US Dollar Status as Dominant “Global Reserve Currency” amid Reckless QE & Government Deficits

The decline of Dollar Hegemony. But other options are also shaky.

By Wolf Richter for WOLF STREET.

The global share of US-dollar-denominated exchange reserves – these are financial assets such as US Treasury securities, US corporate bonds, US mortgage-backed securities, etc., held by foreign central banks – declined to 59.2% in the second quarter, according to the IMF’s Composition of Official Foreign Exchange Reserves (COFER) data released today. In Q4 last year, the dollar’s share hit a 25-year low of 58.9%. And by the dreary looks of it, the dollar continues on its long, slow, uneven downward trajectory (2014 is the beginning of the quarterly data, prior data is annual):

The Fed is a reckless money-printer, and the US government, which had binged on deficit spending for years, went hog-wild since March 2020. But the central banks and governments of other major developed economies have also been on this program, some even worse. And so, the pandemic didn’t shift the relationships around and left intact the long-term downward trajectory of the dollar as dominant reserve currency.

Since 2014, the dollar’s share has dropped 6.8 percentage points, from 66% to 59.2%, on average nearly 1 percentage point per year. At the pace of the past six years, the dollar’s share of global reserve currencies would drop below 50% in about a decade.

The Fed’s own holdings of dollar-denominated assets – mainly $5.4 trillion in Treasury securities and $2.5 trillion in MBS – are not included in global foreign exchange reserves. Nor are the ECB’s holdings of euro-denominated securities. Nor are the Bank of Japan’s holdings of yen-denominated securities, etc. Included are only the assets each central bank that are denominated in foreign currency.

The arrival of the euro didn’t help the dollar: two decades of decline

In 2001, the dollar’s share of foreign exchange reserves ticked up to 71.5%, after which the last bout of the dollar’s long-term decline started. It’s also the period of the full-blown arrival of the euro. The dollars share has since then dropped by 12.3 percentage points, to 59.2% currently.

But there was a spectacular plunge in the dollars share of global reserve currencies that started in 1978 and bottomed out in 1991, reflecting years of massive inflation, during which the dollar lost about half its share. It then recovered until the euro came along (year-end % shares, except 2021 = Q2):

Exchange rates have something to do with it.

Central banks hold foreign exchange reserves that are denominated in various currencies. For example, the People’s Bank of China holds about $3.1 trillion worth of foreign exchange reserves, denominated in all kinds of currencies. Of this amount, $1.1 trillion are US Treasury securities denominated in USD. The remaining $2 trillion in reserves are composed of undisclosed amounts of yen-denominated securities, euro-denominated securities, etc. The IMF, when it compiles its COFER data, translates all non-dollar amounts into USD.

So the dollar’s share of total foreign exchange reserves depends to some extent on the exchange rates of those other currencies against the USD.

And exchange rates have fluctuated a lot. But since 1999, roughly the time span since the euro eased into existence, the Dollar Index (DXY), despite violent moves up and down, has barely changed.

And the long-term decline of the dollar’s share of global foreign exchange reserves over this time span isn’t attributable to exchange rates, but to central banks unloading dollar-denominated assets (data via YCharts):

The dollar v. the euro v. the also-rans v. the Chinese RMB.

The euro share of global reserve currencies has been relatively stable in recent years at just over 20%. In Q2, it was 20.5%. It has been the second largest reserve currency throughout its existence. The fervent hopes in the early years of the euro for “parity” with the dollar were vigorously bashed during the euro debt crisis.

All other reserve currencies combined, including the Chinese renminbi, had a share of 20.2% in Q2. They’re the spaghetti at the bottom of the chart. The RMB, which became an official reserve currency in 2016, was supposed to blow the dollar away; it’s the short red line at the bottom:

The chart below is a close-up of the also-rans, on their own, on a scale from 0% to 6%. In the group, the yen stands out because it gained considerable share over the past few years, to 5.8% currently.

Note the rise of the RMB (red line) from around 1% when it first became a separately listed reserve currency in Q4 2016, and was removed from the “other” category whose share then dropped (yellow line).

Nearly five years after becoming an official reserve currency, the RMB’s share reached 2.6%. People who’d hoped the RMB would pull the rug out from under the dollar will have to be exceedingly patient.

The RMB became the fifth largest reserve currency in 2018 – behind the USD, EUR, YEN, and GBP – when it surpassed the Canadian dollar and the Australian dollar.

The very slow progress of the RMB, visible only under this type of magnifying glass, indicates that central banks around the world remain leery of the RMB – the only reserve currency that is still not fully convertible, further impeding its acceptance.

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  123 comments for “US Dollar Status as Dominant “Global Reserve Currency” amid Reckless QE & Government Deficits

  1. 2banana says:

    A few thoughts.

    India, a huge population and a fast growing economy that is expected to be one on the top three in a decade, is not even a blip.

    Canada Loonie is quietly getting more respect.

    Russia, with a very low debt/GDP ratio not even a blip.

    So, what would seem as obvious variables, may not make much of a difference.

    • Wolf Richter says:

      The Russian ruble is known for its serial collapses/devaluations that make the ugly dollar look like a saint.
      In 2008, 100 RUB = $4.20.
      Now, 100 RUB = $1.40

      No one wants to hold anything denominated in rubles unless it pays a huge amount of interest to compensate for the risk.

      • JoeyB says:

        Is the SDR “other” in this graph?

        • Wolf Richter says:

          No. The SDR is not a currency. It’s a unit of account for the IMF based on a basket of currencies. “Other” are currencies from other countries. There is no public data on what currencies are included, but it’s minuscule. Might be some Brazilian real, Swedish krona, etc.

        • Arthur says:

          CHF is probably the largest in this group.

