US Dollar’s Status as Dominant “Global Reserve Currency” Drops to 25-Year Low

Central banks getting nervous about the Fed’s drunken Money Printing and the US Government’s gigantic debt? But still leery of the Chinese renminbi.

By Wolf Richter for WOLF STREET.

The global share of US-dollar-denominated exchange reserves dropped to 59.0% in the fourth quarter, according to the IMF’s COFER data released today. This matched the 25-year low of 1995. These foreign exchange reserves are Treasury securities, US corporate bonds, US mortgage-backed securities, US Commercial Mortgage Backed Securities, etc. held by foreign central banks.

Since 2014, the dollar’s share has dropped by 7 full percentage points, from 66% to 59%, on average 1 percentage point per year. At this rate, the dollar’s share would fall below 50% over the next decade:

Not included in global foreign exchange reserves are the Fed’s own holdings of dollar-denominated assets, its $4.9 trillion in Treasury securities and $2.2 trillion in mortgage-backed securities, that it amassed as part of its QE.

The US dollar’s status as the dominant global reserve currency is a crucial enabler for the US government to keep ballooning its public debt, and for Corporate America’s relentless efforts to create the vast trade deficits by offshoring production to cheap countries, most prominently China and Mexico. They’re all counting on the willingness of other central banks to hold large amounts of dollar-denominated debt.

But it seems, central banks have been getting just a tad nervous and want to diversify their holdings – but ever so slowly, and not all of a sudden, given the magnitude of this thing, which, if mishandled, could blow over everyone’s house of cards.

20 years of decline.

Two decades ago, when the dollar had a share of about 70% of reserve currencies, a presumed competitor became day-to-day reality: The euro, which combined the currencies of the member states into one currency, thereby combining their weight as reserve currency. Since then, the dollar’s share has dropped by 11 percentage points.

By contrast, between 1977 and 1991, the dollars share had dropped by 46 percentage points – with huge plunges in 1979 and 1980 possibly linked to US inflation which was threatening to spiral out of control, peaking at nearly 15% in 1980. The plunge bottomed out in 1991, with inflation more or less under control. And the dollar’s share then surged by 25 percentage points until 2000:

The other reserve currencies.

The euro’s share had since been in the range between 19.5% and 20.6%, but it Q4 it broke out of the range and rose to 21.4%, the highest in the data. The ECB’s holdings of euro-denominated assets that it acquired as part of its QE are not included in the euro-denominated foreign exchange reserves.

The rest of the reserve currencies are also-rans – the spaghetti at the bottom in the chart below. This includes the Chinese renminbi, the bold red line at the bottom:

Renminbi a threat to the dollar’s hegemony? Not yet.

The renminbi’s share is still only 2.25%, despite the magnitude and global influence of China’s economy, and despite the hype when the IMF elevated the renminbi to an official global reserve currency in October 2016 by including it in the basket of currencies that back the Special Drawing Rights (SDRs).

But the renminbi’s share has been creeping up ever so slowly. At the rate it has been gaining momentum over the past two years (+0.36 percentage points in two years), it would take the renminbi another 50 years or so to reach a share of 25%.

Clearly, other central banks are still leery of the renminbi and its implications, and are not eager to dump their dollars all at once in exchange for renminbi; easy does it.

Also-rans under the microscope: Rise of the yen.

To see what’s going on with the spaghetti at the bottom of the above chart, I magnified the scale and limited it to the range of 0% to 6%. This takes the dollar and the euro out of the picture, and allows for a detailed look of the other reserve currencies.

What sticks out is the surge of the yen, the third largest reserve currency. This includes a 2.0-percentage point gain since Q4 2016, which blew away the 1.15-percentage point gain over the same period by the renminbi. With regards to the yen, the renminbi is losing ground.

Despite Brexit and all the scary hoopla around it, the pound sterling (GBP), the fourth largest reserve currency, has not given up any share.

The Eurozone has had a large trade surplus – between €200 billion and €275 billion a year in recent years – with the rest of the world after it emerged from the euro debt crisis in 2012. From the US side, the US trade deficit in goods with the Eurozone was $183 billion in 2020.

The Eurozone’s trade surplus shows that it is easily possible for an economic area with a large trade surplus to also have one of the top reserve currencies. There is no requirement that a large reserve currency must be associated with a large trade deficit. But having the dominant reserve currency helps the US in funding its trade deficits and ballooning government debts.

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  183 comments for “US Dollar’s Status as Dominant “Global Reserve Currency” Drops to 25-Year Low

  1. Cobalt Programmer says:

    I was worried. Why my comments do not appear on this website? Then I realized, I am not commenting here. So, here are my few cents.

    1. Renbibi (People’s currency) must be the reserve because they are manufacturing everything.
    2. Trade deficit occurs because US do not produce anything of value. Funny “Guns germs and steel” starts with a question, why we do not have anything to sell to you?
    3. Every other country must have dollars to purchase oil. They have it a lot because they sell something to us (US).
    4. other countries do not know what to do with the dollars except buying properties in US or keep a reserve or exchange it to some thing better like Euro or gold or bitcoins?

    • Petunia says:

      I was in two stores of a big discount chain recently. The stores are more empty than full. America doesn’t make anything and it looks like we can’t afford to import much anymore as well. The lower inventory levels in many of the big box stores is real and visible. By comparison, the Goodwill is well stocked and so was a consignment store I visited.

      • MiTurn says:

        I needed a part for my 17-year-old GMC Envoy, which is a great vehicle. The first parts store I went to had it in stock. The part was made in South Korea. They wanted too much for it. The second parts store had it in stock too, and it was made in China. This is typical.

        • historicus says:

          Light bulbs, spark plugs, computer chips…
          how many critical military parts are made outside our country?
          Self sufficiency of a nation is a strength. Globalists hate the concept.
          Even Adam Smith in Wealth of Nations… IV, Chapter II…
          nations should protect the industries that are vital to their existence and survival.
          And, trade deficits DO MATTER, IMO.

        • Maximus Minimus says:

          If you want to get really serious, think medicines. A good part of vital one are also imported. China is the producer of medicinal primers.
          The most expensive healthcare system in the universe couldn’t function without cheapo drugs from China or India.
          I would link an article where other essential items, e.g. US military uniforms to wit are made, but that might be bad form.

        • Gandalf says:

          The Berry Amendment, USC, Title 10, Section 2533a, originally passed in 1941, requires that the US military buy its clothing and many other items from wholly US sources. There are occasional exceptions and exemptions applied, but most military uniforms are Made in USA

        • Jeff says:

          So which did you buy?

      • Jack says:


        This could mean many things, is it that people can afford more with free money so buy faster than the big box stores can replenish due to high demand & slow delivery (Supply chain disruption), or is it that these companies need much less stock cuz sales are way down, could the goodwill be well stocked because free money allowed people to afford more.

        It’s a difficult one to answer unless you see it or experience it yourself & I’m not in the US, I personally believe right now people in the US are all behaving like rich superstars, free money makes most people, I mean look at the markets, buying at the top of a hyper bubble, property & stock, gambling, regardless those two stores will change places soon, if I am right, the goodwill stores will be in demand when the US Gov has no choice but to get real & pay it’s debt, stop stimulus, they will go back to taking away food stamps soon, just like they did 2019.

        • Petunia says:

          What I see is a totally bifurcated retail market. The low end is struggling and the high end has nowhere worthwhile to spend the cash. This is a consequence of the financial repression of the working class, the hollowing out of America.

          Seeing half empty stores at the street level is not a supply chain problem, it is a political failure, a long time in the making.

        • nodecentrepublicansleft says:

          “….I’m NOT in the US, I personally believe right now people in the US are ALL behaving like rich superstars….”

          Talk about your sweeping over-generalizations! You know how everybody (all 330,000,000 +/-) is behaving. That would be a crazy thing to say even if you were IN the US!! :)

          I guess I’m a bit of a “rich superstar”…..driving my 1999 Acura TL, buying groceries and cooking at home, watching classic films on dvds mailed to me by netflix.

          I did do something kind of crazy. I quit a 6-figure job because corporate America makes working for them so awful. If I hadn’t just sold my 2 properties, I probably couldn’t have quit the job. Interviews tomorrow and Monday.

          My point: None of us know what “ALL” of us are doing or thinking. Perhaps some humility is in order?

          We’re in uncharted waters and nobody knows what is going to happen. Gotta run…the horde is trying to break in!!!

      • EndTheFed says:

        I’m seeing the same. The economy is being destroyed by the government paying people and entities to produce nothing. Then they steal our money through inflation and taxes. We lose on every level.

        • Rubicon says:

          The “government” is a mere handmaiden for the Financial, Insurance and Real Estate Bohemoths.
          The huge rise of the Ultra Wealthy is what, along with Big Tech, and as noted above, The FIRE SECTOR is destroying the American society of ordinary, and highly ignorant citizens.

