Alrighty

 

I got like 8 pieces on the state of the $.

Yeah...:-).

Lucky me.

First of all?

Lets remember this:

"To be quite honest?

I see things more from this perspective than ours."

from

I

Posted: 

TUESDAY, MARCH 1, 2022.

Freddie King sang 

Let the good times roll"

So?

Here we go...

Dollar :-(

"We tend to be sceptical of “RIP DOLLAR!!!” chatter, as the US currency enjoys the mother of all network effects. But Stephen Jen’s latest note raises some interesting points."

(Me to until recently 

and yes this person does have some interesting points to consider.)

"Jen is a very well-known currency analyst. At Morgan Stanley, he famously coined the “dollar smile” theory, which posits that the US currency tends to do well when the economy is humming or heaving. He now runs money at Eurizon SLJ, and occasionally still publishes fascinating research on the world of FX.)

(FX = Foreign Currency Exchange)

"His latest briefing note argues that the US dollar has “suffered a stunning collapse” as a reserve currency, which has seemingly quickened after Washington’s decision to wield its control over the dollar-based international financial system against Russia."

"Jen estimates that if you adjust for price changes the dollar’s share of official global reserve currencies has gone from about 73 per cent in 2001 to around 55 per cent in 2021.

(Thats 18% in 20 years.)

Then, last year, it fell to 47 per cent of total global reserves."

(Thats 8 % in a year. 

At this rate? The dollar would be held at 0% of the worlds currency in just 8 years.

It's not how much theses foreign central banks are sitting on pallets of $'s and T-bills, it's, "how much are those $'s and t-bills worth? And its a very valid point and worth considering.)

"The USD is losing its market share as a reserve currency at a much faster rate than is commonly believed. After steady declines in its global market share for the past two decades, in 2022 the dollar lost market share at a pace 10 times as rapidly. Analysts have failed to detect this big change because they calculate the nominal value of the world’s central banks’ dollar holdings without considering the changes in the price of the dollar. Adjusting for these price changes, the dollar, we calculate, has lost some 11 percent of its market share since 2016 and double that amount since 2008."

(The USD is losing its market share as a reserve currency at a much faster rate than is commonly believed. After steady declines in its global market share for the past two decades, in 2022 the dollar lost market share at a pace 10 times as rapidly." 

(Yeah...I'd go with that...I really would)

"This erosion in the USD’s reserve currency status has accelerated precipitously since the start of the war in Ukraine. Exceptional actions taken by the US and its allies against Russia have startled large reserve-holding countries, most of which are from the Global South."

(It was from the get go, a war of attrition and therefore also a currency war. Somebody knew collectively they could end the role of the $ as the reserve currency of the world.)

". . . Without the need for us to take sides in this debate on Ukraine, it seems reasonable to speculate that the main driver of the collapse in USD’s reserve status in 2022 may have reflected a panicked reaction to property rights being jeopardised. What we witnessed in 2022 was sort of a ‘defund-the-global-police’ moment, whereby many reserve managers in the world disagreed with the conduct of both Russia and the US. "

"Moreover, as Jen stresses, there are actually two pillars that make the US dollar so mighty: its role as the reserve currency of choice, and its dominant use in global finance and trade. “Investors ought not be confused by these two different concepts,” he argues."

(Both of those are rapidly disappearing so its kinda hard to make those arguments. Especially, "it's dominant use in global finance and trade" as China and the Saudis look to do trade in their currencies, Brazil and China the same, the ASEAN nations are wanting to come up with heir own currency etc.)

"While the Global South seems unwilling to continue to hold dollar assets, they do not seem to have the ability to divest from the US dollar as an international currency, particularly for financial transactions. We suspect it will be very difficult to overcome the strong network effects that have been behind the dollar’s international currency status."

(Nothing like being held hostage by something you dont wanna be held hostage by...)

"The key to topple the dollar’s throne as an international currency is predicated on the relative developments and stability in the various financial markets. If the financial markets outside the US could thrive (growing in size and becoming ever more energetic, without being unstable), and if the opposite happens in the US, the dollar could very well meet its demise. This is, however, not an imminent risk, in our opinion, though the trends are heading in that direction."

(It is an imminent risk, 

and the trends are heading that direction. 

Consider:

"What is crucial to note is while the share of GDP of G7 nations based on PPP, reduced from 50.42% of the World's GDP in 1982 to 30.39% in 2022, the share of GDP of BRICS nations increased from 10.66% in 1982 to 31.59% in 2022.Apr 9, 2023"

That made the headline news right?

BRICS GDP bigger than the G7 for the first year last year?

It's not gonna change back, ever.)

"However, Jen argues that the US shouldn’t kid itself, things could change, and quicker than Washington might appreciate.

"The prevailing view of ‘nothing-to-see-here’ on the USD as a reserve currency seems too innocuous and complacent. Having said this, the dollar still enjoys substantial network advantages as an international currency, mainly because of its huge, liquid, and reasonably well-functioning financial markets. The persistence of these preconditions, however, is not preordained. If the US makes more policy errors and abandons the culture of self-examination, there will likely come a time when much of the rest of the world will actively avoid using the dollar. Finally, what needs to be appreciated by investors is that, while the Global South is unable to totally avoid using the dollar, much of it has already become unwilling to do so."

(And:

"The persistence of these preconditions, however, is not preordained. If the US makes more policy errors and abandons the culture of self-examination, there will likely come a time when much of the rest of the world will actively avoid using the dollar."

is exactly where we are RN.)

One down ,

only seven or eight more to go 

I dont do nothing lol.

Killin me Lucy...

Just killin me honey.