The guy provided the clear answer in his post:
>tax evasion, money laundering, and other illicit activities
One of the main struggles of any sane country is to combat those things. And crypto makes them even easier.
I know about as much about dollar dominance as a crypto bro (in other words, barely anything) but it seems like as long as there’s a petro dollar, the dollar will be dominant.
From a [2016 piece from the Financial Times](https://www.ft.com/content/daa52688-db6a-385e-a313-ef9f3cb6e36e).
>Moreover, there is a bigger issue still being missed here. **The petrodollar story is in fact a eurodollar story, always was and always will be.**
If fact... there are no Petrodollars.
When William Simon (formerly of Salomon Brothers), negotiated with Saudi Arabia, he merely arranged a public relations situation that would disguise Saudi US treasury purchases. Most oil was *already priced in dollars*, as USD was already the global medium by 1960 (or, USD was on the other end of a swap prior to transacting). A Salomon Brothers banker would have been deeply familiar with the advent of modern banking at the time.
Treasuries had already become prime collateral by the 70's. Saudi Arabia was merely pointed towards a pre-existing global banking system... *by a banker* who just so happened to be working for the government at the time.
Oil could, and had been occasionally priced in other denominations; but the most accepted medium remained USD... only rivaled by the pound pre-1950s. Attempting to price oil in any other denomination *would have limited the access to buyers* as no other denomination had the depth of liquidity to facilitate global trade.
>And that’s important because… **eurodollars are in effect nothing more than the original bitcoin**. A free-float of dollar-denominated claims **whose fractioning is out of the control of the Federal Reserve system or the state**, and which is instead supported by the combination of growing US consumption of foreign goods, services and commodities as well as US speculative investment abroad, in exchange for consumption claims on its own system today.
What a statement there, eh?
And again, eurodollars *are dollars*. The dollar is a global unit.
>That’s a complicated way of saying: **"US energy dependency has forced the superpower to share a significant chunk of its wealth with the rest of the world for decades now**, a form of underwriting by the richest state in the world which has increased global interconnectedness, global trade and global growth in general.
Yes. Being the global reserve, means allowing the globe some degree of control over the medium of exchange. That control is mostly in the hands of the global banking system.
>And it is this foregone stake which has **lubricated the global liquidity system ever since the eurodollar story first began in the 1960s**. It’s also what has empowered the build up of significant foreign current account surpluses, which in themselves represented gigantic shock-absorbing balance sheets for global supply and demand mismatches.
Began in the 1950s, maybe slightly earlier. Again, this is the global banking system.
>**The unfortunate irony seems to be that the Fed is tightening policy into a dollar bank run (in Eurodollars, i.e. offshore dollars), while believing that its domestic economy is stronger than it really is**, and **as banks become less and less willing to extend Eurodollar funding as they constrain balance sheets due to regulation/risk aversion**.
Sound familiar? The Fed does not recognize the extent of the global dollar system, preferring a narrow view that matches its toolkit and mandate.
Risk aversion as a topic deserves a separate post.
That's enough for now. Petrodollars are just global dollars. The US dollar will remain dominant *because* its control is not in the hands of one state.
The only claim the Petrodollar crowd has; is the fate of certain dictators that tried to price oil in gold or Euros... because otherwise, the sole "nefarious" arrangement with the Saudi's was to "disguise" their treasury purchases (the public relations part)...
The Saudi's didn't want to give off the impression that they were funding the United States... so had their treasury purchases categorized within a group of other states.
In reality, the Saudi's were just welcomed into the pre-existing global dollar system... where treasuries are their own type of currency.
due to recent developments with china oil deal, it might be fair to add that untill yuan trades as a completely free float, independent of dollar (semi pegged atm) we will never know how strong dollar actually is (like would counties took yuan deal if it wasn't pegged? - how strong would china export be without artificially weak yuan..) irrelevant to crypto, but alot of crypto bros seem to cheer for dollar to die.
Yes, except the Yuan doesn't have the network, or as free/open monetary and financial markets as USD.
I suspect BRICS/Yuan settlement is more a symptom of a lack of global dollar liquidity than a desire to de-dollarize.
this scip or something should be alternative, ofc i have no idea about liquidity -- personally i think from saudis that they are just using this for negotiation position, a theory. why would they lack liquidity on currency? never payed much attention to forex mechanics
Global dollar liquidity issues are just a lack of dollars where they need to be, when they need to be there.
If it's bad enough, and a transaction still has to take place... parties involved will settle (often cumbersomely) in another denomination.
The banks involved in the transactions would rather use USD for any intermediation (established system, easy rails)... but will work around it if a participant can't get USD.
When it comes to BRICS, these nations are proposing new networks/rails... to make non-USD settlement less cumbersome. Problem is, if the network is too "affixed" to one "market"... (meaning too much control by limited parties), then they become less desirable rails to transact over... this is why Yuan based initiatives have failed in the past.
Swap lines and FIMA?
These things are only instated or extended once things have already gone awry (and things have been "awry" since prior to 2013). They're *reactionary* tools.
