Friday, September 2, 2016

The Reports of the Dollar’s Death are Greatly Exaggerated

NB: I have added an update, below.

The US dollar is tightening its grip on the global financial system at the expense of the euro, entrenching American hegemony and rendering the US Federal Reserve more powerful than at any time in history.

…the dollar’s share of the $5.1 trillion in foreign exchange trades each day has continued rising to 87.6pc of all transactions.

Roughly 60pc of the global economy is either in the dollar zone or closely tied to it through currency pegs or ‘dirty floats’, and the level of debt issued in dollars outside US jurisdiction has soared to $9 trillion.

It is much the same picture for the foreign exchange reserves of central banks, a good barometer of global trust. The dollar share has recovered to 63.6pc, roughly where it was a decade ago.

Outside of the dollar, basically the Chinese yuan has increased share at the expense of the Euro, which has lost share.


What isn’t happening?  The world isn’t walking away from the dollar.  Despite China, Russia, Iran and others establishing bilateral trade in their own currencies, despite the establishment of alternative global institutions such as the Asian Infrastructure Investment Bank, despite the dollar losing 96% of its value in the last 100 years…the needle hasn’t moved in any meaningful manner.

As I recall, once Rome started seriously devaluing the coinage it took a couple of centuries to hit bottom.

You might mark the beginning of this path for the dollar in 1913, with creation of the Federal Reserve.  It strikes me that the more appropriate mark would be 1971 and Nixon’s closing of the gold window.

Either way, we have a long way to go.

Update:  I have been thinking about further aspects of the cited article, written by Ambrose Evans-Pritchard.  First, more on the Euro:

The euro share has tumbled over the last eight years from 28pc to 20.4pc, and is barely above Deutsche Mark share in the early 1990s.

This is really a stunning statement.

The eurozone is crippled by the lack of a unified EU treasury, joint bond issuance, and a genuine banking union to back up the currency. It would require a change in the German constitution to open the way for fiscal union, an unthinkable prospect in the current political climate.

This was certainly the plan of the elite – throw Europe into a financial crisis in order to drive the continent to union.  It hasn’t gone to plan.

Then, London and the British Pound:

The BIS data showed that London’s share of global foreign exchange turnover has held steady at 37.1pc, down slightly from the last survey but higher than it was a decade ago. The eurozone share has fallen to 8pc.

Whether this will survive Brexit is a hotly-disputed question. Mr Jen, a Chinese-speaker from Taiwan, said Britain would flourish once it has broken free of a region caught in a failed currency experiment.

“London’s position is very secure. The talent is here and so is the scale. There is a very clear and strict rule of law. In five or ten years I think the pound will become a super-charged Swiss franc,” he said.

I might not go as far as “a super-charged Swiss franc,” but which currency will survive even past the next generation?  If you had to bet meaningful money on the Euro or the Pound…well, one of the two has a history that stretches back several centuries.

The Europeans did not come together in the wake of financial crisis, contrary to what was likely expected by the elite.  One might consider that, due to this “failure,” the Anglo-elite have thrown in the towel on its European integration experiment.  Bringing together the tribes has proven much more difficult than expected, perhaps. 

But why throw in the towel?  Brexit occurred to save the Anglo-Empire from the European continent – consider the stable position of London and the British Pound, and the aforementioned stable position of the US Dollar – by cutting it loose from its sinking brethren.

Finally: as the European masses have not gone along with pan-European integration (and the European elite have not been able to guide the masses toward this objective), are all of the mass-migration efforts in Europe designed to put the final knife in the possibility of Europe developing into a rival, another potential rival in a multi-polar world? 

If you are not with us, you are against us.  If you are against us, we must destroy you.


  1. I sometimes wonder about the various pre-Euro currencies, each with a goodly amount of zeros on them, and a willingness by those countries to switch into a new, yet-to-be inflated currency.

    If there were to be a switch back to national currencies, would they lose the zeros?

    1. They would at least start that way. How it goes thereafter? History offers a pretty good guide.