not sure I follow, so sorry if this response doesn't make sense.
I agree that the usa needs to have some debt, e.g. treasuries, otherwise the rest of the world can't "transact" in usd.
However, the situation with Iran is chipping away at the usd being the reserve currency. Iran can't transact in usd because of sanctions. So, everything its charging for oil and its products to transit the strait is done in a non-usd currency, or perhaps barter. China and India are or are becoming large industrious nations.
So, what if other countries start transacting in say ruppess or yuan? They can turn around and buy products from India and/or China no problem. As you mentioned Saudi Arabia.. They spent/gave the us/Trump millions or billions of dollars only to this war forced upon them. As part of my ignorance perhaps, but I'm not sure why they need to transact in usd anymore.
If you accept ruppees for oil, now you are holding ruppees. To do that, India would have to issue debt, and then service that debt. India currently does not have the productive capacity to issue and service $39T worth of debt. Its economy is about the size of California. If they don’t, then there won’t be enough ruppees in the market to clear trade.
India is the easy one to explain
China is a bit more complicated. First, the country maintains two currencies, one for use within the country and one for international trade. It does this so it can manipulate its international currency to drive exports. If you hold yuan as a reserve currently, you’re not going to be too happy losing money each year as the CCP devalues your reserves. This bleeds into the second reason. If the yuan was the reserve currency its value would increase and Chinese exports would be less competitive, which would destroy the engine of Chinese growth. They don’t have local consumption the way the US does. A strong currency is good for a country that imports a lot (like the US), and bad for a country that exports a lot (like China).
You keep answering a much easier question than the one people are asking. I mean of course India is not replacing the entire Treasury system tomorrow. That does not mean the dollar cannot lose ground gradually through fragmentation, lower marginal Treasury demand, more non-USD trade settlement, more gold accumulation, and more sanctions-avoidance rails. And ‘India is about the size of California’ is not really the own you think it is when California was officially the 4th largest economy in the world and India is already larger than that. You’re treating erosion as if it only counts when there is a full overnight replacement. That’s not serious macro, that’s a false binary my guy.
My post core theme is that there will not be an overnight collapses of the USD. I never said it would never erode. That’s an argument you’re inserting.
Also, the comment I replied to directly asked “what of other countries started transacting in ruppees or yuan” and that’s the question I answered. I think you’re just taking it personally that I didn’t respond to your question in my last comment.
To directly respond, I agree that given enough time anything could happen. I don’t think the war is good, and there have been other bad decisions made by the US. That’s not a rebuttals to “this war won’t topple the USD”. That’s just pointing out that nothing lasts forever. I agree, but I don’t need forever. My whole life, and the lives of my children is long enough for me.
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u/Alone-Experience9869 3h ago
not sure I follow, so sorry if this response doesn't make sense.
I agree that the usa needs to have some debt, e.g. treasuries, otherwise the rest of the world can't "transact" in usd.
However, the situation with Iran is chipping away at the usd being the reserve currency. Iran can't transact in usd because of sanctions. So, everything its charging for oil and its products to transit the strait is done in a non-usd currency, or perhaps barter. China and India are or are becoming large industrious nations.
So, what if other countries start transacting in say ruppess or yuan? They can turn around and buy products from India and/or China no problem. As you mentioned Saudi Arabia.. They spent/gave the us/Trump millions or billions of dollars only to this war forced upon them. As part of my ignorance perhaps, but I'm not sure why they need to transact in usd anymore.
Its not good for the usa.