          Someone noted the rise of Goodwill. Find out which multi-billionaire(s) own that “store.” The Salvation Army has been destroyed.

          Thirdly, the wealthy are not going without out. They purchase high-end Italian, German, Chinese (Others) specially made for that market.

    • Thomas Roberts says:

      The actual percentage of how many different types of items manufactured in China is dropping. In a typical Walmart like store, made in China is mostly gone from the clothing sections. And is also getting less common in the household and many other sections. In the electronic sections, made in Vietnam and soon to be India and other Asian countries are getting far more common.

      For alot of things like electronics, most of the high value parts come from devoloped countries, before being assembled with some made in China components. It will just say made in China though, these other components are not reflected in the trade balance and do skew it. It’s also important to remember that alot of machinery necessary to run the factories in China come from abroad. As well as nearly all the resources needed to make everything.

      Under the CCP’s “”leadership””, China doesn’t invent almost anything, it’s far less than much smaller countries like Taiwan and South Korea. When countries like Japan were expected to take over the world (post ww2) they actually advanced industries. Mostly cheap stuff comes from China, and that can be made anywhere. America and Europe did stick the factories for some more important things like electrical grid components in China, but just like everything else, it can be produced elsewhere.

      Right now, not enough, but much more than you think is made in America. There’s nothing that only China can make. Right now, because of the CCP’s greed, it’s becoming more expensive and ridiculous to produce things in China and stuff will continue to move elsewhere.

      The Chinese yuan isn’t freely exchangible and could never be the world’s reserve currency. The yuan bearly beats the Canadian and Australian dollars. 2 countries with hugely smaller populations. We also have to remember that the CCP lies about china’s true GDP, which is roughly a third smaller than claimed, they also make up a lot of other metrics which effect the PPP. Right now, the CCP is making a very pathetic attempt at taking over the world. It’s starting to fail. In order to keep it going, they have to have everyone believe they are the emerging superpower, but really the CCP is turning China into a giant North Korrea. If everybody stops falling for it, the CCP’s leverage and ability to cause Mayham across the world begins to disappear.

      The US government could easily take out bitcoin, so that’s not a replacement. Even if the EU survives (I think it will, though it may downsize), the euro may not. The only real possible replacement for the US Dollar at this time, is to simply bypass third party currencies in international trade altogether and hold non currencies as reserves.

      • Depth Charge says:

        Textiles from India tend to be high quality fabrics, well made and durable. China not so much…

        • Petunia says:

          India has also developed an amazing fashion industry with real quality and fabulous design. The fashion in the west is awful both in quality and design with ridiculous pricing for what they sell.

        • Harrold says:

          Apple is firing up iPhone 12 manufacturing in India

      • DawnsEarlyLight says:

        Good comments!

      • Asul says:

        I think you are underestimating what is really going on in China. The fact that you don’t find cheap things made in China anymore is not a good sign, but actually a bad one. China’s capacities and know-how is improving significantly. 15 years ago there was no Chinese smart phone, now they have Xiaomi, Huawei etc. They are the leaders in 5g and even 6g technology, they have extensively invested in EV’s.

        The communist system is vastly superior in dealing with crisis, because it is effective, dictatorial and brutal. There is no place for human rights there. You have to be quarantined? They come, they bring you food for 14 days and then they weld your door, so you can’t get out.

        It is the same with large investment projects of the state. The idea that free but corrupt governments can compete with a communist one is wrong. They can and they will. Now America has to compete not only with China, but with every country in the world and that is a lot of competition. Brazil, India, China, Europe … that is a post soviet collapse world, my friend, and the US propaganda “we are the best” just does not function anymore. You have to prove it again, and it really does not seem the US has the stamina to do so. It looks like a beligerant failing state, which is loosing allies everywhere.

        Japan became a technology hub in the 80’s by producing cheap stuff, cheap cars, cheap videorecorders … But somehow, these techology became better and better and Toyota is still a remarkably reliable car. They came South Korea, which stole the position of cheap manufacturer of cars and videorecorders. But somehow the technology improved and now they have Kia, Hyundai and the behemoth Samsung. Here we are talking about small countries (Japan’s pop is 120 million, South Korea 47 million). But now we have China, a 1,4 billion giant with formidable capabilities and a leadership that is vastly undervalued. The Chinese think 40 years ahead, while the American leadership thinks about the presidential term at best.
        The Chinese plan ahead and they will get there. What is today a 2 % Reminbi, will become a 20 %. They will slowly but surely get Asia and Africa under their influence and they will get the benefits of a long-term relationship with these countries.
        The US is playing checkers and China chess. And they are a chess player of the Capablanca level.

        • MiTurn says:

          “China’s capacities and know-how is improving significantly”

          The engines on my recently bought American-branded rototiller and backup generator are both made in China. They are basically Japanese-designs made in China and they are fine quality.

          China is fully capable of making high-quality manufactured goods, but it can be a crapshoot.

        • Harrold says:

          This is all explained in The Innovator’s Dilemma by Clay Christenson.

          China is not immune to being disrupted by India, Vietnam, Malaysia, Indonesia, etc.

        • JK says:

          Great comment.

          In early 2000, I moved to California and rented a place. Across the street was this American Chinese guy. Worked in finance-bonds. We would talk every now and then and he totally opened my mind to what was going on in China. He mentioned that the Chinese didn’t have the know how, but were sending their kids to universities around the western world to get the know how. Then, they can bring that knowledge back and use it to do things, to create. How right he is.

          I normally don’t watch Shark Tank because the rich jerks there irritate me, but I will never forget this episode. One of those guys made a comment to someone like “You don’t think they can make quality in China?” It was a question. Obviously, he thought so. I believe so too. Yes, there is junk, but a lot of the high end tools I use in my landlording are made in China.

          They are going to bury us. Their attitudes, patience, morality (restricting porn), perseverance, hard work ethic, etc is what used to be America. I have not been there, but have to many places around the world. I will make the assumption that I can walk streets there without worrying about being attacked in their large cities whereas ours have become cesspolls. They are biding their time, but I don’t think they are looking to create a military empire like we do and subjugate every country under our yoke.

        • Synergy says:

          Very well said.

        • Bobber says:

          China’s greatest problem is that it will never attract great minds. Nobody with superior intelligence and potential wants to live in a dictatorship, where free expression is suppressed. They don’t like being told what to do.

        • Thomas Roberts says:

          It’s important to remember that if you say anything against the CCP or China, you are done in China. For this reason, very few businessmen at the current time will say anything against them. As the CCP losses leverage, this will start to change.

          The CCP always claims, that they are going to shift from low end to high end manufacturing. However, mainly this is because low end manufacturing is leaving. They still don’t invent the things they make. It’s true that some middle end manufacturing products are made in China, they don’t invent these things. The CCP simply rips off and copies designs from foreign companies. The reason they get away with this, is because of the dream of the China market. In order to sell in China, you must produce in China, however, this dream is becoming more and more of a bust for an ever greater number of companies. Many companies, especially, electronic companies are beginning to move some or all of their production elsewhere.

          As far as Huawei goes, virtually all their networking equipment is ripped off from foreign countries. All the more advanced parts of their phones come from foreign countries and the software that runs their phones is just a fork of Android. As far as 5g goes, they were able to rush out the short range type of 5g tower, however it fell very short of how fast, short range 5g towers are supposed to go. Short range 5g towers are also of very limited use. 5G is basically short and medium range cell towers, it’s been in Development by various organizations for over a decade, much of the IP used to make their 5g towers is public domain and much of the non public domain IP was stolen. They claim to be ahead in things such as 6g with no proof.

          As far as handling crises is concerned, that is very wrong. We have to remember the CCP-19 pandemic was caused by their incompetence in the first place. It was well known that Tedros (Head of the WHO) was their puppet since he took office. The CCP has lied about how many people were infected and died in China since the beginning. And the CCP played every card they had to make the pandemic worse elsewhere. They handled it far worse than say Taiwan or South Korea.

          The CCP also has built an extremely poorly designed dam network in China, the crown jewel, the three gorges dam, was at risk of collapse last year. Had the three gorges dam collapsed, the death toll would be in the millions (it could still easily break in the future), some of the crisis response plans actually leaked about it and it was revealed that the CCP was surprisingly, most concerned with protecting itself and it’s own high ranking members, should such a crises occur. Many of the unseen types of infrastructure in China, such as flood control, are very poor to non existent, including in big cities. China does have a dam network, which can help with small floods, but makes big floods worse/more dangerous. Big Chinese cities (the vast majority), don’t have the kind of drainage systems or other systems that cities in developed countries would. During the floods last year, in order to prevent the big cities from flooding, the CCP would actually blow certain dams and sections of levees, sacrificing villages in the process. They also would typically give no advance notice to the villages, people died from that. In general, anyone living in villages (most of the country) receive little to no help from the national government, but are commonly subject to whatever schemes the CCP is up to.