      • MCH says:

        Do you think we can somehow get Bitcoin in there? It is the currency of El Salvador after all, and they have to count for something in the grand scheme of things.

        😝

      • Lisa_Hooker says:

        I had a premonition. That’s why I didn’t move to St. Petersburg for a great software management job in 2009.

    • Gary says:

      I don’t think India currency will become on the top three in a decade, cause whether one country’s currency become reserve is dependent on its economic scale (export, personal disposable income, domestic consumer market), all these figures can’t surpass over China

      • sunny129 says:

        True, but Indian Rupee is free floating unlike YUAN pegged to US$!
        China talks a lot but fails to walk it’s talk!

        Global Economy after binging on insane creat creation is entering the contraction phase, long kicked dowen by the CBers!

      • Mira says:

        I can’t see . China & especially not India sitting at the top of the global wealth pile any time soon.
        Talk on China becoming the LION .. is scaremongering & elite know nothings wanting to sound astute .. before their underlings.

    • Cobalt Programmer says:

      Usually, reserve currencies must be hard currencies. Indian currency is a soft currency. The huge population part is true except they are consumers not producers. Also, its better to have reserve currency of a exporter nation. Why have Indian currency when India is a importer? As I told here before, Indian equivalent of pennies was retired around 1990s (Even before India was ~50 years old). Indian equivalent of nickel and silver were retired around 50 years of age before the 2000. Similarly, the dollar equivalent 1 rupee is not worth for anything except in digital transactions. Probably, the value of Indian currency is going down by more than 10% every year. Anyone holding the Indian currency outside Indian subcontinent is not so smart. This is the number one reason Indians are heavily in to gold jewellery.

      • Mira says:

        Gold Jewellery ??
        In India it’s all tin & acrylic paint.
        Look fantastic .. but couldn’t buy you a cup of coffee.

        • Mira says:

          sharing is caring 👀
          I’m into Bollywood .. google Kajra Re Full Song Youtube
          Watch this enchanting & talented beauty do her stuff.
          Observe please the jewels that adorn her.

        • Cobalt Programmer says:

          As long as people believe in it, a shiny rock worth thousands. Most important idea is to save and put hope in a shiny metal.

    • andy says:

      True. I remember not long ago many Indians standing in long lines to get new currency. It was very popular practically overnight.

      • Brant Lee says:

        It was a trick to get hidden currency out from under mattresses and into banks where the government could keep an eye on the people’s money.

        Coming soon to a nation very close to you. Too close.

  2. Mark 2 says:

    Interesting that the Euro hasn’t declined and they’re into negative interest rates. A mortgage can be had in France for 1%.

    • fred flintstone says:

      Mark, the Euro zone has a positive trade and current account. Unlike the US the Euro is backed by economies which are able to compete in world trade. We on the other hand export approximately 60 billion dollars per month which has to be absorbed. The real question is whether corporations like Apple (that have more foreign executives than US) continue to claim US residence. Approximately 67% of Apple revenue is from overseas…….when will they pull the plug and admit they are no longer US. Once that happens the run on the dollar will be on……and it will be a run not a walk. Gold is a manipulated market….but when the boys are not able to hold back the tidal wave it will explode in dollar terms to a level approaching the cost of producing it by artificial means.

      • LK says:

        “The real question is whether corporations like Apple (that have more foreign executives than US) continue to claim US residence.”

        You mean that publically-traded on the New York Stock Exchange Apple? That NASDAQ darling? The one whose headquarters is in the heart of a technology culture and education system where Venture Capitalists go to discover Unicorns in their natural habitat? The one that’s part of an industry desperate to acquire H1-B Visas and import foreign talent?

        THAT Apple?

      • Cas127 says:

        “Unlike the US the Euro is backed by economies which are able to compete in world trade. We on the other hand export…”

        Note from Germany – What do you mean “we”?

        Germany is the overwhelming engine of European export competitiveness.

        Without Germany, Euroland would likely be as bad off as the US or worse.

        • Wolf Richter says:

          It’s not that simple. Many countries, including Italy, are HUGE suppliers of components to the German export machine. The final product gets assembled in Germany, but components come from other Eurozone countries. In terms of the Eurozone, Germany is the exporter. But internally, Italy exports to Germany. Italy has a large trade surplus.

      • Roger Pedactor says:

        The EU is essentially Germany and then not much else. The USD is by far the shiniest turd in the toilet. If all the currencies we’re crypto they would literally all be referred to as Shitcoins which is why cryptos were invented.

        Not that they are proving to be much better.

    • RH says:

      I am invested in EU stocks as well. However, if a good capacitor or fuel cell or solid state battery is created for cars, their technologies are lagging and their car producers may face shrinking of demand.

      The US economy, despite being infested with parasitic banksters and Wall Streeters, also is the cleaner, dirty shirt. Imagine if they were all sent to exile in Northern Alaska to hunt for food! We would all become rich.

      Good luck if you are invested in China. LOL. Enjoy its Cultural Revolution V. 2.0! Hope you have other savings.

      Japan is still shrinking in population, which may good for individual Japanese but bad for Japan’s economy and power. South Korea has issues.

      Other countries are small fry economically. Thanks to this our US dollar is only SLOWLY being replaced as the world reserve currency. The CCP has helped us by terrifying the world. LOL.

    • Mira says:

      Why only the other day Yanis Varoufakis said that the EU was poor & Germany was cash rich.
      It’s hot air that’s keeping the afloat.

  3. THEWILLMAN says:

    Are you familiar with David Graeber’s take on bonds and the dollar?

    He says that we make subservient states hold USD and pay them lower return in bonds than inflation. It’s the modern take on old tribute states where powerful states made subservient ones pay tribute.

