Re:Evergrande teeters on edge of default as $148M payment fa...
by rsj_hn on Wednesday November 10, 2021 @07:27PM
(#29182901)
> If we're talking about a country that's attempting to (or has no choice but to) cut USD out of its foreign trading
For some small country -- and it would need to be a small country, like Sierra Leone, that cannot access the Forex markets, then they need foreign reserves ahead of time. This is true. But if they don't want to hold their reserves as USD they can hold them in EUR or YEN if they like, and then when they need to buy oil, they sell the EUR for USD and buy oil with USD.
While the USD is the largest foreign reserve, it's like 60%, there is also EUR, British Pound, Yen, and some other currencies that are ubiquitous enough for Sierra Leone to hold. These can readily be sold on the spot for whatever a nation wants as payment.
https://www.federalreserve.gov/econres/notes/feds-notes/the-....
And what currency a good is purchased in absolutely means something!
Your claim is that people store the proceeds of sales in dollars because of the trust factors, volume, and tight spreads. But I'd say that 2/3 of those (volume and tight spreads) are consequences of its utility and use as an international settling currency. Catch 22.
Yet are those things worth enough that international exporters would continue to trade in / hold in (effectively the same, if we collapse the goods trader and forex trader into a single entity) if the dollar ran 5% inflation and low central bank rates for years?
I suppose we'll see, but that's an atypical situation in the last 50 years of pure fiat international finance.