          Also, there is plenty of p0rn in China (use of VPN’s is still very common). It is important to remember the standard workweek for most people there is 72 hours a week, 12 hours a day, 6 days a week. Just like everywhere there are people working more and less than that. The crime rate is far higher in China, than in America. In China, however, the police will despite the very extensive surveillance network, very simply ignore most crimes, most of the time, including big crimes such as the kidnapping of little girls (extremely common). If you do anything to anger the CCP however, the hammer will come down on you with great force and urgency.

          We hear that the CCP thinks 10 steps ahead, but that is very untrue. Right now, political purrges are happening in China and many of the top business people in China are being targeted such as Alibaba’s founder Jack Ma, and Tencent executives such as Zhang Feng. What grand chess plays involve destroying many of the top companies in your country?

        • Lisa_Hooker says:

          @Bobber – try working for the US government and not doing what you are told. Or any large corporate entity.

        • Auldyin says:

          Spot on Asul
          China currently has an excavator working on the DARK side of the moon preparing geology samples for return to Earth. Way ahead of the capabilities of even the Russian space-masters. This is the case in so many fields. We call democracy putting a cross in one of 2 boxes every 4yrs. Whereas a CCP representative has to work his way up through serving local districts for years. I saw an independent documentary once about a local rep’s life. He was badgered every minute of every day by any citizen on any subject. To progress, in the party, he had to show his superiors he was capable of serving the needs of his district. He could be expected to do this for 20yrs before progressing up the ranks. Our reps only need to get financial backers to advertise for election and then forget about us once they are in. Democracy is one of those weird words that means whatever you imagine it to mean.
          What China has got certainly works for them and they are not aggressive with it. They had huge chunks of their territory stolen from them and they have negotiated patiently and peacefully to get it back. Imagine if the UK had stolen San Francisco from the US 200 years ago?
          I had another response about China here recently but I cannot find it now. I think it was removed for reference to weapons or something?

        • DJ says:

          “Imagine if the UK had stolen San Francisco from the US 200 years ago?”

          there’s no such thing as “stealing” territory.

        • Thomas Roberts says:


          You might get fired. However, unlike China, you and your family won’t have the risk of being thrown in prison and having your organs stolen (during this process, you will be given drrugs to paralyze you, however they won’t necessarily give you anything to prevent pain and you may be conscious as its happening). And yes, that does happen alot. In fact, the person buying your organs, may in fact request to see you before the harvesting. Depending on the hospital, they may allow this. The exact process varies on several factors such as, is this hospital run directly by the military? If so, you may be given said drrugs to paralyze you (but not be made unconscious, there is a belief this makes the organs better) at the prison, you will then be transferred to the hospital, after the procedure starts you will be alive, awake, and in great pain as you are cut open and organs are stolen from you, that will be the final moments of your life. You will be cremated, your ashes disposed of and your family (or remaining family) won’t be notified you are gone.

          In the past the organs mainly came from the Falun Gong people and other dissidents, however, it looks to be expanding to Christian, Muslims, or anyone who offends the CCP.

          Anyone with enough money can travel to China, schedule a screening, pay “”for the surgery”” wink wink, and choose your surgery date.

      • Jack says:


        These anti China attitudes are why China is what makes the US so complacent & lazy, you say a lot of things that can easily be replaced by the US, you can literally replace the name China with the US, fake figures is a prime example, the US say they are growing, what growing but spending borrowed at a rate of $5 for every $1 growth.

        The reality is the US corporations for bigger profits & no care for their own country are the problem, not China, without the US consumers China wouldn’t be doing so great, without the vast borrowing & spending the world economy won’t be growing at all, not for a long while anyway, it’s all fake prosperity.

        Forget about China & concentrate on how to improve the US

        • historicus says:

          “Forget about China & concentrate on how to improve the US”

          How about we concern ourselves with China (who still steals our technology, subsidizes their industries, etc) AND concentrate on how to improve the US?

        • jack says:


          “How about we concern ourselves with China (who still steals our technology, subsidises their industries, etc) AND concentrate on how to improve the US?”

          If China steal tech why are they able to sell in countries who have patent law, didn’t the US steal massive amount of tech from Britain & Germany as they rose, to me this is nonsense talk, sure China has certain policies, but it’s their country, if you wanna concern yourselves with China then how about telling Apple to leave, they can’t cuz without China Apple cannot get the tens of thousands of technicians to make it’s products.

          To me this is the arrogance that is destroying the US, like they can force a nation to do what it wants, tell US corporations to leave, or continue, either way excuses will do zero to change things.

        • Thomas Roberts says:


          There are many problems in America, there are vastly more in China. The difference is in America, people are allowed to acknowledge these problems, one of them is an out of control CCP. America has to figure out how to solve this problem simultaneously with other issues.

          What is the perfect country you are from?

        • nodecentrepublicansleft says:

          JK says:

          -China is going to “bury us”.
          -They have what “used to be America” (morality, etc.)
          -You’re safe walking their streets.
          -US cities are “cesspools”
          -China won’t subjugate countries like the US does.

          Why are you living in the USA? You clearly believe China is a vastly superior place to live!! If I were you, I’d move there. Don’t put up w/the USA and all it’s faults, China is Utopia! :)

        • Maximus Minimus says:

          You could start improving the US by ditching the market-will-take-care-of-everything mantra, but good luck with that.

          Secondly, stop producing trained buffoons whose main stock in trade is making bombastic empty statements, who uncannily seem to be attracted to top political offices. Good luck with that, too.

      • nick kelly says:

        It is far easier to make skirts and shirts than footware, especially boots. In 2020, 70 % of US footware came from China.

        But of course China will gradually hand over low profit, Walmart stuff to less developed, cheaper labor countries, just like the US handed it to China (and doesn’t want it back, despite nostalgia for the sweat shop, presumably manned by others)

        From the salad:

        ‘In the electronic sections, made in Vietnam and soon to be India and other Asian countries are getting far more common.

        For alot of things like electronics, most of the high value parts come from devoloped countries, before being assembled with some made in China components.’

        So it’s ‘assembled’ in China but ‘made’ in Vietnam?

        The big bucks here is the smart phone and both China and Nam are currently just assemblers. Apple will chase cheap labor anywhere. However China is much further along in progress towards its own chip making.

        I am anti-CCP especially with Xi being something of a throwback to Mao, complete with a book of ‘Xi Thought’. The challenge for China is to move on from the CCP, which the CCP could begin by apologizing to the Chinese people for the Cultural Revolution.

        But this stuff about China ‘not inventing anything’ is too ridiculous to pursue, just note their patent numbers and ‘Jade Rabbit’, the rover they placed on the moon.

        • Thomas Roberts says:

          They invent very little under the CCP’s control. Overwhelmingly, everything that went into the Jade Rabbit was designed or built in other countries. Can you point to anything that proves the rocket used to launch the Jade Rabbit was an original design? Was the rover itself powered by domestically made electronics and an original OS? The CCP can rip off and reproduce designs to varying degrees and they can claim anything.

          Also, even in countries like America or Germany, the vast majority of patents are for things that already existed. The validity of patents are determined in courts. The overwhelming majority of patents everywhere are ridiculous.

      • roddy6667 says:

        People don’t realize that when labor started to get more expensive in China, they switched to factories in Vietnam, Cambodia, and Bangaladesh. The product now ships with a Country Of Origin label that is not China. However, the companies are Chinese and the end profits flow to a bank in China.

      • MarkinSF says:

        Its barely and mayhem.

      • EndTheFed says:

        I believe the IMF has the currency ready to replace the SDR.

        You have a good take on the China situation. If push comes to shove with them I wouldn’t be surprised at all if they made a play for Taiwan. Then it’s game on.

      • Rubicon says:

        What makes you think China even needs to sell items for American consumption? We’ve heard their total trade around the world is only about 20% for America.

        Why is that? Because it’s doing a terrific job in trading with the EU, Asia, Russia and other Eurasia nations.

        By the way, China goods sent to the EU are frequently more cheaply priced, such as cellulars, electronics, etc. because they don’t have a FED, or a huge Megalithic group of Super Billionaires, nor a Fire Sector that imposes horrible costs upon average over here.
        Europeans are especially pleased with purchasing Chinese goods.

    • cas127 says:

      Not bad, for a quick, approximate summary.

      But until the mortal danger of running the US this way for decades on end is more widely understood, DC will keep shooting the country up with monetary heroin until the currency/economy dies.

      • cas127 says:

        My comment was in response to Cobalt Programmer’s initial statement.

        For some reason, the commenting system occasionally appears to mis-position reply comments.

      • Absur Ditty says:

        Clearly, these graphs show that the USA needs to send out a lot more stimulus checks. Looks like we could do a few more rounds and the % of dollars as global reserve currency would barely budge!

        We need to send stimulus checks to every person so they can buy stuff like clothing and electronics to stimulate the economy and create jobs. We need to send stimulus to every county and state to prop up their pension plans. And we need to send stimulus to anyone who has big losses so they don’t have to suffer.

        This is the privilege for being the world’s best system and having the number 1 reserve currency! There is no need for anyone to suffer or be sad or go hungry or lose their business just have the govt start sending out those checks!

    • historicus says:

      And the academics will insist “Trade Deficits Don’t Matter” for the dollars must return, and the consumer gets the benefit of cheaper goods.

      What they miss, those in the Ivory Towers of Academia is…

      ****With the return of dollars comes changes in ownership and control
      (example: China takes their surplus dollars and buys the influence of a Congressman. The dollars come back, the Congressman joins the Country Club, and the constituents lose.

      ****We are essentially trading our currency for items that will be in a dumpster within years, as China (for example) accrues power, control, and ownership of lasting and useful assets.

      • Jack says:


        This comment here I would agree with, that China saves the Dollars and buys real things, so trade deficits do matter, but when it comes to knee jerk reactions demonising another country I disagree, it’s up to the US citizens to choose, do they want to address the real problems or blame others.

        • Rubicon says:

          Jack: HOW can US citizens “address” the immense problems in America? Firstly, most American’s only have a very vague understanding of the mess. Secondly, to “address” the problem, you’d have to take on Big Tech, The entire US Financial, Insurance, Real Estate problem.
          It’s an impossibility. The American Hegemony is faltering for most ALL American citizens.

        • 91B20 1stCav (AUS) says:

          AND…they don’t know ‘Jack’…

          may we all find a better day.

    • Mel says:

      Cobalt Programmer,

      Point 1. For a currency to be used as reserve, other countries have to be able to get hold of some for themselves. When the US$ became THE reserve currency in 1971-72, US military spending had spread US$ all over the world. It was sort of natural to use US$ as international settlement currency because so many different nations had US$ to spend.

      With China manufacturing and selling merchandise in the world, not so many RMB leave the country. It would be handy to pay China for their goods in RMB, but China would have to be a net purchaser or net lender before other countries would have the RMB to pay.

      Your other points seem right on to me. I think Michael Hudson’s book _Super Imperialism_ is an excellent guide to the mechanism and history of the reserve US$. He’s coming out with a 2021 edition real soon.

    • David Hall says:

      China is a known money printer. They were able to build empty cities with what one Chinese citizen called, “hot money.” They built a city with streets arranged like Paris. Tianducheng even has an Eiffel Tower. Chinese people buy lots of gold and real estate as the yuan is not stable. If you buy a controlling interest in a company there, you might end up in jail like Jack Ma. He is not the only billionaire to disappear behind the bamboo curtain.

    • Michael Droy says:

      The Renminbi can’t be a large reserve currency until there are large quantities of liquid short term assets in the currency that foreigners can hold. Like the T-Bills, bonds, CDs and other short term assets we can all hold in USD.
      Step 1 would be for China to boosts its money markets and access for foreigners. (I’m sure it will happen – but China doesn’t need it for itself).

    • Point Blank says:

      “1. Renbibi (People’s currency) must be the reserve because they are manufacturing everything.”

      China has a closed capital account which makes it near impossible for anyone to respect it as a viable alternative to the US dollar. No one can make real investments in China that are largely free from government intervention.

      China prints massive quantities of money to subsidize their manufacturing sector. They also subsidize manufacturing by their lax environmental enforcement, which will likely need to change in the future.

    • sunny129 says:

      Wake me up,when RMB is allowed to free float against other global currencies! Until then it is a paper tiger!

      Being pegged to US $ is a sign of insecurity and lack of confidence! Even Indian Rupee is free floated!

    • Actual Programmer says:

      “Trade deficit occurs because US do not produce anything of value.”

      On the contrary, the US produces a great deal of high margin products, much of which is sold domestically. Search for “US manufacturing output” and you will find graphs of uninterrupted upward sloping lines. The US imports a huge volume of low-margin goods from countries (China, Mexico) and regions (Europe) that have insufficient markets to support their manufacturing output. We pay the salaries of the world.

    • roddy6667 says:

      I wonder how much of the US GDP is comprised of financials. Money goes from the wage earner to a broker and to a mutual fund. Commissions and fees are shaved off the principal every step of the way. Hundreds of billions of dollars are accumulated by these money changers in the temple and are included in GDP. They produce nothing, yet they are treated the same as manufacturing or service industries.

      • 91B20 1stCav (AUS) says:

        roddy-excellent question. Popped smoke comes in many colors…

        may we all find a better day.

    • gnokgnoh says:

      China’s manufacturing output is no. 1 in the world at 20% of global manufacturing. The US is no. 2 at 18%. Japan is 3rd at 10%. Good grief.

    • Exactly CP!
      1. Renbibi is not yet a threat but it’s growth in the global reserve system will grow following the logistic model, and will be exponential growth at first. That means, when you see it coming, it’s already here.
      2. We’ve had trade deficits since before Nixon, that’s why we left the gold standard. . . that’s never been a problem because we of 3 and 4.
      3. In light of 1 and of recurring oil gluts, how long is 3 going to last?
      4. expect dollar to hyper-inflate
      Great job CP! Thanks.

      • Wolf Richter says:

        I don’t get this. Someone help me out. What is all this “renbibi” stuff here. Someone started it, and now it’s all over this comment section. As far as I can tell, China’s currency is called renminbi or RMB.

        These “renbibi” comments are now showing up as #1 on Google search for: currency of China renbibi. ?

        At this pace, WOLF STREET commenters are going to change the official name of the Chinese currency to renbibi in three years ???❤??

        • 91B20 1stCav (AUS) says:

          Wolf-never underestimate the current speed and expansion of degeneration in American English (no doubt am guilty of aiding it, myself). Have noticed it in formerly-rigorous journals such as (but not limited to) the NYT & WSJ for about a decade now. My (un)favorite fingernails-on-a blackboard term is the now widespread ‘hone in’ instead of ‘home in’. One used to ‘hone OUT’ a cylinder, or ‘hone AN’ edge on a blade. Concurrent to that one would ‘HOME in’ on a radio signal, actually or allegorically.

          (Oh, oxymorons, where art thy stings? Just shows I really need to get back outside, now. Lotsa satisfying wildfire-mitigation work in progress here).

  2. FromKS says:

    I read that unless US lifted sanctions on Iran, Iran would become more flexible on oil sales, including Renbibi denomination. THAT could be interesting.

    • SpencerG says:

      Could be… but probably won’t be. The whole point of using a “Reserve Currency” is that it can be used to buy a variety of things from a variety of people. MAYBE the Iranians can get their money’s worth from China ALONE… but that is unlikely.

      Plus the Iranians would be letting another dictatorship control the value of their only real export…instead of oil being what the markets say it is worth it would only be worth what the Chinese say it is worth. And the Chinese leadership could wake up tomorrow and announce (or worse… NOT announce) that they are devaluing their currency by 10 or 20 percent… so now the oil you sold them in the PAST is worth less than what you got for it.

    • Yes FromKS! You’re right on target.
      Iran and China just signed a 25-year cooperation pact.

  3. DawnsEarlyLight says:

    We have nothing to back up our dollar. Nothing to even buy from us with the dollar. Hard to argue with those two statements.

    • DawnsEarlyLight says:

      …some thing better like Euro or gold or bitcoins? LOL, please.

    • Carl Wilson says:

      The US Dollar is backed up by the US authority to collect taxes. Watch how that is being eroded.

    • 2banana says:

      The US is dollar is backed the world’s largest economy and most lethal military.

      • char says:

        Uhm, third largest economy and most expensive military

        • Thomas Roberts says:


          The CCP lies about china’s real GDP, roughly a third smaller than claimed and lies about many other metrics, which, effect the PPP.

          Also, in this crazy made up world of yours, who’s the second biggest economy?

        • char says:

          EU obvious

      • cas127 says:

        “most lethal military.”

        That has been unable/unwilling to fully defeat two non-industrialized non-state actors for over 15 years?

        Any possible response to that question is going to be very troubling.

        • DawnsEarlyLight says:

          Defeat? Our military plays delay games, with no intent to finish.

        • MonkeyBusiness says:

          Delay games? We’ve bled billions of dollars on top of lives. And it’s the US that asked for peace.

          I guess that’s how winning looks like nowadays.

        • MiTurn says:

          “That has been unable/unwilling to fully defeat two non-industrialized non-state actors for over 15 years?”

          That’s the game! When the military-industrial complex needs an excuse to enrich itself and try out new weapons. The heck with the lives of the American soldiers. Former soldier and president Dwight Eisenhower must have been intimidated by these folks because he waited till his farewell address to even address the problem. JFK stood up against them and tried to get out of Vietnam…

          Read “War is a Racket” by Smedley Butler — the most decorated US Marine in history.