    Interesting to see the slide coincide with US geopolitical might in Vietnam and then the failure of War On Terror.

    • RH says:

      This is true if maybe unplanned. We did not fail in the war on terror. If the agreement with the Taliban to remove our troops had not been carried out, the Taliban would NOT have evaporated away. LOL

      The same, billionaire-owned, US media would be documenting how their new, renewed attacks were killing or maiming US and coalition troops. Thank god, we are out. With the new US, long-distance drones, the Taliban will still fear our retaliation if it aids terrorism against the US. We may even want to secretly aid them if they then help Uighur freedom fighters who the CCP calls terrorists.

      • 42 says:

        The USA hasn’t been in a War of Conquest since fighting the Spaniards for the South West. Every other conflict has been a Police Action for keeping the peace (We purchased Alaska from the Russians).

        • drifterprof says:

          Sure, right. If you define “police action for keeping the peace” as using violent or coercive means to install puppet governments, often fascist dictators, who agree to play ball with the U.S. economic and military control of the “free world.” Or U.S. support of terrorists who are fighting one of those “worst kind of evil” enemies” of the U.S.

          (e.g., assassination of Allende, installing Shah of Iran, funding key allies of Bin Laden in Afghanistan, etc. etc.)

          Although, the psychopath type puppets are prone to turn against the master at some point, which is somewhat disconcerting for the world hegemony planners.

        • Winston says:

          drifterprof, it’s a battle between inherently and inevitably corrupt oligarchies. Always has been, always will be. It’s just a matter of at least tolerating the least evil oligarchies.

          Because the US has a government effectively owned by big business [see the 2014 Princeton study “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens”] with those businesses now being highly multinational with boards including many non-US citizens, globalism is their unified agenda and the corporate media and tech giants act as propaganda and censorship arms for them, violating 1st Amendment rights. Here’s a highly prescient quote from one of the dystopian novels on exactly that. Text in brackets is to clarify the meaning gleaned from a much longer quote:

          “[Censorship] didn’t come from the Government down. There was no dictum, no declaration, no censorship, to start with, no! Technology, mass exploitation, and minority [special interest group] pressure carried the trick, thank God.” – Captain Beatty to Guy Montag, Fahrenheit 451

          So, although our modern Amerika is becoming more like China every day, I’d still rather support this less evil oligarchy over theirs. At least I can’t be harmed unless I present a truly serious threat to the corrupt status quo in which case serious harassment and lawfare will be used. But at least that’s better than being disappeared as in China.

        • drifterprof says:

          Winston – I don’t see it as a zero-sum, either China or America.

        • RH says:

          Dear Trailer Trash, the Soviets DID bring themselves down by overly ambitious plans and spending. However, their Afghan invasion and frustrating, futile, bloody war (in which we “secretly” aided their opponents and gave them anti-air missiles, LOL) kept them busy and reduced substantially the prestige of their commies, which prestige their Chernobyl accident then obliterated. While I disagree with much of what Reagan did, thank god for his and others’ efforts, which brought down the Soviets before their swarms of tanks descended on Europe.

          Let us hope that the CCP suffers the same fate before it starts a nuclear war.

      • Trailer Trash says:

        “We may even want to secretly aid them”

        Yes, let’s do that again.

        The first time Uncle Sam created and funded moderate headchoppers in Afghanistan during the Carter Administration (see: “Operation Cyclone”) brought 40 years of misery to the Afghan people and billions of profit to US defense contractors.

        • RH says:

          Also it brought down the Soviets. Thus, it was a good deal. A nuclear bomb can ruin your whole day and they threatened war.

        • Trailer Trash says:

          RH, the Soviets brought themselves down, just as Uncle Sam is bringing himself down through self-inflicted bad policy, incompetence, and corruption.

          The world is more likely to have nuclear war today than it was 40 years ago, as US bails out of one treaty after another. Today’s Uncle Sam is agreement incapable, so not much chance of new treaties any time soon.

      • Mira says:

        Aren’t the Taliban trained up in Pakistani owned & Saudi funded special schools on the border of Pakistan & Afghanistan .. would Saudi money stop at education .. ?? .. surely hey would want to see their investment to flourish .. in management of the wealth of Afghani natural resources.

      • RH says:

        Amen, Winston.

        Drifterprof, since Chinese immigrants might not be willing to bare their hearts to you and tell you everything, e.g., how female applicants/immigrants are Weinsteined, you should go and live in China for a few years. Then, come back, if you can, and you might have a different perspective because the CCP is becoming increasingly aggressive against foreigners too now.

        You may even get to enjoy a realistic Tienanmen massacre re-enactment up close! Given what went on with their real estate developers and massive debts, etc., that is probably coming.

  4. Sams says:

    With the resent price hikes hit and miss on commodities, energy and consumer goods together with supply chain problems some may start to question the need for currency reserves. Just currency is what there have been no shortage.

    It may be more useful to have reserves of strategic important supplies and good connections back the supply lines.

  5. Old School says:

    All the central bankers keep printing the nominal value of stuff higher. Houses, stocks, gold. All currencies ugly contestants in a beauty contest.

  6. MonkeyBusiness says:

    For now. Back in the day (1971?), Nixon had to end the dollar’s convertibility to gold when everyone wanted out of the mighty US Dollar. The 1970s was also known for the energy crisis mirroring today’s situation ….

    • drifterprof says:

      Major world governments felt there was little choice but to accept Nixon’s order (August, 1971) permanently closing the Gold Discount Window of the New York Federal Reserve. Because the dollar was the pillar of the world financial system.

      Subsequently, the U.S. devalued the dollar ($35 to $38 per ounce gold) as part of the “Smithsonian Agreement” (France thought it should be more like $70). The agreement also permitted currency value fluctuation to increase from 1 percent to 2.25 percent.

