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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.
Glad we are admiting that Ukraine is just a proxy state for America. So the US can bomb, invade and occupy countries left and right and have proxy states right on Russia's border and there are no sanctions. However, other countries have no real legal protection and are left to the wims of American for whether their dollars are worth something or not.
There is a reason why this system isn't going to be stable.
Russia wanted Ukraine in its sphere, America wants it in its sphere. There's nothing original about this exact kind of proxy conflict, they've been happening between these very parties since 1945. If Russia or China (or anyone else) wanted to sanction the US and allies for supporting Euromaidan, they obviously could. They don't because it's transparently not in their interest.
In other words there is no rules based international order, there is just powergrabs. If that is the case then it is expected that other countries will be weary of the US and their power. Why be vulnerable to a country that is nothing more than extractive empire? The US has a problem and it is that the rest of the world is no longer far behind the US and therefore they can't bully countries to submission.
Because it's completely unclear that predation by China or (in some regional cases like Central Asia/Middle East/Caucasus/Baltics/Eastern Europe) Russia would be any better, when in fact it would likely be much worse. Sure, you can be a free agent with no permanent alliances, but that leaves you like the Philippines would be if they went full neutral; completely open to Chinese aggression. Much of the Pacific prefers the US to China. India is obviously fearful of China. In Africa and Latin America the factions are more mercenary, as we see. In Europe the bargain is that being part of the US alliance vs China is necessary to guarantee American support versus Russia.
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