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Mike Norman Economics 2023-04-28 16:18:19

Summary:
The “Demise of the Dollar” is a long-running story in hard money circles, and has gotten a recent push by the growth of transactions in the Chinese yuan in international transactions. Although it seems likely that the yuan will grow in importance, this is largely a nothingburger from the perspective of the United States.Emerging market investor Paul McNamara was recently interviewed by Tracy Alloway and Joe Weisenthal on this topic. His views are better thought out than mine, but I just want to chime in from the perspective of a developed market govvies analyst.…There are two distinct issues (at least) involved in de-dollarization. The first is an actual replacement of the US as the global reserve currency, which most people in the know say is not imminent. On the other hand, once a trend

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The “Demise of the Dollar” is a long-running story in hard money circles, and has gotten a recent push by the growth of transactions in the Chinese yuan in international transactions. Although it seems likely that the yuan will grow in importance, this is largely a nothingburger from the perspective of the United States.
Emerging market investor Paul McNamara was recently interviewed by Tracy Alloway and Joe Weisenthal on this topic. His views are better thought out than mine, but I just want to chime in from the perspective of a developed market govvies analyst.…
There are two distinct issues (at least) involved in de-dollarization. 

The first is an actual replacement of the US as the global reserve currency, which most people in the know say is not imminent. On the other hand, once a trend passes a critical point and goes viral, there can be a run on the currency. That too is not imminent, as some think it is.

The second issue is the availability of workarounds in international trade that bypass the USD and therefore weaken the effort of the US to weaponize its currency in economic warfare. Economic warfare and cyber warfare (and biowarfare) are preferable to the use of destructive weapons in that they enable what is in effect conquest while leaving infrastructure intact. As a result, one sees US politicians and officials reacting publicly as targetted countries evade sanctions, freezes, seizures, and exclusion from the customary settlement system.

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Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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