      Lacking the stability of gold as a standard store of value, the “Smithsonian Agreement” quickly collapsed, opening the floodgates to a worldwide Las Vegas-style exchange rate speculation binge. The United States could then create as many dollars as it wished, unrelated to gold. The world had to suck it up and eat the inflated dollars, as long as the U.S. remained the Western world’s major economic / military power.

    • Mira says:

      Do we still have oil ??
      Dwindling oil supplies ??
      Almost non existent oil supplies ??
      The UK is a cluts .. they let all their poorly paid disrespected & abused international drives go home.
      Have the defence forces drivers come in yet ??
      Or is the PM going to let the UK sink into the pit of despair first.
      Now it will cost the taxpayer a small packet.

  7. The dollar index belongs at 65 or lower but expect an intervention before that happens. In exchange terms it should never happen, but the political three way standoff gives the obstructionists some cover. Maybe a chance to buy back all that debt with cheaper currency.

  8. MiTurn says:

    Asked in honest ignorance, but do the various ‘net currencies’ like Bitcoin play a role in any of this?

    • Wolf Richter says:

      No. None. They’re not currencies. They’re not dollar-denominated assets, or any currency denominated assets. They’re gambling tokens.

      • Wisoot says:

        Hmmmm

      • David W Young says:

        Hear, Hear, Wolf, once Tom Brady stood behind Bitcoin as a key asset in his portfolio, I knew the voice of reason would rise across the land as to the “temporary” nature of crypto-currencies. Stick to throwing the ball, Tom. A Michigan alumni like myself, but not a Rhodes Scholar in financial matters.

      • Citizen says:

        I agree, they are Monopoly money and while the technology is very interesting and has lots of promise…there is no good reason for Bitcoin to be worth lots of money. The idea has just gotten out of control like the internet in 2000. They should have never let it get this far though which was really stupid.

        I think inflation is happening because all the currencies are bad and there isn’t one for them to go up against. I really wonder why gold hasn’t gone up much more though. It makes me believe the conspiracy type stuff about it being kept down because otherwise it makes no sense at all. Now if it doesn’t go up after this next round I will likely give up on it…. soon if winding down QE makes the market crash …they will come in and do even more QE and that should be where the market would finally be forced to wake up and realize that there is no going back to normal. If that happens gold should be on it’s way to $5,000 but we haven’t had any sanity in the market for over a decade.

      • Wisoot says:

        JPMorgan has surprisingly turned bullish on bitcoin’s medium to long-term growth potential. In its latest Flows & Liquidity report, JPMorgan reportedly stated that bitcoin will compete favorably with gold as an alternative currency in the coming years, as millennials take up a larger share of the total investment picture.

        “Bitcoin Will Rival Gold”

        Flows and Liquidity, edited by J.P. Morgan global market strategist Nikolaos Panigirtzoglou, previously expressed similar thoughts about bitcoin’s long-term growth potential. This time, however, the assessment went into great detail to analyze why the bank believes bitcoin has such vast upside potential.

        According to the excerpt published by Tapiero, the comparison between bitcoin’s $240 billion total market cap and gold’s $2.6 trillion total stored value presents a massive growth opportunity for bitcoin. This is because as millennials take a bigger share in the total investment picture, they are likely to favor bitcoin over gold, at least to a modest extent. This leaves at least $2.2 trillion worth of value currently stored in gold bars potentially open for bitcoin investors to gobble up.

  9. Chauncey Gardiner says:

    Might be missing something here, but it seems to me the amount of debt denominated in dollars outside the U.S., rather than just those held as reserves by foreign central banks, is a more useful indicator of both the relative importance of the dollar in the global capital markets and the potential emergence of systemic dollar liquidity issues due to rising dollar interest rates, falling commodity prices, a decline in dollar export earnings due to the pandemic, collateral shortages, unavailability or widening spreads of foreign exchange swaps, debt and funding maturity mismatches, capital flight, or other factors.

    Think it’s also important to consider the broader trade-weighted basket of currencies against the dollar, rather than just DXY when considering dollar depreciation in the foreign exchange markets. Don’t believe the former is showing dollar depreciation.

    Would also like to see someone quantify the economic costs and benefits of the dollar’s global role to the American people, rather than blindly and passively accepting the dollar’s role as the primary global reserve currency being of unquestioned overriding value. As with all such policies, I suspect there are domestic and global constituencies that benefit from this arrangement, but others who do not.

    Really appreciated this post, particularly as food for thought about a range of policies. Thank you.

    • historicus says:

      The central bankers (Powell) think they are larger than the market….
      they arent.
      the rubber band is snapping
      They just live in a bubble and can not, as Hayek noted, know all that the market participants know collectively. And that collective knowledge is more accurate and powerful than closed door committee decisions.
      Note “transitory” was rejected immediately, but sustained by the monetary dictators. They were were wrong, again.

      • Nacho Bigly Libre says:

        This mindset is seen in many other places.

        There is a tendency to assign Czars – border crisis czar, port congestion czar, gun control czar.

        All stem from the faulty thinking that a single person or a small group of individuals can know more than the collective. It’s an impossible ask and the reason free markets always trump socialism.

      • andy says:

        Are there specific examples were
        collective knowledge is more accurate? Outside of economics science that is.

        • Nacho Bigly Libre says:

          How about something essential like food?

          In Mao’s China, tens of millions lost their lives because Food production czars and food distribution czars couldn’t figure out appropriate production or distribution.

          In slightly more recent times, Yeltsin was astonished to see the wide variety of offerings in US supermarkets. Despite his smartest food czars working on the problem, there was nothing close to a supermarket.

