The De-Dollarization Fairytale

[ny_quant]

what’s the potential alternative?

Japan? Its government bond market is 60%+ absorbed by the BoJ, and there have been multiple days in a row (!) where no trade happened in the JGBs – how can you store your FX reserves in such an illiquid market?
Europe? With such a fragile monetary but non-fiscal union, and the only AAA countries potentially able to provide the world with safe collateral (German Bunds) instead sticking to austerity for decades?
China? Brazil? Russia? You are facing a combination of capital controls (China), lack of democracy/rule of law (Russia), corruption and frequent episodes of double-digit inflation (Brazil) – do you want to take these risks when storing your hard-earned FX reserves accumulated from selling your goods and services abroad?

The truth is that US Treasuries don’t have a valid competitor as a global vehicle where to invest FX reserves.





USD-denominated foreign debt is huge, and it makes an orderly De-Dollarization not more than a fairytale.

Comments

[ammosov.livejournal.com]

FX следует соотносить с оборотом международной торговли, а не с задолженностью, которая санируется часто внутри страны же. В Японии госбанк, а в США избыток ликвидности недвижимость поглощает.

[ny-quant.livejournal.com]

> FX следует соотносить с оборотом международной торговли

Это было в предыдущей записи по теме:

https://ny-quant.livejournal.com/1008057.html