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Worrying About a Dethroned Dollar (The Economist)www.economist.com/finance-and-economics/2025/04/04/how-worrying-is-the-weakening-dollar
824 sats \ 17 comments \ @denlillaapan 5 Apr econ
Always lovely when the world humbles you.
A few months ago...
the consensus was that Donald Trump’s presidency would boost the outperformance of American stocks, raise Treasury yields and strengthen the dollar. So far this year, all three bets are deep in the red
oops.

"it is the weakening of the dollar that has shocked the most."

it is reasonable to worry that as Mr Trump pulls up the drawbridge, the dollar’s role in the global financial system is in danger. America’s rivals and allies alike have long sought alternatives that are beyond Uncle Sam’s reach, whether by developing new payment rails or agreeing to invoice trade in other currencies. Mr Trump’s past aggressive use of sanctions, for instance, against Iran in 2018 after blowing up a nuclear deal, make such endeavours all the more urgent. Perhaps, you might fret, the dollar’s present weakness is a sign that it is being dethroned.
A KID CAN DREAM!
Implications:
  1. American consumers will suffer more than expected (tariff costs borne further by consumers ("Americans buying imports will now have to pay the costs of both heavier duties and a weaker currency.")
  2. Foreign investors, owning American assets "are getting whacked." Negative wealth/return effect where the dollar "exacerbating losses from falling share prices."
  3. [Silver lining?]: "a weaker dollar ought to cushion some of the damage to global economic growth from Mr Trump’s protectionism"
A mighty greenback slows growth by inhibiting global trade, some 40% of which is invoiced in dollars and which therefore gets more expensive when measured in other currencies. It also puts a squeeze on countries and firms that borrow in dollars, as in many emerging markets, by raising their debt-servicing costs in local currency.
The piece doesn't really worry about the weakened dollar as much as explain it. Perhaps the bottom line counts: Should Trump success in "dismantl[ing] global trade... the resulting turmoil would be likely to strengthen the dollar again—and for all the wrong reasons."
non-paywalled: https://archive.md/oGNEK
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43 sats \ 0 replies \ @stack_harder 5 Apr
all i can say is that , i am getting less and less pounds every time i convert from USD to the tune of roughly one big shopping trolly of food a month.
between my wife shitty ruble income and now this, i cant catch a break from fiat garbage games!
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121 sats \ 0 replies \ @monkeylove 5 Apr freebie
The U.S. has been experiencing low growth since the early 1960s because the dollar's been used for global trade. This also led to chronic trade deficits, which started during the 1970s, which in turn prompted the country to promote financial deregulation, or Reaganomics, in order to increase debt and thus meet increased spending, especially for consumers and the military.
In short, for over 40 years, and even after the 2008 crash, the U.S. has been borrowing and spending heavily, to the point that it has to borrow more just to pay for part of the interest of previous debts. Part of the spending went to the American dream, which consisted of taking on increasing credit to buy all sorts of things and financial speculation, like flipping McMansions. Another part went to the military, which with onerous foreign policies was used to keep other countries weak and thus dependent on the dollar for trade. Otherwise, the borrowing stops, spending drops, and the country falls apart.
The problem is that BRICS and emerging markets became stronger, and have been slowly moving away from the dollar and U.S. influence.
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30 sats \ 6 replies \ @justin_shocknet 5 Apr
By raising the prices Americans must pay for foreign goods, his levies make them less attractive and thereby induce Americans to sell fewer dollars to buy them.
Correct, less dollars exported abroad = stronger dollar.
In fact, the clamour has all been to sell. The greenback’s value had already been falling for months
Because the former even hasn't happened yet, the tariffs are not in effect and therefore have not yet pressured currency flows. Where does FT/Econ find such dishonest retards?
the euro has risen by 6% so far this year, the pound by 3% and the Japanese yen and Swiss franc
Pressure on the dollar is globalists taking their ball from US markets and going home, in the form of Swiss Gold and European Stocks, before their fiats go to 0 once the dollar exports start to dry up.
A suckers rally for the Europoors. Bye Felicia.
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0 sats \ 5 replies \ @028559d218 6 Apr
When the 'dollar exports' dry up... I think the point of the article is that other countries are looking for and finding alternatives.
Dollar exports 'drying up' assumes that countries will have to 'use' the dollar and that they won't find anything else... instead of the Dollar continuing to fall as other countries choose alternatives (the Euro, Yen and eventually Bitcoin)
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0 sats \ 4 replies \ @justin_shocknet 6 Apr
Their debt is still priced in dollars, and monetary zones reflect security zones which really only leaves 1-2 other options that would be even more untenable to the globalists. Globalism is inevitably taking the L. Yen and Euro's are going home to their local stock markets as phase 1 of the of the decoupling, but they are in no way becoming reserve, they're not reserve material.
Countries adopting Bitcoin as a neutral reserve will be better off in the long run sure, but that still means devaluing their local currency to acquire said Bitcoin.
There's no way around the fact that it's not possible to have a trade imbalance without fiat currency manipulation, since you literally can't buy stuff and import it if you didn't first take in money by exporting the same amount of stuff. The subsidy that made this possible is going (mostly) away.