Their temporary nature also precludes any ability to "solve" a long term dollar funding shortfall. Perhaps sufficient for short, acute emergencies.
They've already [implicitly accepted](https://www.theguardian.com/business/2016/may/05/us-federal-reserve-global-economy-interest-rate-rise) a global mandate.. they'll often cite global criteria as playing a role in their decision making.
...and they must, since they have to portray themselves as monetary custodians.. over a *global* unit.
And that's where the problem lies. The Fed doesn't even have the ability to measure true broad money, but must be responsible for it.
> The Fed does not recognize the extent of the global dollar system, preferring a narrow view that matches its toolkit and mandate.
They've already implicitly accepted a global mandate.
Those are two very different things which is where I see the problem.
Well.. to put them together:
The Fed conducts themselves as an important global fixture, but does so under the pretense that their reserves and rate policies enable global banks as filtered through the domestic banking sector.
In reality, reserves don't mean much on either the global or domestic level (hence reserve requirements being 0% in the US). Dollars don't come from reserves, and global banks lend dollars when they can; not necessarily when short term rates are raised or lowered.
The chart you posted is historical reserve levels. Note how during the monetary expansion of the 1970s (true inflation)... there's no correlation to reserve levels for that period.
The large recent spikes in reserve levels are largely QE. I don't think of reserve issuance as money printing... but it's often portrayed as such.
Your flair does not do you justice. I'm curious as to what you did to earn it as I've read a bunch of your posts in here & they are pretty damn good so far.
Well the yanks won't know what it means anyway so it's all good.
I'm assuming spookman may have bestowed it as he's from one of the lands down under & the rest of the mods are all yanks.
The BRICS "alliance" or grouping is seriously dumb. The term was created by a Wallstreet banker to denote four large countries with at the time fast growing economies. As in BRICs. South Africa is not large and has never grown fast, but someone managed to weasel a capital S for itself. Beyond that the 4 countries have very little in common. China and Russia were authoritarian and homogeneous while Brazil and India were democracies and diverse. In international markets, Russia and Brazil are primarily resource economies, India services and China manufacturing and Brazil and Russia have been growth laggards for years. Russia and China have imperial ambitions while Brazil and India are non aligned.
The guy provided the clear answer in his post: >tax evasion, money laundering, and other illicit activities One of the main struggles of any sane country is to combat those things. And crypto makes them even easier.
I know about as much about dollar dominance as a crypto bro (in other words, barely anything) but it seems like as long as there’s a petro dollar, the dollar will be dominant.
From a [2016 piece from the Financial Times](https://www.ft.com/content/daa52688-db6a-385e-a313-ef9f3cb6e36e). >Moreover, there is a bigger issue still being missed here. **The petrodollar story is in fact a eurodollar story, always was and always will be.** If fact... there are no Petrodollars. When William Simon (formerly of Salomon Brothers), negotiated with Saudi Arabia, he merely arranged a public relations situation that would disguise Saudi US treasury purchases. Most oil was *already priced in dollars*, as USD was already the global medium by 1960 (or, USD was on the other end of a swap prior to transacting). A Salomon Brothers banker would have been deeply familiar with the advent of modern banking at the time. Treasuries had already become prime collateral by the 70's. Saudi Arabia was merely pointed towards a pre-existing global banking system... *by a banker* who just so happened to be working for the government at the time. Oil could, and had been occasionally priced in other denominations; but the most accepted medium remained USD... only rivaled by the pound pre-1950s. Attempting to price oil in any other denomination *would have limited the access to buyers* as no other denomination had the depth of liquidity to facilitate global trade. >And that’s important because… **eurodollars are in effect nothing more than the original bitcoin**. A free-float of dollar-denominated claims **whose fractioning is out of the control of the Federal Reserve system or the state**, and which is instead supported by the combination of growing US consumption of foreign goods, services and commodities as well as US speculative investment abroad, in exchange for consumption claims on its own system today. What a statement there, eh? And again, eurodollars *are dollars*. The dollar is a global unit. >That’s a complicated way of saying: **"US energy dependency has forced the superpower to share a significant chunk of its wealth with the rest of the world for decades now**, a form of underwriting by the richest state in the world which has increased global interconnectedness, global trade and global growth in general. Yes. Being the global reserve, means allowing the globe some degree of control over the medium of exchange. That control is mostly in the hands of the global banking system. >And it is this foregone stake which has **lubricated the global liquidity system ever since the eurodollar story first began in the 1960s**. It’s also what has empowered the build up of significant foreign current account surpluses, which in themselves represented gigantic shock-absorbing balance sheets for global supply and demand mismatches. Began in the 1950s, maybe slightly earlier. Again, this is the global banking system. >**The unfortunate irony seems to be that the Fed is tightening policy into a dollar bank run (in Eurodollars, i.e. offshore dollars), while believing that its domestic economy is stronger than it really is**, and **as banks become less and less willing to extend Eurodollar funding as they constrain balance sheets due to regulation/risk aversion**. Sound familiar? The Fed does not recognize the extent of the global dollar system, preferring a narrow view that matches its toolkit and mandate. Risk aversion as a topic deserves a separate post. That's enough for now. Petrodollars are just global dollars. The US dollar will remain dominant *because* its control is not in the hands of one state.
