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De-Dollarization and Trade: Be Careful What You Wish For
by Charles Hugh Smith Of Two Minds
Be careful what you wish for, because currencies are not abstractions we ponder, they are commodities that serve real-world functions that place demands on the currency as a mechanism of trade, trust, value and risk.
The current telling of the story of de-dollarization–the replacement of the US dollar as the global economy’s primary reserve currency with a new BRIC (Brazil, Russia, India, China) funded reserve currency–depicts the loss of the reserve currency as a catastrophe that will crush America.
As delightful as this prospect may be to various audiences, once we shift from considering a reserve currency as an abstraction to a mechanism of trade and finance, then another outcome takes shape: supporting a reserve currency is a burden, and lifting that burden from the US will benefit the US and hurt mercantilist exporting nations.
As a bonus, it will also shift the burden of supporting a reserve currency to the BRIC participants, who will then have to do what the US has done for decades: