alt Hacker NewsWhat happens when USD stops becoming the the reserve currency for the world? And who takes its place?
Replies
The USD has already been in decline as a reserve currency. The only thing that is happening is the decline is accelerating.
It is not necessarily a question of "takes its place", but more about being more serious about diversification. Or to paraphrase the old IBM saying "nobody got fired for buying USD" is no longer the case.
In terms of options you have JPY, EUR and CNY as the big-three and maybe tag AUD on top.
Look up something called "dedollarization," it's been talked about in academic circles for quite some time and now more mainstream institutions are discussing it more too.
The share of the USD as a reserve currency has already been slowly declining over the last decade, although it is all but dramatic. The reduction is not in favour of another particular currency. Instead, the proportion of minor currencies is increasing. Here is a diagram for the years 2016 to 2023: https://de.statista.com/statistik/daten/studie/232562/umfrag...
I doubt it would be replaced by a single global reserve currency. More likely there would be a handful of currencies that perform a similar role (USD, EUR, CNY, maybe some others) and which you primarily use depends on whose sphere of influence you are in.
My guess would be EUR takes its place, gold will also be used more. I guess what happens is USD gets much weaker and US buying power goes down. Maybe destroying the USD will eventually cause the boost to domestic manufacturing that Trump wanted, since foreign goods will be out of reach. Cut down the forest to kill a squirrel. I'm no expert though
I wonder if there needs to be a single reserve currency any more.
In the past it made things easier for everybody to use the same currency, but is that still the case with modern electronic transactions?
Maybe it splinters into Euro, BRICS, and USD?
>And who takes its place?
Anybody who can (EU, Yuan) does not want to. Primairly because as export based economies, they want a weak currency in relation to a strong reserve (dollar) so they can make their goods more competitive, and also because surplus naturally appreciates a currency without central bank intervention via buying US treasuries to offset the appreciation. And for China, they're not going to accept the liberalized capital controls neede for it either.
So the answer is if the US dollars fail it would be global economic collapse and then chaos, but contrary to the rhetoric the rest of the world's economic systems are too uniquely vested in the USD to see it fail. As for gold, well we come to the same problem as noted above but worse, and in that situation the US actually holds the highest gold reserves so they still benefit the most out of it.
The US starts more wars until its eventual complete collapse. See The Rise and Fall of the Roman Empire. We're operating out of a playbook for imperial destruction word for word.
The petrodollar (a product of Kissinger) has been in collapse since Saudi Arabia began divesting from it.
We've been printing pretend money for quite some time, and supressing the value of precious metals (which is why you're now seeing silver bullion sell for $100+ an ounce). Copper is also selling out now.
These precious metals are extremely valuable because they're used to manufacture all of the technology consumers and nation states rely on daily. We're going to see a regression towards mercantilism and commodity hoarding. Most likely fiat will be abandoned in favor of crypto as we enter a new era of hyperinflation.
Buckle up - 2026 is going to be a wild ride.
Probably some type of balanced trade. Holding each trade partners currency and balancing it at times. Or even between multiple holders and currency pairs.
If there is need you can now build very complicated systems as everything is digital anyway.
Maybe stable coins would be finally useful. Each currency has own stable coin and then they are automatically traded in massive market... /s
Bitcoins, probably
That would never happen until the US Navy ceases to be effective globally.
We finally realise there is no such thing as a “reserve currency” in the floating exchange rate era and that the concept is a long dead hangover from fixed exchange rates.
And that’s definitely going to upset the gold bugs.
(In reality lots of things are held in reserve)
USD is a routing currency that is used because it is cheaper than the mesh alternative. When it stops being cheaper whoever is then cheapest will get the routing transactions.
To the rest of the world - Nothing. Trade works just fine without a reserve currency.
For the USA - massive inflation. All of those dollars are coming back home, which will weaken the dollar.
Plus, there's the second-order effects from a president taking control of the fed by trumping up charges on its members. So high inflation + low/zero/negative interest rates.