        • Paulo says:

          Folks will never forget that image of the evacuation of Saigon, with Hueys pushed into the sea to make room for more to land before they ran out of fuel.

          Back to the article and comments. It isn’t just about US vrs China for reserve currency ‘King’ status. It is simply the reality of options, particularly the Euro and/or a Basket of Currencies. As Saudi Oil importance fades into the past, the World will use other currencies for the energy purchase needs. Maybe even for promised goods or for future considerations as done now with Iran. There might even be a World trading token, purchased with currency of choice. Who knows? (You know, that much demonised World Currency).

          The recent America First regime blatantly emphasised the King was/is just out for himself; at all times and in every sector. Or as the old saying goes, sometimes you have to go along to get along. If there are options, trading players may choose to go elsewhere out of self interest. The military card hasn’t worked for a long long time. (Ask the British about their navy and Pound Stirling).

          The Belt and Road policy is absolutely brilliant, and once again demonstrates the ‘long view’ with incremental plans and goals. Compared to 4 year pendulum swings, well, there is no comparison. Threatening/imposing sanctions every time you don’t get your way is unbelievable. Obstructing the Nord Stream pipeline is ludicrous, for what? The LNG export sector of Texas? Everyone ‘gets it’, that is why the reserve currency status decline is a question of when, not if.

        • Jonas Grimm says:

          We got into a land war in asia. Nobody survives that unscathed.

        • roddy6667 says:

          America has not won a war since 1945.

        • SpencerG says:

          Oh nonsense. Ask either Saddam Hussein (Iraq) , Mullah Omar (Afghanistan), or Abu Bakr al-Baghdadi (ISIS) about the U.S. military’s ability to depose a government by force.

          In fact, ask any of these yahoos about the “lethality” of our military and intelligence services… Osama Bin Laden, Hamza Bin Laden, Qasem Soleimani, Abu Mahdi al-Muhandis, Qasim al-Rimi, “Jihadi John”, Anwar Nasser al-Awlaki, Abu Muhsin al-Masri, and Imad Mughniyeh. The list goes on… and on… and on. Not that you can actually “ask them” anything at all (and get a response).

          The only issue is whether we win the PEACE that follows. But how much is that really an issue? No other nation on earth cares a fig for the “Pottery Barn Rule” whatsoever. When Putin decided in 2015 to intervene in Syria (which all the talking heads said was him entering a “quagmire”) did he care about fixing the place when he was done? When France deposed the leader of Ivory Coast in 2011 did they spend a trillion dollars (or even a BILION dollars?) repairing the damage they caused? How about Libya… does ANYONE care what happens next now that Qaddafi is gone?

          Americans have an overdeveloped sense of responsibility. People pick a fight with us, we smash them like bugs, and then we we think it only fair if we rebuild their nations. That rebuilding works better sometimes rather than others… Japan, Germany, Panama.

          But there are ZERO governments around the world who have any doubt about America’s “lethality.”

      • JK says:

        That military spending buried us. It’s a ridiculous amount of money per year. We can’t defend against Russian hypersonic weapons. We pissed away so much money and destroyed this great country with these endless wars.

        • nodecentrepublicansleft says:

          That was OBL’s stated goal.

          He wanted to sucker the US into invading the Middle East and bankrupting itself (as he saw the USSR do in Afghanistan when OBL was w/Mujahedin, receiving covert US a$$istance). People on camels w/stinger SAMs.

          When guys like Dubya (baby bush the lesser) and Dick (both w/deep ties to MIC and oil industry) are in charge, you know what happens next!

          We can’t have healthcare, education, affordable housing, clean water, competent Covid-19 response, etc., we need those trillion$$$ for MIC + tax breaks for the 1%/huge corps.

          What was really funny was when George H.W. Bush had to step down from the Carlyle Group. It was bad optics for him to be in an organization that included OBL’s daddy!!!

      • Problem is the US is an 18th century empire trying to rule over a 21st century world. It ain’t working.

    • Robert Moran says:

      True: our currency is keystrokes.

  4. ThePetabyte says:

    I guess you could say that the market is high on methamFEDamines.

  5. Tom S. says:

    Why the Yen though?

    • cas127 says:


      Good question.

      One possibility – View foreign investment (of which FX holdings are in fact a kind of) as a fraction of national “wealth”.

      In times of distress (Japan, with 30 yrs of stagnation-at-best, likely qualifies) a nation may downgrade international trade priorities (which Japan’s USD holdings facilitate through influence on FX rates) in favor of simple “repatriation” of foreign currency holdings/ntl wealth back to the mother country.

      In times of trouble, Japan Inc. may shift focus from overseas involvement (necessitating use/holding of USD) to emphasis on healing/growing the domestic economy. Which would mean that USD serves less of a purpose.

      So USD get turned in for Yen.

      • Tom S. says:

        Thank you, sounds like the Yen is viewed as a stable USD and EUR alternative. But, I’m not sure if there will really be a trend of isolationism going forward. The central bankers won’t allow it.

      • nick kelly says:

        You mean they ‘re gonna quit making autos? In those ’30 years of stagnation’ Japan has long past the US auto industry, ex. trucks protected by a steep 25% tariff. And autos are just where the consumer most often sees Japan’s expertise: head into any area of precision machinery and you run into it real quick.

        Can’t make head nor tails of these yen theories but Japan is not in distress, especially compared to the US and is certainly not downgrading trade to heal the domestic economy.

        • nick kelly says:

          PS: Japan’s govt debt, unlike its currency is all held internally and it just surpassed China as largest holder of US debt.

    • Stupid says:

      Probably because the Yen is the strongest tradable currency in the East and many countries from Russia on east want to dump the dollar and use something else.

    • Petunia says:

      Japan has stable and highly functional financial markets. They are considered the third most important global financial center behind the US and London. That’s why the Yen is more desirable than the Euro.

  6. RepubAnon says:

    I’d guess that part of this is due to the US abusing its sanctions power. Once the US proved that it could just decide not to honor its treaty obligations, it became time for the rest of the world to slowly unwind dollar holdings. The Iran-China deal is a portent of the future, where the US Dollar loses its superpowers.

    • 2banana says:

      You do know a treaty is approved by the senate?

      A presidential “agreement” or “deal” or “accord” has zero validity and is not worth the paper it is written on.

  7. 2banana says:

    The RMB is not going higher because the Chinese do not want it go higher. They are no where near ready to become a reserve currency.

    The RMB is essentially pegged to the dollar.

    The RMB doesn’t float.

    There is no free flow of currency in or out of China.

  8. char says:

    States need to spend their dollars companies loan payments are due and the companies don’t have the dollars because of covid. A much more likely explanation

  9. economicminor says:

    If you write a contract in US$ and need to enforce it in court, the US does have a relatively fair judicial system on that level.. Can you imagine trying to enforce a contract in a Chinese Court? Or deal with a Chinese Insurance Company?

    I agree the US is blowing it with its debts. At one point the world thought it might go with the yen, then the euro. As for the Renminbi? Really!

    I think it is going to be a while before the US loses its status as reserve currency.

    • IdahoPotato says:

      “Or deal with a Chinese Insurance Company?”

      Have you dealt with a U.S. health insurance company? Or one that deals with long term care insurance?

      • economicminor says:

        My point is how do you write a contract under Chinese legal system and use a UK or US Insurer? Would any real insurer get involved in such an apparent worthless document? Any such thing in China would be at the discretion of the Party.

        As for our legal system, as bad as it has become for We the People, it still sort of functions on the corporate level. From my reading, the Chinese system is for the state’s interests, period.. A foreign entity has no real status. Doing business in China or with China is totally at the whim of their leadership and its state controlled media.

        • roddy6667 says:

          Maybe that’s why over 4000 American countries have chosen to do business in China and make more money than they do in America. The US has whimsical leadership and a state controlled media.

    • cas127 says:

      “the US does have a relatively fair judicial system on that level.”

      Hmm…I don’t know…the Executive has demonstrated a lot of banana republic behaviour for 20 years, would a foreign investor really believe the judiciary could not follow?

      • Jeremy says:

        The UK has good judicial system for contract law honestly

        • cas127 says:

          Not sure how the UK got in the conversation.

          In any event, my fundamental point is this…if the US executive branch engages in more and more banana republic behavior (money printing, etc) and the US judiciary has a marked (though not universal) propensity to defer to the Executive in many matters, then I don’t think foreign investors really hold USD primarily because they have unalloyed faith in the integrity of US institutions.

      • Mark says:

        “the US does have a relatively fair judicial system on that level.”

        Yep ….. The best judicial system that money can buy.