          As the cliche goes, in socialist countries people wait for bread and in free markets bread waits for people. Collective carries way too much information and dynamism than a committee can ever handle.

          Collective decides how much milk should be sold in a gallon jug, how much in pint cartons, where should they be sold, how they should be stored and transported. How much milk should be converted into yogurt, how much into ice cream. Collective learns and adapts way faster than a committee can even comprehend.

        • K-Agri says:

          Nacho – nice comment! We should teach this to kids in school. Kids these days seem to be taught a simplistic one-sided argument – free market bad, government controlled market good. Kids should be taught about the huge benefits free markets bring, or else they risk losing (more of) them in the future.

    • historicus says:

      The amount of debt created outside the view of Powell and other central bankers is enormous and uncalculatable.
      Agreements struck that can go sideways in a heartbeat.

    • Wolf Richter says:

      Chauncey Gardiner,

      There different measures:

      – Dollar as a trading currency (about equal with the euro)

      – Dollar as a funding currency

      – Dollar as a reserve currency. This here was about reserve currencies.

  10. Mike says:

    If China wants to dethrone the dollar they only need to tell the world their real gold holdings.

    • sunny129 says:

      ‘they only need to tell the world their real gold holdings’

      And every one is going to believe them, right?

      LOL!

    • Helmut Beintner says:

      Not China, Canada has still some Gold Dust in their Coffers.. i think. ;)

      • Stuart says:

        That was all sold years ago by the Bank of Canada. Feb 3 2016 showed no gold reserves from a duckduckgo search.

      • GrassRanger says:

        The only gold in Canada’s coffers is the cobwebs remaining after they sold their last ounce. The only gold they keep now is enough to stamp out a few Maple Leafs each year.

    • DawnsEarlyLight says:

      How gold is of any real value in modern society is certainly a ‘romantic’ investment!

      • andy says:

        Perhaps value is in gold’s holding its value.

      • SpencerG says:

        Gold serves as an escape hatch for the vulnerable. But so do Dollars to the vulnerable who don’t live in America. I have seen people in the Third World hoard both of them.

      • Old School says:

        You holding an I-phone, you are holding some gold. For some things it is the best choice. Apple must think it is worth paying market price.

    • SpencerG says:

      Why would that matter? The U.S. Dollar is the Reserve Currency because the United States is the most stable economy… not because of our gold holdings (which dwarf every other nation’s). As the charts show… our share of the Reserve Currencies has been dropping steadily since 2013 and unsteadily since 1999… yet OUR gold reserves have been just a hair over 8000 tons for that ENTIRE time.

      The only way Gold has any real value is if everything goes to hell. In that case it becomes the “Reserve Currency of the Reserve Currency” so to speak… and at that point the gold that is in the hands of the people counts for more than the gold that is in the vaults of the Central Banks.

      • Wisoot says:

        Stable – how do you equate the generally understood principle of stability with FED activites -shall we start with Dallas ? The concept of an economy hasn’t existed for at least 10 years if not 20 in the global banks which own whole global supply chains. Walk a mile in a globalists shoes – countries dont exist. No borders. Economies relate to these.

      • MonkeyBusiness says:

        No amount of US Dollars can print energy. Lots of people seem to be not getting the memo it seems. Cheap energy is running out. In a world where energy is unlimited, fiat currencies make sense. But energy is limited and no, renewables will not save us. Constructing renewable energy sources will consume a ton of non renewable energy and there’s not enough time and resources to do the switch.

        So yes, everything is going to hell, just not in the way you imagine it.

        • ru82 says:

          Right on! So some people think using tons of energy to create new crypto currencies will help print energy while using massive amounts of energy. Quite ironic. I bet China wish they could get back some of that energy they used to mine BTC the past 4 years that now is banned. Lol

        • K-Agri says:

          How is cheap energy running out?!! Are you referring to hydrocarbons? What about all the other fuels we have? What about the hundreds of years (at current energy usage levels) of confirmed fissile fuel reserves? What about the thousands of years of fissile fuel reserves we highly suspect are present, but it’s so abundant we haven’t even bothered to measure it? What if we crack nuclear fusion? What if we one day build a Dyson sphere?

          We live in a universe of abundance, there is energy in everything around us. We can access enormous amounts of cheap energy if we bothered to try.

          If governments and oligopolies stopped manipulating energy markets, and we had a truly competitive energy marketplace, with good and fair environmental regulations applied, we could provide cheap and clean energy to the masses. As the commenter above noted, the collective free market is more intelligent and faster acting than any central planner could ever be. The energy woes we are facing today are all a result of atrocious central planning.

        • MonkeyBusiness says:

          KAgri, those sources you mentioned are not cheap to develop, otherwise we would have done so already. Just look at fracking. Hundreds of billions of dollars were thrown at it and yet it’s only this year that the industry will turn “cash flow positive”. Compared to the amount of money spent though, that cash flow might as well be a drop in the ocean.

          You also must be missing the memo on the energy crisis that’s only in the first inning.

        • MonkeyBusiness says:

          From Bloomberg today (this site does not allow links):

          Energy crisis forces German power plant to halt on lack of coal

        • K-Agri says:

          MonkeyBusiness – Nuclear power is expensive because our society has decided it should be.

          It is very difficult to get a handle on the true costs of electrical production. All of the studies out there are sponsored by one or more incumbents, and the conclusions always miraculously suit their needs.

          Nuclear power is currently expensive because it hasn’t received enough (any?) investment over the last 40 years. Despite this lack of support and outright PR kneecapping by its rivals, Gen 4 reactors are nearly here. Imagine if we properly funded nuclear R & D the way we did with renewables? We could be mass producing incredible SMRs by now.

