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Since no one's posting...
The dollar is done dude. It was nice while it lasted. But I believe that the U.S. dollar's reign as a universal reserve currency has ended. Over time fewer countries will hold U.S. treasuries and do business in U.S. dollars.
But why?
The dollar is a bad investment. How would you feel about holding a currency that is controlled by the government of a foreign country? You'd feel pretty bad if that country is $35 trillion in debt and will need to print trillions more every year to have any hope of even making the interest payments.
China is dumping U.S. treasuries and buying gold instead. It just makes financial sense.
U.S. treasuries are suffering their worst bear market possibly ever. Let's say you bought TLT (a long-term treasury ETF) at its peak in 2020. Today, you'd be down by more than 50% in real terms. What is supposed to be a "safe" investment becomes very unsafe in the presence of inflation.
The long-term picture isn't much better. Since the end of the gold standard in 1971, gold has outperformed U.S. treasuries. Simply buying and holding a lump of rock is better than holding the debt of the U.S. government. And the government was actually in good financial health for most of those years, unlike now.
The U.S. is not a trustworthy partner. Before Russia invaded Ukraine, Russia held about $600 billion in currency and gold reserves. About half of those reserves, $300 billion, were held in the West. After the invasion, those reserves were frozen. Now, they are now likely to be given to Ukraine.
Because of this, there is no reason for a country like China (or any other country for that matter) to store their wealth in the West, or to hold U.S. dollar-denominated assets. It's all conditional on U.S. allegiance.
For most countries, trade with China is more valuable than trade with the U.S. China now dominates most of the world's industries, and the trend continues to point in that direction. Third world countries often have much stronger trade ties with China than they do the U.S. They export natural resources and import Chinese goods. Increasingly, they can do without U.S. goods and services. Do what we say or otherwise you can't have our, um, Microsoft Excel licenses...
As this process strengthens, China will be able to lean on these countries to do business in Yuan, or perhaps in some resource-demoninated currency.
Okay, so the dollar is done. What comes next? Probably nothing major. I don't think that the Yuan will become the reserve currency, or that we'll move back to the gold standard (although global reserves will be held increasingly in gold). But the U.S. dollar will no longer be the uncontested reserve currency. The world will once again be multipolar, with the U.S. just one of multiple competing forces, and not necessarily the strongest one.
In the long run (10+ years) I expect gold to significantly outperform treasuries.
Tlt bad investment. You compared long term investments where the market was priced at 0% (historically high prices) to now higher rates. This is just bond math. Interest rates change. T-Bills did not lose any money. 30 year bonds are a bet on rates.
US took Russias money. If I have $20 of Jeroboam’s money in my pocket. And you Jeroboam punched me in the face he shouldn’t be surprised when I don’t give him his money back. Seems rational. The funny thing before Jeroboam punched me in the face he knew he was going to punch me in the face. Yet he also knew I had his money. Why didn’t he get it back before punching me? Something something there are good reasons why Jeroboam had his money in my pocket before punching me and it’s very sticky.
No accounting for a risks free asset versus a hunk of metal that only has value if someone else values it. Gold is a Ponzi scheme depending on a new sucker getting talked into owning gold. The Dollar is not a Ponzi scheme. People have to use it and if they don’t use it a military takes them and puts them in jail.
Edit: Too emphasize point 2. His argument for dollar weakness is the dollars greatest strength. Russia chose to go to war with America. They fully knew we would confiscate $300 billion. And could not liquidate before going to war. I complain that Apple is incredibly sticky and people just buy IPhones so they don’t look ghetto with green text. The dollar is so sticky you can go to war with America and can’t get rid of the dollar.
Can't get rid of the dollar..until you can.
For your information,Iphones are kind of rare elsewhere. ..and..green text? Wut?
Iphone is just incredibly bad value. I
Americans use traditional SMS messages to text each other, instead of Whatsapp like everyone else. When you text another iPhone from your iPhone, it actually uses a different app called iMessage that doesn’t cost money and the text appears in a blue bubble. If you text an Android user from an iPhone, the text appears in a green bubble and costs money (or consumes a bit of your plan, or whatever).
European countries do often have cheaper data than the US, but that's not the main reason why Americans use iMessage. The main reason is that early smartphone adoption in the US was extremely iPhone centric for anyone (a) under 40 and (b) not-poor. That has only grown more skewed over time. Premium Android phones in the iPhone price range are almost unheard of in the US - especially outside some first-gen immigrants from China/India (who use WeChat/Whatsapp). In Europe a lot of early smartphone adoption was HTC/Samsung/Sony Android devices; it's not uncommon for PMC types to have thousand dollar Samsung Galaxy whatever phones, although the trend is still toward iPhone in the long term. Not a single one of my American coworkers has an Android, ever.
This means that in a work group or social environment in the US for middle-class and above people, setting up a chat on iMessage is always an option, whereas in Europe even if 3/5 or 8/10 people use iPhone, you still use Whatsapp to include the others.
I don't think so. The nicer Samsung phones (S and Note) are fairly popular. At least among the people I know.
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That seems overstated. If you walk into any carrier store, at least half the shelf space is usually for higher end Samsung, Motorola, Google, or even OnePlus devices. Maybe it's because I'm in the midwest, but Android easily outnumbers iPhone among my friends and family.
iPhone has 80% marketshare among 18-24 year olds in the US, and well in excess of 80% marketshare among high income millennials too. Phone retailers (including carriers) love Android because they make more margin on their phones (a deal Samsung etc readily agree to in exchange for store space). For reference, after the iPhone X (2017), Apple cut margins for resellers (which obviously include carriers) to sub-4% in many cases. Samsung resellers make more like 6-7%, so it's a huge difference for the retailer if you sell 10,000 $1000 iPhones vs 10,000 $1000 Samsungs.
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