

  • A Brazilian soybean producer sells soybeans to a merchant in China.
  • A Brazilian scooter manufacturer buys Lithium batteries from a Chinese merchant.
  • The soybean producer buys nothing from Chinese merchants.
  • The Chinese battery producer buys nothing from Brazilian merchants.

Why would the Brazilian soybean producer want to hold yuan, especially given that the yuan doesn't even float?

Why would the Chinese battery producer want to hold the Brazilian Real?

Trade is not between nations, it is between individuals and corporations. No one is forcing the soybean producer or the battery producer to do anything. 

By choice they prefer to trade in dollars, instantly convertible to any currency the producers may wish to hedge in. In contrast, the yuan doesn't even float.

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