          If this really is the first inning of a long energy crisis, all the more reason to finally have some proper grown up conversations about nuclear power. We need to stop the political and media hyperbole that is preventing the progress of humanity (I wish I knew how to do this, but emotions still dominate these discussions).

          Germany were not very smart when they shut down all of their nuclear plants. European energy policy in general is a disaster, just take a look at their upcoming NG issues.

        • ElbowWilham says:

          K-Agri – yes energy is abundant, but you have to be able to extract that energy using less energy. There is a lot of energy in a blade of grass, but it does me no good to eat it.
          It is taking more and more energy to extract fossil fuels, so the energy left over to do other things, like mine bitcoin, play video-games or smelt iron-ore, grows less and less. Quality of life goes down.

        • K-Agri says:

          Elbow – a very valid observation.

          However, this horse race is fixed. Some horses are being deliberately held back and some have been given steroids. When the fix is in, us spectators can’t tell which is the best horse.

          In a free and unmanipulated market we could easily see the true costs of each power source and know when is the best time to switch from one source to the next. This is the most efficient and cost effective way to deliver energy to the people. Instead, our governments have distorted the energy markets so badly, we can’t tell what’s cheap and what’s expensive anymore. That’s the real reason we face an energy crisis. Without this distortion it would be a fairly simple calculation on how the energy source mix should change over time as some resources become more costly and some less so.

      • Mike says:

        The US does not have 8000 tons of gold. I guarantee the US has no gold.

  11. Ross says:

    An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions.

    First line of Greenspans 1966 essay on “Gold and economic freedom”

    Now, bring on those statists.

    • Michael Gorback says:

      A gold standard prevents running deficits. No deficits = no war and no welfare, two popular ways to exert control.

      “The best way to destroy the capitalist system is to debauch the currency.” – Vladimir Lenin

      “The big banks are the “state apparatus” which we need to bring about socialism, and which we take ready-made from capitalism; our task here is merely to lop off what capitalistically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. Quantity will be transformed into quality. A single State Bank, the biggest of the big, with branches in every rural district, in every factory, will constitute as much as nine-tenths of the socialist apparatus. This will be country wide book-keeping, country-wide accounting of the production and distribution of goods, this will be, so to speak, some thing in the nature of the skeleton of socialist society.” – Lenin

      Lenin would love Fedcoin even more than the 8300 form.

      • MonkeyBusiness says:

        Didn’t the two World Wars happen under the Gold standard?

        People might not like it, but war will always be humanity’s eternal companion. Before man is war was.

        • Sweet Kenny says:

          Peace bonds during war etc were a way around the gold standard. The US went off the gold standard in 1971 due to a war that could not be funded that way.

          Peoples ignorance is their undoing – when the collapse comes it will be so significant that people will again understand the brutality of suffering of war.

        • Michael Gorback says:

          Just as Lenin said. One bank to rule them all.

          Plenty of wars were fought under a gold/silver standard. Kings used to tax and borrow in order to go to war. Bonds didn’t exist.

          BTW the loans were rarely repaid. Who’s going to turn the king over to a collection agency?

          Neither world war was a result of the gold standard, although arguably the attempt by the US and UK to circumvent the discipline of the gold standard led to the crash of 1929.

        • MonkeyBusiness says:

          Michael Gorback, you said: “A gold standard prevents running deficits. No deficits = no war and no welfare, two popular ways to exert control.”

          I didn’t say the Gold Standard creates wars. That’s just ridiculous, but it clearly does not prevent them either since the biggest wars this planet has ever seen happened while the gold standard was in effect.

  12. Diego Lopez says:

    The Central Banks have been working on their own form of cryptocurrency (Central Bank Digital Cryptocurrency [CBDC]). In my opinion only, once they have all, or enough, pieces in place, they will shift all the world currencies to it, and make, force, all other forms of cryptocurrency illegal. It will happen suddenly. A decent predictor is the move China recently made.
    Those who control the blockchains and ledgers, control YOU.

    • Wisoot says:

      Agreed until you wrote illegal. Legality belongs to countries with borders which dont exist in reality. A form of agreed ethical approches globally will take shape to supercede laws.

      • ru82 says:

        I don’t think it will be illegal to own cryptos….but I am guessing they will be banned or deemed illegal for purchasing transactions. The IRS has a hard enough time tracking the USD illegal transaction. Now add in the complexity of trying to track 1000s of cryptos and any illegal or non paying tax transactions.

        I am guessing cryptos will eventually be an asset like a Pokémon card or a collectible baseball card or legos.

        But what do I know…. I am often wrong😉

  13. 2BFrank says:

    Even now some almost 100 years after the end of empire, and many devaluing episodes, decimal conversion being just one, the pound sterling still plays a minor part in reserves, it takes a very, very, long time to replace a reserve currency.

  14. sunny129 says:

    Gold hit’s peak to 2010 last year but now it cannot stay above 1800, too long?
    I just invest in calls of GLD with a very puts as hedge in different time frame. Same with gold miners like GDX!

    Typical SECULAR BEAR has started with’ lower of the HIGHS and lower of the LOWS, with many ‘bear traps’ on the way. No prob for option traders!
    Been there, seen it and now prepared to welcome the ‘reality’ after 12 years insane credit orgy!

    Perfect storm (is developing) of supply chain problems, energy (natural gas) rise, inflation persistent and NOT transient, China;s energy and debt problem, Congressional in-fight, Covid hasn’t gone away (fall and winter coming), over bought, over hyped and over valued Equity mkts, DIP buyers mentality is still bullish++

    But, but, Fed is always to the rescue, right?

    • Sweet Kenny says:

      That is why there will be a collapse – so far it has been delayed with financial injections and bribes. No amount of money can solve a supply chain problem – complex systems when they collapse push one into a reality that existed before the complex system – problem is can we survive that?