  10. US has the best currency, you want to sell to the US, you hold their currency in reserve. US has the best stock market, if you don’t have our money in your bank, how about our stocks? US has the best bonds. Gary US Bonds.

    • RightNYer says:

      Do you really think that’s sustainable long term? A country that has no economy except dollars, bonds and stocks, with nothing to back those up?

      • Absur Ditty says:

        RightNYer you can use USD to buy bitcoin & precious metals, so that’s what backs the US dollar. It is actually backed. Just easier to settle transactions in USD.

        • Chris Herbert says:

          I’m not sure that the US wants to start converting bitcoin into dollars. It is more likely, in my opinion, that the federal government is more inclined to start enforcing anti-money laundering laws (i.e., bitcoin). As for what backs up the dollar, the answer is US resources, including labor and minerals as well as technology advances, food and manufacturing. We’ve slid some on the manufacturing and infrastructure businesses, but that will change if Democrats manage to avoid saving defeat from the jaws of victory. “I’m not a member of any organized political party. I’m a Democrat.”

        • Absur Ditty says:

          Chris Bitcoin is legit part of the establishment now what are you talking about? Bitcoin transactions are totally public how can that be money laundering? I put a bunch of my stimulus into bitcoin. Seemed appropriate.

          You can send me bitcoin 34xp4vRoCGJym3xR7yCVPFHoCNxv4Twseo there’s nothing illegal or shady about it.

      • Lisa_Hooker says:

        Sure. Look at London.

  11. Augusto says:

    All currencies have their own problems but all share one problem from an outsiders perspective. That one problem for all countries is that in time of serious internal economic crisis they will renege on their promises to foreigners whether in the form of agreements, currency, bonds, etc….The US, China, the EU, etc..they will be to save themselves and if that means not paying someone else so be it. The US is currently the safest international currency, because they have the most foreign interests and therefore the most to lose by not living up to their promises.

    • RightNYer says:

      What promises? The only promise is to pay back a bondholder with dollars. There’s no promise as to what those “dollars” will be worth.

  12. bungee says:

    “The Eurozone’s trade surplus shows that it is easily possible for an economic area with a large trade surplus to also have one of the top reserve currencies”

    distinct from a nation with the reserve currency.

    in the last article of this series i asked why they even bother holding countries’ debt. if they need dollars (or other currencies) why not use swaps going forward?
    Wolf answered that they are holding treasuries but that swaps are cash. my follow up question (to anyone here) is, so what?

  13. Rcohn says:

    Some entities need to hold Treasury securities for regulatory reasons .
    Given the negative real return , why would any other entity want to hold any Treasury security and lock in a guaranteed negative real return . ?

  14. Depth Charge says:

    It’s criminal what the career politicians have done to the US. These fossils who are limping around the Capitol the past 40+ years as they sold the US down the river should be cuffed and stuffed.

    • MiTurn says:

      “It’s criminal what the career politicians have done to the US.”

      Concur. And toss in the career military officers in the Pentagon that end up retiring and working for the arms industry.

      • Absur Ditty says:

        I totally disagree. They just sent me $16,800 dollars for my family of 12. How can that be criminal? Our politicians are very generous. They have my vote.

        • Lisa_Hooker says:

          Apparently you did not get all the dollars you are entitled to.

        • Absur Ditty says:

          Lisa how can I get more $$$ I really need to know! How many am I entitled to? I thought I got the correct amount?

    • nodecentrepublicansleft says:

      You’re 100% right, DC!

      The problem lies w/the ignorant / apathetic US public.

      It’s the dumb-ass citizens of our beloved fading Republic who:
      1) vote these criminals back into office;
      2) can’t be bothered to vote….watching TMZ, NFL and tweeting….

      Like George Carlin said: “The public sucks…..f*ck hope.”

  15. Rick says:

    Quite a few countries got invaded/sanctioned because they tired to escape the US dollar hegemony in the past. Now Russia and Iran are for sure on boat with RMB trading with China, expect many more to join officially in the future. Then falls another hegemony like many that had fallen in the past due to currency/credit destruction.

  16. YuShan says:

    Even within China, a lot of borrowing is done in US$. The reason is that RMB is very regulated and by borrowing in US$ you can avoid that.

    Another thing is projects like Road and Belt initiative. The Chinese are building infrastructure in all kinds of countries, contracting local labour etc. But these guys cannot be paid in RMB, they must to be paid in US$.

    Of course the dollar dependence is a strategic risk for China, Russia etc, because the US has a lot of ways to cut of the supply and block payments etc (ask Iran), crippling their economies. So they are trying to move away from the US$. But there are very few markets that are deep enough to facilitate that.

    Although I don’t see moves into that direction yet, I wonder if gold could facilitate that in the future. It is a universally accepted and most important, an A-POLITICAL currency (it doesn’t belong to any specific country that can print it or cut off supply). In the past it was awkward to transact in it, but now that you can have ownership on a public ledger. This turns it into money that you can use for instant settlement of transactions.

  17. Depth Charge says:

    I liked this quote from Sven Henrich today:

    “First we took your savings income.
    Then we made rich filthy rich and housing unaffordable for many.
    And now we’ll finish off the bottom 50% with inflation we don’t count.

    And we’ll make millions with speaking engagements.”

    What the FED is doing is absolutely diabolical. Somehow, some way, they need to be stopped. And immediately. They are destroying this country to feed their rapacious greed.

    • CRV says:

      I’d like to add to your commend about “inflation we don’t count” the following i read on Yahoo finance yesterday:
      “… grocery prices are rising faster then inflation …”.

      I had to take a moment and count to ten.

      This journalist or whatever, doesn’t understand that rising prices = inflation and that the inflation he is referring to is the official inflation reported by the G. When even journalists are disconnected from reality and can’t give an accurate description of it, what is the point of journalism?

      • SnotFroth says:

        Enthrallment of the masses

        • MiTurn says:

          Control of the ignorant and distracted masses. Keep ’em guessing and distract them with ‘important social issues.’

    • Stupid says:

      Who owns the Fed?

    • historicus says:

      Depth Charge.
      “What the FED is doing is absolutely diabolical.”

      No truer words were spoken. Jerome Powell drives the getaway car for the theft of future generations.
      The Fed is the great enabler for all the Socialist programs, the Pork in the Pelosi Bills, coming out of Washington.
      If the government had to actually borrow at free market rates, the irresponsible spending would be curtailed.
      The stature of the dollar has been abused…and when the day comes it no longer is held in high regard (soon), the inflation we will see from imported goods will be staggering, and punishing.

  18. Depth Charge says:

    Another quote I saw from Charlie Bilello:

    “1. Stocks: all-time high
    2. Home prices: all-time high
    3. Crypto (Bitcoin/Ethereum): all-time highs
    4. Inflation expectations: highest since 2008
    5. Fed: we need 0% rates through at least the end of 2023 & trillions more in bond buying to boost asset prices & increase inflation.”


    “The Fed continues to buy tens of billions in mortgage bonds every single month to “stimulate” a housing market that is absolutely on fire (+11.2% nationally over past year, highest since 2006). And no one is questioning any of it.”

    • Beardawg says:


      The Wolf Streeters question it every day – but unfortunately (for now) the Wolf Street voice is a whisper in the valley. Perhaps some day the Streeters ‘ voices will be heard.

      • Absur Ditty says:

        I question the questioners. Do you really want your home price to come down? That’s nuts!

        • MiTurn says:

          Yes, I do. I’ll die in this house and as tax rates are based on value, I’d like the value to drop.

        • Absur Ditty says:


          so basically you want to hurt the other 380,000,000 people who need their home prices to go up just so you can save a few $ on taxes. Wow. All I can say is. Wow.

        • MiTurn says:

          Absur Ditty, think “fixed income.” I get punished with tax increases. And so do a large number of seniors in the same situation.

    • historicus says:

      The Fed has skewed the evaluations of all assets by skewing the cost of borrowing for 12 years now.
      Bernanke promised QE would end (WSJ July 2009) when things returned to normal. The Dow was circa 10K at the time. I guess that was an “untruth”.

      • Depth Charge says:

        What we have found, with a preponderance of evidence to support it, is that the FED are pathological liars. Even worse, they gather behind the scenes to carefully craft these lies to manipulate and deceive the country. How a cabal such as this is allowed to continue shows how crooked our politicians are.

  19. What is the difference between allocated and unallocated reserves in COFER? Allocated are securities and unallocated bank deposits?

    • Wolf Richter says:

      Jan Nieuwenhuijs,

      Unallocated reserves are just like allocated reserves, but a few smaller central banks do not provide the IMF with details of their holdings (what types of securities, denominated in what currency). They only provide the amount of their total holdings. These are the unallocated reserves because they’re not allocated to specific securities and currencies.