This is why the reciprocal tariffs are set as a multiple of the deficit, because this is a currency war, and there's no other economy that can subsidize the rest of the worlds currencies. The fuse has been lit, the temporary bump in FX is just ducking for cover.
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0 sats \ 3 replies \ @028559d218 6 Apr
I wouldn't even call them 'reciprocal tariffs...' They're not reciprocal tariffs as far as I can tell.
They're like... import taxes to reduce the trade deficit. They're "trade deficit disincentives" or "trade deficit taxes" on Americans to reduce the purchasing of overseas goods.
It's not even about other countries tariffs at this point
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0 sats \ 2 replies \ @justin_shocknet 6 Apr
They're reciprocal against all forms of protection regardless of what the other countries call that, hense the multiple of the trade imbalance... This includes the aforementioned currency manipulation without which such imbalance is not possible
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0 sats \ 1 reply \ @028559d218 6 Apr
Do you think the end goal then... is to balance the trade deficit with multiple countries? Make the balance of trade basically zero then?
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128 sats \ 3 replies \ @Undisciplined 5 Apr
How much do you think we can learn this early in the process?
A shakeup of this magnitude was clearly going to cause an economic correction, which would have all kinds of volatile transitory effects.
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23 sats \ 2 replies \ @denlillaapan OP 5 Apr
Not much. Hyperbole and doomerism abound
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0 sats \ 1 reply \ @Solomonsatoshi 5 Apr
When ever in history have tariffs succeeded in achieving greater prosperity for those imposing them?
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21 sats \ 0 replies \ @028559d218 6 Apr
Never. Mr. Trump's tariffs and trade-antics only accelerate the decline of the United States and the embrace of dollar-alternatives.
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0 sats \ 0 replies \ @Solomonsatoshi 5 Apr
'It is happening because America’s president wants to dismantle global trade. Should he succeed, the resulting turmoil would be likely to strengthen the dollar again—and for all the wrong reasons. '
China has won the trade war, and so Trump wants to dismantle global trade. Figures-Trump is demonstrably a poor loser.
Only problem for US exceptionalists is what Trump is doing undermines US legacy hegemony and drives other nations closer together.
The subservience and complicity the US has long relied upon from Europe, Japan, Australasia and others is no longer assured. They are all pushed closer to China which already offers superior trade options and has already prepared arguably superior digital trade payments options to US petrodollar/SWIFT hegemony.
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0 sats \ 2 replies \ @Solomonsatoshi 5 Apr
The bottom line is not explained - it is pure irrational US exceptionalism - refusing to see that the tariffs cost and weaken the US the most, while strengthening trade and common cause between all other nations, undermining the legacy advantage the US has held in international institutions and protocols.
There will now be far greater willingness, even urgency, between other trading nations to utilise alternative trade payment protocols to the USD SWIFT hegemony upon which the USD global reserve currency 'petrodollar' status relies.
China has enabled trade payments for Iran and Russia and now has mBridge digital payments protocol ready to expand with Saudi Arabia recently joining both mBridge and BRICS. Europe is going to be much less willing to be complicit with US/SWIFT sanctions on Iran and much more willing to accept trade with China denominated in Yuan or Euros.
The viability of US debt servicing is already questionable- it is already close to a $1 Trillion annual drain on US the government finances - if Trump insists on rewarding himself and his wealthy corporate sponsors with more tax cuts, any gains in US government solvency from the tariffs will be squandered and US Treasuries will be relegated to the status of junk bonds.
Trump is trashing the USD petrodollar reserve currency trade payments hegemony and the credibility of US Treasuries. He is opening the door for China to build upon its already operational digital trade payments gateways and Europe, Japan and others to join it.
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14 sats \ 1 reply \ @028559d218 6 Apr
US Treasuries will be relegated to the status of junk bonds.
If this ever happens the world will fall apart, economically at least.
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21 sats \ 0 replies \ @Solomonsatoshi 6 Apr
World trade is already centred upon China. China pays the best price for most commodities and sells manufactured goods at the best price. Thus most, if not all, nations need to trade with China or suffer economic disadvantage. The value of US Treasury bonds is presumed upon the liquidity of USD financial markets, the universal acceptance of USD and the credibility of the US government honouring the debt obligation those bonds are. It is no secret that the US government has been operating a chronic deficit for decades and consuming more than it produces - this enabled by the global reserve currency status of the USD enabled by the hegemony of the SWIFT trade payments network. The viability of this continuing is highly questionable and increasingly in doubt- this is part of the reasoning given by Trump for his imposition of global tariffs. In current world circumstance if the US and its Treasury bonds were to default there would be massive dislocation and losses on financial markets, but trade in the goods people need and want would continue and be denominated in different currencies as is already increasingly the case. The USD based financial markets could well fall apart leaving huge disruption and wealth redistribution- but actual trade in commodities and manufactured goods would not cease. It would shift substantially from current patterns and protocols to new patterns and protocols. The US era of empire would be over.
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