    • Shandy says:

      I’m not so sure about calls GLD with “PUTS” a different time frame.
      Miners like GDX will return like Nordstrom Best on fire.
      I’d look at Mexican silver establish mines for insight.
      Then stay away from political, health, Equity mkts diversity.
      You are onto the right idea here just not sellable for real profits.

      • ChrisR says:

        The Fed and its proxy banks have been very active in the GLD slamdowns in recent weeks, trying to signal nothing to see here, (i.e “transitory” inflation, supply chain woes, energy and fuel price anxiety, etc.) It would be rude not to use Puts.

  15. Stoneweapon says:

    The ultimate art of war is to fabricate one, where the reality created is so perplexing, it completely overshadows all the moves on the battlefield until defeat shatters your reality.

    Slowing down the velocity of money via engineered inflation, supply chain disruptions and lockdowns damages China considerably more because their economy is leveraged overweight on exports, double digit growth and dollar purchasing obligations. China was duped into believing they could replace the US dollar with its RMB as the next world reserve currency. A free floating currency adapts to inflation over time as its foreign exchange value increases. China was foolish to think they could defy the gravity of inflation with bribes and Marxism. China was played like a fiddle by the Rothschild banking cartel, much like Americans were played by WallStreet during the lead up to the 2008 mortgage crisis.

  16. wkevinw says:

    The charts make a lot of sense/seem orderly. The rest of the world is filling the void caused by their historic inefficiencies; As markets continue their march forward. The chart of the dollar will continue to point down, steadily and slowly.

  17. Crunchy says:

    If I recall correctly, don’t many oil exporting countries demand dollars for their product? This being the case, it might be wise to hold dollars (rather than other currencies) in reserve, strengthening the U.S. position in this international pi$$ing contest.

  18. DR DOOM says:

    Congress and the Fed are trying their hardest to remove the dollar as the reserve currency . The Electorate must have patience . It takes time to de-base a trusted stable system. The Electorate can sleep well knowing America can get this done with good old American know how that has delivered a powerful de-basement machine called the Triad of De-basement. The Fed ,Congress and the US Treasury. The final piece of the Triad fell into place with the Treasury and Fed merger. This powerful de-basement machine is already producing results. Set back and relax. Keep your attention focused on the machine in your hand and let its religeon deliver you to the new promised land.

  19. George says:

    And this the shining example of our reserve currency status. “Once the government is funded, albeit temporarily, Democrats will turn their full attention to the need to raise the limit on federal borrowing, which now stands at $28.4 trillion.”

    Nothing about living within our means or raise taxes on everybody to cover their runaway spending just the underlying need to increase the limit on borrowing?

    This is sick and embarrassing. Don’t know how you call this a clean shirt because by any definition of the term, we are tits up.

    • Michael Gorback says:

      The phrase is “the cleanest dirty shirt”. IOW the least bad option.

      Or “the cream of the crap”.

  20. Flownover says:

    Reserve currency status is all about confidence. How can the global community maintain its former levels of confidence in the $US in the face of the accelerating disintegration of US societal cohesion and leadership? I would expect the decline of global $US holdings to decline at an ever faster pace.

  21. keppered says:

    Are you getting dizzy on the merry- go-round yet kids?

  22. Wisoot says:

    They will learn soon enough. In a truly global realised environment, it is of course, risky to put all your eggs in one basket ie have one main global reserve currency. Reason shows power trips go to the head of the ‘cant do without’. As digital currencies embed in human behaviour, active management – formally – if regulators choose to do their jobs correctly – or informally – by activist seed funded community interest groups – will ensure many options for holding money remain available which will derisk day to day experience. The notion that digitalisation of civilised society will end up being controlled by a handful of blood line families or gangster mob defence contractor nasties is flawed. Quite the opposite. It flattens barriers to entry inviting SMEs to innovate and be heard in multi channel self programmed online experiences – which drive resource use based upon local community aspirations, not top down GDP economic indicators but raw materials and sustainable nature impacts. Until such time as the internet as we know it today will be let go and connectedness remains in new forms with civilised society engagement radically different to today. Some call it progress.

  23. Shandy says:

    We beat this dead horse year after year. In my opinion there will be no more dead currency wheelbarrows ever.
    This time dead laptops get use to it.

    • Michael Gorback says:

      Take out the batteries before you burn them. Unlike paper they tend to burn or explode.

  24. emirate says:

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  25. historicus says:

    Jerome Powell heard to say..

    “Gee, I didnt think that would happen.”

    and every other sentence…

    “Maybe if we do nothing it will all get better”

    every other sentence…..

  26. Brant Lee says:

    Our own personal wealth policy depends on when and where we live. If I had lived in Turkey for the last 20 years, gold and silver would have preserved my wealth and even made substantial gains against the Lira.

    In the US, of course gold is not currently mounting sizable gains. How can the world’s largest dominating currency be continually printing if gold were appreciating substantially against the dollar? The big guy makes the rules.

    That said, it’s a different story in the actual physical bullion markets. Only TWO years ago, one could put back some nice silver for well under $20. Most silver eagle dates beginning in 1986 could be had for under $20. Those are dried up and gone forever. Even with silver currently priced at $22, any silver eagle before 2020 will cost you $35+, if you can find them.

    Like gold and silver or not, if you get the urge to put back some nice coins: silver dollars, older date bullion coins, double eagle gold, etc, you’re going to pay about twice what you would have two years ago. The good stuff is gone forever, probably bought up by members of the Fed. There are junk-ass 2021 rounds and bars if you are not picky.