      Unallocated reserves have steadily diminished as more and more central banks started reporting the details of their holdings to the IMF. In Q4, unallocated reserves accounted for just 6% of total reserves (compared to 41% in 2014). So I stopped discussing it because it’s no longer a significant issue (but it was six years ago).

  20. davie says:

    The Cassandra about government debt and money printing gets old.
    Your subtle birthright of American Exceptionalism is showing.
    The USD is getting less popular for probably the same reason any currency is less popular.
    People are less interested in their market.

  21. Micheal Engel says:

    1) With no fault of their own, our allies will make the dollar strong ==>
    US gov can print as much as they want.
    2) JPY will be weakened because of China. USD/JPY next stepping stone will be between 125 and 150.
    3) NR and China cancel culture will slowdown JPY/USD as well as the EURUSD advance. EURUSD will turn around on the way to parity.
    4) Higher corp taxes will hurt corp buyback and executives perks. Pareto top Billionaires chop shop will redirect their lucrative donations in undesirable directions. The 1615 reparation plan will replace donations.
    5) The $1,400 in repetition will build zombies skills. It will save the banks from default. NPL will drop. The value of the debt will fall. Real work will be done by the new slaves coming from the southern border.
    6) 5G have no use for me, but it’s good for AAPL and AT&T.
    7) In order to survive US corp will have to spend capex in US, not in China. China is an old worn out Nike running shoes.
    8) My cell tower blew up and I had no phone connection for 3 days.
    9) Suddenly my viaduct was dissected with no fault of my own.

    • SnotFroth says:

      Well at least it wasn’t your prophecy viaduct that got ruptured. Keep writing poems Engel, I do enjoy reading them.

    • sunny129 says:

      The constant worry by the investors and the clueless public Corporate taxes and tax rates is perpetual myth! % mega corporations controlling 90% or more of the media are complicit in it!

      Google, to findout how many mega US corp HAVEN”T paid US taxes for the past 2 decades or more! The rate 21%, 28% or 32% means ZILCH! They have so many loop HOLES to drive several trucks!

  22. Micheal Engel says:

    1) Gold Futures weekly : it breached the thin part of the cloud, price under a flatbed, TK had a negative flip and Chik under Price. The cloud above is green. The dent at the top look sexy, but the front end have flipped to red.
    2) Silver Futures weekly look better.

    • Brant Lee says:

      We’re all in search of substance these days, right? Or, what will be substance. Until that time comes, maybe we can make the right trades with our excess paper.

  23. Jack says:

    So this is what Seneca was talking about in response to my comments in the previous article, well if ya reading this Seneca I did say countries are going broke from to much borrowing & spending, all this data fits in with I said.

    The Dollar & the current system is so dysfunctional, the last year of US spending has been crazy, the world economy is shrinking rapidly so USD will drop, this to me clearly indicates a shortage of money as countries spend their USD savings, the other currencies haven’t risen to compensate to their drop in USD, that means they are spending what they have rather converting it, extremely valuable information this.

    The US is playing fast and loose with their USD.

    • sunny129 says:

      ‘USD will drop’

      So will be others, much worse! Turkey’s LIRA for example

  24. Jack says:


    today Google announced a return to the office drive, limiting future work from home, did people really buy bubble property & move thinking this is permanent, what becomes of the people.

    It’s obvious all corporations are being pushed to ease the commercial property collapse by sending people back, what are these people going to do.

    • Wolf Richter says:

      It’ll be a hybrid model (3 days a week at the office). People who want to work from home permanently have to apply for it. Google is also changing its offices: Big lounge type areas to meet, and hot-desking for those needing a desk, it seems. But it never said it would go to permanent from anywhere (unlike some of the other companies). So Googlers knew they’d have to come back.

      • Jack says:

        Right, ok thanks for that Wolf, appreciated.

      • jon says:

        My company in Southern CA is doing the same. My company has 15K people working and looks like over time, it’d be remote work as for the last 1 year, 70% of the people are working remotely with no impact to productivity per company.

  25. Micheal Engel says:

    1) Tomorrow, on Good Friday, the markets will be closed.
    2) SPX open gaps between Feb 21/24 and Mar 6/ 9 were a case of : Iam-Falling and I can’t get up. SL became useless.
    3) Failed can get an A grade. Several failed attempts to close an open gap, of a big red bar, down below, indicate a potential for a strong bullish thrust, followed, possibly, by few uptrend air bubbles.
    4) Gaps blowup by a gap line. Gaps leave their foot steps in the sand.
    5) Sniff them.

  26. Micheal Engel says:

    6) Warren Buffett extreme measures of buyback saved the markets.

  27. rhodium says:

    If they’re all engaging in beggar thy neighbor type policies then currencies are irrelevant anyways. If I was China or any country seeing the U.S. as a rival, I would spend all of my dollars asap on acquiring and stockpiling resources like industrial metals.

    Okay, so I just googled it. China is indeed stockpiling metals (isn’t rational thinking wonderful? The U.S. should try it sometime). One source says they are stockpiling cobalt. Hopefully they leave some for Elon and don’t try to dominate the EV market themselves with the absolutely massive research subsidies spent by the Chinese govt. Where I work a large number of Chinese postdocs just went back to China because they received the best job offers there due to the government’s increasingly massive research budget. Several told me that American corps were offering salaries too low compared to our increasingly insane cost of living. Now isn’t that interesting.

  28. Yancey Ward says:

    The Eurozone’s trade surplus shows that it is easily possible for an economic area with a large trade surplus to also have one of the top reserve currencies

    I find the Euro curious as a reserve currency. The EU area’s trade surplus is huge, but it is lopsided within the area itself- the surplus with the external world is almost all German, and Brexit only makes that more extreme- the UK is now outside the EU area. The Euro as a reserve is only a proxy for the no longer existing German Mark.

    • Wolf Richter says:

      Yes, there is that imbalance within the EU, and Germany’s dominance in terms of exports. But Italy (big industrial producer whose primary customer is Germany) has a big trade surplus too. There are some other countries within the EU that have trade surpluses.

  29. Joe in LA says:

    SPX 4000!

    It’s very appropriate that this should happen on April Fool’s day.

  30. Real problem for the dollar is third world debt written in our name. The dollar is not a commodity while you are outside looking in. Any commodity must have uniform value, and pricing. If your local currency loses value you pay more for dollars in the open market. Any commodity is information, and all forms of information are commodities. The dollar should come with a brochure. Stock market returns have soared since the beginning of the electronic revolution, and bonds as well. When those dollars travel to producer nations, where the management of their currency exchange has less stringent rules, then we call the IMF, and it rolls out space dollars (SDR) to solve the dollars commodity problem. Similar to building a smoke belching ICE automobile, and then tacking on emission devices, until someone says enough, let’s build an EV and put the smog valve on the power plant. If SDR is commodity money, then the dollar is not. SDR is based on a set of economic profiles, like saying you producer nations cannot figure out what the dollar is worth, so we will tell you. A dollar looks different to every country who needs them, than add on sanctions. Bitcoin is a perverse solution, many varieties, all possessing commodity value ( pure information). Bitcoin is market based, on barter, while SDR tracks obscure government data, and geopolitical intrigue. Despite predictions that the Euro currency would fail, the only problem at present might be Turkey’s Lira debt issued in dollars, owned by EU member banks.

    • sunny129 says:

      There is at least 2T or more Euro-dollars + Debts issued in US$ in EM countries!

      When there is distress in overseas dollar pool, FED offers ‘Dollar swap with their currencies’ for short term, before it will strangle the global banking system!
      MMT is already here! More Money Today! Balance sheet will hit 30T and no one complains!

  31. Jdog says:

    Our government is inept and corrupt. It is the worse enimy of the American people….

  32. DanS86 says:

    King $ will not go easy. Ask Gaddafi. The Carrier Groups are plying the seas…who do they visit next?

  33. Yort says:

    Congrats Foolish Fed, not only are you destroying the USD as the world’s reserve currency, you are making it almost impossible for small biz to hedge commodity based businesses. For example, soybeans have moved 6.74% in the last 24 hours…that is nuts, soybeans are now a daytrader commodity as the Fed has flooded the market with trillions so the Wall Street gamblers can play with our food stocks as if it is TESLA options. Note that 1000 acres x 80bu/acre x $0.92 (previous 24 hour price change) is $74,000!!! That is a big number for a small business owner whose name does not end with Musk or Bezos. Same with lumber, steel, etc…almost all commodities.

    The irony is the Fed says he is creating inflation to help the little people, yet there will be no little people left owning companies of any size as said relentless inflation volatility puts us all in a situation where the solution is to sell to giant companies that can manage the volatility. Sometimes I think that is the end game, force the small business to sell every house, hard asset, farm, lot, and company to big biz via the guise of “inflation for maximum minimum wage job creation”…

    Fed rant off…but I must say it is hard to believe than one single unelected Fed monetary God on this planet can cause so much unnecessary financial chaos for over 7 billion humans.