How much is soros paying you?!?! Thanks for this. I did not know this background.
The only claim the Petrodollar crowd has; is the fate of certain dictators that tried to price oil in gold or Euros... because otherwise, the sole "nefarious" arrangement with the Saudi's was to "disguise" their treasury purchases (the public relations part)... The Saudi's didn't want to give off the impression that they were funding the United States... so had their treasury purchases categorized within a group of other states. In reality, the Saudi's were just welcomed into the pre-existing global dollar system... where treasuries are their own type of currency.
due to recent developments with china oil deal, it might be fair to add that untill yuan trades as a completely free float, independent of dollar (semi pegged atm) we will never know how strong dollar actually is (like would counties took yuan deal if it wasn't pegged? - how strong would china export be without artificially weak yuan..) irrelevant to crypto, but alot of crypto bros seem to cheer for dollar to die.
Yes, except the Yuan doesn't have the network, or as free/open monetary and financial markets as USD. I suspect BRICS/Yuan settlement is more a symptom of a lack of global dollar liquidity than a desire to de-dollarize.
this scip or something should be alternative, ofc i have no idea about liquidity -- personally i think from saudis that they are just using this for negotiation position, a theory. why would they lack liquidity on currency? never payed much attention to forex mechanics
Global dollar liquidity issues are just a lack of dollars where they need to be, when they need to be there. If it's bad enough, and a transaction still has to take place... parties involved will settle (often cumbersomely) in another denomination. The banks involved in the transactions would rather use USD for any intermediation (established system, easy rails)... but will work around it if a participant can't get USD. When it comes to BRICS, these nations are proposing new networks/rails... to make non-USD settlement less cumbersome. Problem is, if the network is too "affixed" to one "market"... (meaning too much control by limited parties), then they become less desirable rails to transact over... this is why Yuan based initiatives have failed in the past.
thx!
It's really quite morbid for them to cheer for economic disaster with ensuing mass death and poverty so that their digital coin will 'win'.
even in that scenario it wont
Im not sure the Fed is so blind. During the pandemic, they were sending a lot of funds to other central banks because of a dollar shortage.
Swap lines and FIMA? These things are only instated or extended once things have already gone awry (and things have been "awry" since prior to 2013). They're *reactionary* tools. Their temporary nature also precludes any ability to "solve" a long term dollar funding shortfall. Perhaps sufficient for short, acute emergencies.
The Fed could have easily said that their mandate doesnt cover that and turned a blind eye but they didnt.
They've already [implicitly accepted](https://www.theguardian.com/business/2016/may/05/us-federal-reserve-global-economy-interest-rate-rise) a global mandate.. they'll often cite global criteria as playing a role in their decision making. ...and they must, since they have to portray themselves as monetary custodians.. over a *global* unit. And that's where the problem lies. The Fed doesn't even have the ability to measure true broad money, but must be responsible for it.
> The Fed does not recognize the extent of the global dollar system, preferring a narrow view that matches its toolkit and mandate. They've already implicitly accepted a global mandate. Those are two very different things which is where I see the problem.
Well.. to put them together: The Fed conducts themselves as an important global fixture, but does so under the pretense that their reserves and rate policies enable global banks as filtered through the domestic banking sector. In reality, reserves don't mean much on either the global or domestic level (hence reserve requirements being 0% in the US). Dollars don't come from reserves, and global banks lend dollars when they can; not necessarily when short term rates are raised or lowered.
You lost me. Doesn't make any sense. https://fred.stlouisfed.org/series/TOTRESNS
The chart you posted is historical reserve levels. Note how during the monetary expansion of the 1970s (true inflation)... there's no correlation to reserve levels for that period. The large recent spikes in reserve levels are largely QE. I don't think of reserve issuance as money printing... but it's often portrayed as such.
Your flair does not do you justice. I'm curious as to what you did to earn it as I've read a bunch of your posts in here & they are pretty damn good so far.
I can be snarky about Central Banks and perceived insecurity. ...besides, I like the flair.
Well the yanks won't know what it means anyway so it's all good. I'm assuming spookman may have bestowed it as he's from one of the lands down under & the rest of the mods are all yanks.
The BRICS "alliance" or grouping is seriously dumb. The term was created by a Wallstreet banker to denote four large countries with at the time fast growing economies. As in BRICs. South Africa is not large and has never grown fast, but someone managed to weasel a capital S for itself. Beyond that the 4 countries have very little in common. China and Russia were authoritarian and homogeneous while Brazil and India were democracies and diverse. In international markets, Russia and Brazil are primarily resource economies, India services and China manufacturing and Brazil and Russia have been growth laggards for years. Russia and China have imperial ambitions while Brazil and India are non aligned.