The US has historically benefited from the exorbitant privilege of issuing the world’s reserve currency and the benchmark safe asset in the form of Treasuries.
I agree. But what's the consequence? From my limited-visibility viewpoint, gold is now the quasi reserve currency and benchmark safe asset. Which is a negative, because the US was an institution, a de facto promise, and a growing "asset", while gold is something of limited use, with static potential.
And yet gold has the potential to become much bigger (with the downside of it possibly bubbling).
The dollar will remain the world's most dominant currency, but I think there will be an increasing diversification in the portfolios of international investors. People feel less and less t ease with the dollar and Treasuries and are - from what I can see - moving towards European bonds and a variety of currencies in europe as well as gold.
Thank you for this analysis. As an American watching the decline in real time it stirs up many emotions. On one hand perhaps it's good the 'exceptionalism' is over. On the other, if there is a tipping point and the market really becomes to believe it is no longer a safe asset, could it start dumping it and trigger a real sell off/'crash' like sub-prime? The sad thing is neither US political party seem capable or even interested in getting debt under control, which may precipitate a crisis.
I think the dollar will remain the world's most dominant currency by far, but people will increasingly diversify their currency baskets.
Please note also that the post is about Treasuries, not the dollar. And in the Treasury space I can see many very large investors moving towards Europe.
I agree. But what's the consequence? From my limited-visibility viewpoint, gold is now the quasi reserve currency and benchmark safe asset. Which is a negative, because the US was an institution, a de facto promise, and a growing "asset", while gold is something of limited use, with static potential.
And yet gold has the potential to become much bigger (with the downside of it possibly bubbling).
The dollar will remain the world's most dominant currency, but I think there will be an increasing diversification in the portfolios of international investors. People feel less and less t ease with the dollar and Treasuries and are - from what I can see - moving towards European bonds and a variety of currencies in europe as well as gold.
Thank you for this analysis. As an American watching the decline in real time it stirs up many emotions. On one hand perhaps it's good the 'exceptionalism' is over. On the other, if there is a tipping point and the market really becomes to believe it is no longer a safe asset, could it start dumping it and trigger a real sell off/'crash' like sub-prime? The sad thing is neither US political party seem capable or even interested in getting debt under control, which may precipitate a crisis.
Someone or something has to take on the role of world's reserve currency, right? What is it going to be if not US dollar?
I think the dollar will remain the world's most dominant currency by far, but people will increasingly diversify their currency baskets.
Please note also that the post is about Treasuries, not the dollar. And in the Treasury space I can see many very large investors moving towards Europe.
Thank you for your response and insights!
I think the US would rather default than consider taxing the wealthy or reducing its military budget