  34. Yort says:

    Think the world will be happy to buy USD debt after we pay off all American student loans? Why not pay off all countries student loans, if the money is free and consequence free…

    nah nah nah nah hey hey hey “USD” goodbye

    Per CNBC today:

    $10,000 or $50,000
    There are more than 44 million student loan borrowers in the U.S., and the country’s outstanding balance is expected to exceed $2 trillion by 2022.

    If all federal student loan borrowers got $10,000 of their debt forgiven, the outstanding education debt in the country would fall to around $1.3 trillion, from $1.7 trillion, according to higher education expert Mark Kantrowitz.

    And one-third of federal student loan borrowers, or 14.4 million people, would see their balances reset to zero.

    Canceling $50,000 for all borrowers, on the other hand, would shrink the country’s outstanding student loan debt balance to $700 billion, from $1.7 trillion.

    Meanwhile, the $50,000 plan would forgive all of the debt for 80% of federal student loan borrowers, or 36 million people, Kantrowitz said.

    Even before the pandemic, around a quarter of student loan borrowers were in delinquency or default.

    • RightNYer says:

      That’s the thing the “The USD is the cleanest dirty shirt in the hamper” people don’t get. The decline in trust of a currency starts gradually, and then rapidly accelerates. The gradual portion has already happened, but we’re not going to get a warning when the rapid acceleration occurs.

  35. DawnsEarlyLight says:

    As the worm turns….

  36. SpencerG says:

    “The plunge bottomed out in 1991, with inflation more or less under control. And the dollar’s share then surged by 25 percentage points until 2000:”

    Christmas of 1991 was also the Fall of the Soviet Union. There would have been an increasing flight to dollars on the part of those nations aligned with the USSR both in Eastern Europe AND in the Third World. There really was no other alternative until the EURO came along in 2002… especially after Soros made his run on the British Pound Sterling in 1992.

  37. sunny129 says:

    When (NOT IF!) the DOWN cycle comes, where do you think global investors will park their cash – US treasuries & Bonds! In fact in any geo-political turmoil of any sort!

    Study previous BEAR mkts, you get the answer.

    • SnotFroth says:

      Hopefully they’ll park some in gold when they realize that every down cycle going forward means a frenzy of dollar printing, inflation be damned.

      • sunny129 says:

        Gold remains manipulated and remain suppressed by Govts/Primary dealers.
        Hence money is going towards Crypto – BC

  38. 28Frank says:

    The IMF just “printed” 500 billion SDRs , you might say a trial run, just floating the next potential world reserve currency to see the reaction. However in reality the fed could “print” 10 billion a day for a year with no real impact, it will be 20 years before the USA has to worry about reserve currency status of the dollar.

  39. Auldyin says:

    Another fantastically interesting item Wolf.
    Can we speculate that the vertical drop, late seventies, was a follow on from Nixon closing the gold window? Leading to the inflation spurt?
    Can we speculate that the rise from 90 to 2000 was a response to the internet when US looked like the best bet for the future again?
    It would be amazing to take these charts back for a couple of hundred years to see how the GBP gave way to the dollar and how all the others fitted in. It must have been obvious then, that it would go that way, especially after we blew our wealth on wars. Question now must be what will come up behind the dollar? I don’t see Europe. Look at Co-vid response. Trade-wise it’s got to be something to do with Asia belt & road eventually? Why are they all hording gold?

  40. George says:

    so if you haven’t noticed, our aggressive use of sanctions and tariffs in the case of international trade and global payments have not leveled the playing field as intended. What they have created are equal and opposite reactions that remove the role of the USD at the center of global trade and finance. The multipolar trade and payment order as a result takes aim at the USD.

  41. MaxS says:

    US is right-on-track into the collapse of the great american empire as per Ray Dario’s framework. There is no salvaging it. US is now a has-been. Which is sad. Not because the US has been soooo gooood to everybody (far from it), but at least the US had a modicum of decency. The only candidate to take it’s place, i.e. China, will make us all feel like we are slaves. Mark my words. Worse, much, much, worse is yet to come.

    This is going to be a very painful learning lesson for US people. In some respect, at least, it is karma. It has simply come around. The US has been screwing with everybody and everybody for so long that, historically speaking, is simply their turn.

    The timeline is short, i.e. 5 to 10 years and then it’s all over. The Chinese are on top for good. And if the Chinese history provides any revelation, we will be subjugated for at least 100 years and more likely 300.

    Can’t wait for our Artificial General Intelligence overlords to take over. At least they will be logical.

    • Auldyin says:

      Confucus he says trade not fight.
      China has had internal strife and arguments for centuries but very little history of attacking others. They have traded to exist in spite of having been attacked by all around them many times. I think they’ve probably got wise to this by now and I’m prepared to bet they won’t attack or subjugate anybody, but woe betide any soul who attempts to attack China again. They now have a bigger and more modern navy than the US, not to mention in depth defensive missile capabilities. They don’t seem to be interested in telling others how to live unlike some other well known nations. They’ll lend you money and help you build stuff if you want to do business. Just ask the belt & roaders.

  42. 2BFrank says:

    The Chinese are not the all powerful force everyone seems to think, yes they are a huge and important economy but they are just people, full of faults and idiocies, like electing Chi as lifetime leader for example, they were also one of the first countries to have a paper currency collapse, remarked on by Marco Polo when he was travelling through China. China is also headed for and starting to experience a demographic problem of massive dimensions, already Chinese girls who are outnumbered nearly 3 to 1 in most of China are requiring a BMW a boat and at least two properties of their future husband, any of the slightly less affluent single males are ruled out of marriage with a Chinese girl and thus less Chinese children, yes China will remain powerful and important for years to come, but not infallible.

    • Maximilian Sarte says:

      I did not say that the Chinese were invincible or powerful or anything along those lines. What I said is that the “changing of the guard” so to speak, is coming. If you are interested in this subject, please read Ray Dalio’s “The Changing World Order” (it’s free online). There are multiple dimensions that are making this process irreversible. Then again, I am no fan of Dalio’s but, he is only one among many that it is convinced this process will happen. I am one of them, but I have my own reasons / research.

    • Auldyin says:

      It’s official today in Forbes.
      Beijing has one more billionaire than New York. 100/99
      Saving grace they have 4 times more people so their billionaire ratio is actually 4 times lower than US’s. That also works for Gdp per capita so, although China as country may be as rich as America as a country, an individual Chinese is four times poorer than an American on average. It will take them a long, long time to close that gap.

  43. 2BFrank says:

    Further to the above, America, considered the sole superpower of the last 30 years and the world leader since 1945 hasn’t been able to convincingly win a single war since 1945, ( Grenada and Panama were tiny bugs to be crushed underfoot), is the new supposed superpower of China going to do any better?. China cant defeat the Tibetans, they have been fighting a low level gurellia war for years, they have had their arse kicked by the Indians, twice, in the Himalayas, and the Vietnamese fought them to a standstill.
    As I said a powerful and Important country, but not the all seeing, all powerful force they are so often purported to be.

    • Maximilian Sarte says:

      In short, Yes! Like it or not, China is defeating the Tibetans, the Uyghurs and many other other cultures and groups trapped within China. Not only defeating them, but wiping them out. Literally. You just don’t hear about them because of Chinese control of… well… everything, including news.
      The Chinese economy is surpassing the US in manufacturing. And I am not talking about service and/or farming. Chinese schools are getting close to US quality *while* US’s is dropping. The Chinese are churning out STEM graduates by about 500 K a year (that’s right, a *year*) and their research is getting better an better to the point that they are now leaders in several fields.
      The Chinese plan long term; think 10, 20, 30 or more years. What does the US do? It can’t even plan for the next 2 years because of the election cycle.
      In the military, the Chinese have studied US tactics and devised, designed, tested *and* deployed weapons that make the US military ineffective in the short, medium and long range. Think a-symmetric warfare. The US military only has a response to the Chinese threat *on the drawing board* i.e. everything is dreamware at this point.
      I could go on and on and on. But this is not the forum. Basically, the US is on its way out. This is just a fact of life.
      I suggest you brace. This is going to be a *very* bumpy and miserable run.

  44. (1 dollar index breaks 120
    (2 US dollar becomes the hot money market
    (3 Nobody now within site of the WH who will break the bond – default on Treasuries
    (4 America will build ghost cities, to rival ghost towns of the old west
    (5 China will laugh until they scramble for dollars in the forex market with all the rest
    (6 Repubs win WH in 2024, American named head of the IMF when US threatens to withdraw

  45. 2BFrank says:

    I agree China does control the news, which is why you do not hear about Tibet and similar. I also agree that the USA is on it’s way out, however the point I am trying to make is that the decline of the USA will take many years, 20-30, and the rise of China will take time, 10-15, nor will it become omnipotent, exactly like the USA never became omnipotent.

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