    • Masked Ghost says:

      Brant Lee wrote….”Only TWO years ago, one could put back some nice silver for well under $20. Most silver eagle dates beginning in 1986 could be had for under $20. Those are dried up and gone forever. Even with silver currently priced at $22, any silver eagle before 2020 will cost you $35+, if you can find them. ”

      Do you have a problem with silver 1 ounce Britannias ? I can buy all I want today for $26.64.

      They both have one troy ounce of silver, and are legal tender coins.

  27. historicus says:

    Wolf
    Any chance of posting a Fed Funds vs CPI chart?
    Hard to find….

  28. David W Young says:

    In International Finance in grad school, I learned that interest rate differentials among countries had much to do with the determination of a currency’s strength against competing currencies. The Dollar has caught a bid of late due to market forced increases in interest rates, primarily at the intermediate to longer end of the maturity spectrum. Certainly, nothing the Fed has said or done, since they want a depreciating Dollar to assist in the servicing of America’s erupting mountain of debt.

    In a free and efficient market, hard to find one these days with all forms of governmental intervention in soup to nuts, the supply of an asset, U.S. Dollars in this case, will eventually be the final determinate of market value. Since we as a country are printing Dollars and creating “assets” denominated in Dollars with wild abandon never seen in the history of homo sapiens, there is really no path but down for the Almighty Greenback.

    While we may be the prettiest witch in the covenant for short periods of time such as we are now, no offense to witches with Halloween coming up shortly, the U.S. Dollar is still one very ugly witch:

    1. The U.S. Government is in quasi-disarray. The boys and girls in the Washington sandbox cannot play nice together on a single day, and, frankly, should be sent home to sit facing a corner. This is called Political Stability in currency evaluations terms, and our future is not bright in this respect. This is the most stratified American populace I have ever seen.

    2. The inflation genie is well out of the bottle, and sunning himself on the beach with many of his kin likely to emerge in the quarters and years ahead. The rogue Central Bank of the U.S., and I say this with unmitigated disrespect for the ruination it has caused for current and future citizens, has turned a blind eye to this classic devaluing element to the value of the Dollar. Surging domestic inflation rapidly erodes the buying power of a currency, and we got trouble here in River City, with a capital “T”. We shortly will be in the 8% to 10% annual range for inflation.

    3. The all-important overall Confidence element to valuation is waning as it becomes more and more a possibility, not a certainty of course, that the runaway train named U.S. of A. may in fact default on its external obligations in one fashion or the other. Could be slight-of-hand Dollar “reset” devaluation and/or lengthening the actual maturity of U.S. treasuries such that a 10-year note becomes a 13- or 15-year note. There are many more creative financial engineers out there than I, so use your own imaginations. Those in power will certainly do so.

    We are in for a lower standard of living in this country one way or the other. The fact that our competitor central bankers want less and less of our Dollar denominated assets over time is just a glimpse of the world’s waning conviction that the United States will get back on track toward prudent fiscal, monetary, and financial policies. The Ship of State has already hit the shoals.

    • historicus says:

      “The rogue Central Bank of the U.S., and I say this with unmitigated disrespect for the ruination it has caused for current and future citizens”

      Put my “end the Fed” bumper sticker on the other day….

      IF the 20 and 30 something KNEW the financial environment being left them by this irresponsible FED, they would be in the streets. Occupy Wall Street should have been over at the NY Fed.

      The “dual mandate” game that carves out the one mandate that would prevent all this malfeasance by the Fed……
      “promote moderate long term interest rates”. The wisdom of this mandate is great. Keep rates “not extreme”, either up or down. This keeps a balance between lender and borrower and PREVENTS the pulling forward of future wealth to fluff the present by creating overly cheap debt. Instead, the Fed has had long rates at 4000 yr lows for 12 years…and look what it has done. $20 Trillion at least in new debt.

      It is incumbent on every generation to pays its debt. But this immediate gratification Fed prompted by the immediate gratification politicians (and I include Trump who wanted negative rates) have cast this wisdom to the wind. Shame.

    • sunny129 says:

      ‘there is really no path but down for the Almighty Greenback.

      And replaced by which ‘currency’ (for global reserve currency!)?

      Least dirty shirt still reigns!

  29. Auldyin says:

    Forex
    The hardest game of all.
    GBP has 4 screens. USD has 4 screens, EURO has 4 screens, Yen has 4 screens, They all move every second of every day, only computers can analyse and track it. Only ‘snapshots’ are possible and they can be history before they are even printed, however ‘trends’ can be distinguished.
    “The global share of US-dollar-denominated exchange reserves held by foreign central banks – declined to 59.2%”
    As I say, it’s complex, but IMO a very big factor is US’s inability to mount a successful hard war and their move to use Swift system sanctions as a proxy for trying to bend hostile countries to their hegemonic will.
    These countries, to maintain their freedom of operation, have learned that they have to rely less on the dollar and they are drifting to other possibilities. Russia, China, Iran, Cuba, Venezuela, Germany, N Korea, etc, etc, are all subject to US sanctions of one kind or another and I expect they will be glad to escape the ‘Yoke’ at the first opportunity.
    Things usually start slowly at first, then all of a sudden, what happened???

  30. Mira says:

    Reality is stuck between a rock & a hard place.

    “Prudence is what makes someone a great commoditise trader – the capacity to face reality straight in the eye without allowing emotion or ego to get in the way. It’s what is needed by every quarterback or battlefield general.”
    John Ortberg.

  31. Mira says:

    Did we all watch the National Press Club Address on ABC TV the other day ??
    Our Malcolm Turnbull .. slimmer than when we saw him last & in a million dollar suit .. ran over the Prime Minister of Australia, Scott Morrison several times with a truck & then he ran over him again.
    Have a look see ..
    I was very proud of Our Malcolm ..

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