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American dollar is socialism. Globalized cost when it suffers while you're allowed to print for your 400m with its value maintained. Its utter nonsense that it's not good for the US, it's THE reason why the US economy is the way it is.
Patrick how can the BRIC’s nations specifically India and China arrive at a reserve currency when the enmity and distrust that exists between the 2 border countries is undeniable and has not abated one bit in recent years. Furthermore can India and China agree on a reserve currency when they cannot come to an accord on where the border is between the two countries, a conflict which have costed dozens of lives in the last 5 years?
Remember 2008, when people suddenly jumped swiss franc, yen and gold? I've worked with swiss and japanese businesses at the time. They were in tears - a dilemma of either going red with cutting prices or loosing market share they put so much time, effort and money to get.
Can you imagine if over night, all banking institutions had to change their electronic financial systems and physical payment systems/protocols (nevermind legal requirements) to adopt a different currency paradigm? That very year, we would probably have -50% global GDP. Banks just wouldn't be able to cope with such a shift. If "de-dollarization" does happen, it will take many decades of a slow transition, or else you would see a world wide great depression.
@@cowarddonnie-ji5yz It hasn't. All the BS about "dedollarization" is a bunch of cope. Euro and USD makes up about 90% of all trade. The only one interested in abandoning the USD as the global reserve currency is China and Russia. Russia since they started an economic war with the west and the west holds Russia bye the balls. China since China wants to rule the world. China wants to be like USA, but a genocidal and extremely racist version of USA. The issue for Russia is that Russia is a joke of a country. It is a corrupt shit hole of a failed empire, with a lower GDP than Italy. The issue with China is that none wants to trade using China's garbage currency. China has to really push its influences to get people to even mention it as a possibility. China has one of the most manipulated currencies in the world. You may not like that USA controls your ass. But you can't escape that the Euro and the USD are the only candidates for being global reserve currencies to begin with. The Yuan is not even on the same planet. The reason why China is talking so much about this BS right now is because they want to divert focus from their dying economy. The CCP are a bunch of morons. All they know is propaganda. They can't deal with the truth. That is why we got the corona and why the economy of China is finally collapsing.
Great discussion! You succinctly addressed a great many of nuanced issues. Chinese economic policy precludes them from playing the role of an international reserve currency because of the stance on capital flow controls. Without free convertibility of currency they can not serve this role, nor do they really wish to. Their discussions and meetings with the BRICS on this topic is much more for domestic political consumption.
I also find it a pretty funny prospect trying to work with China, let alone Russia, on a stable currency alternative. Doubly so if the current events are the reason to check out alternatives. Russia brought everything on itself, its been reguarly threatening the west with nukes since 2008, and the chinese regime is just utterly braindead in their obsession over "recapturing" Taiwan (despite the CCP never controlled the Taiwan islands).
It's done intentionally, China doesn't want to de-dollarize yet because that would increase the value of the Yuan and make Chinese exports more expensive (and therefore less competitive). There will come a day when China prioritizes the strength of the Yuan over exports, and there and then will you finally see the capital controls let loose.
The convertibility already started. Many countries prefer China's currency stability then the wild swings of a pure market based currency conversion rate.
@@stephenwest2 China already does. Otherwise China's Yuan would be way undervalued from where it stands today. Trump the knucklehead tried to claim China was deliberately cheapening its currency on purpose, when China had in fact been strengthening its currency.
I will believe in this so called "brics" currency when some of those countries become more free and democratic a while others get rid of so much corruption b/c l think one would have to be on a heavy dosage of crack in order to place any faith in them.
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Sounds like we need a blockchain as a liquidity layer between foreign currencies to solve this problem. Something like XRP acting as a bridge between foreign currencies.
Last night, just after I watched this video, I learned that CVM, Brazil's SEC, made it clear to Petrobras that under their intern'l market obligations they cannot deal in any other currency than USD.
@@rogerbritus9378 ,.agreed and I believe that was indeed the message. For the record, I understand CVM was talking to the government not PBR and possibly at the latter's request so as to kill the nonsense in the craddle.
My understanding was the Yuan is a unit of RMB (RMB translates to "the people's money"), and that CNY is the local currency designation while CNH (China Hong Kong) is the designation for international trade. Unless something has changed, it's the CNH and CNY that can diverge in value as CNH is "offshore RMB" while CNY is "onshore RMB" and Yuan is just the unit -- like a dollar.
My understanding too. For a moment I thought I was hearing “won” the Korean currency, then I thought… nah Patrick wouldn’t get something wrong. Must be the accent. 😂
In Chinese, Yuan (元) is a general word used to describe a currency unit. Mei Yuan (美元) means American dollars. Ou Yuan (欧元) means Euros. Ri Yuan (日元) means Japanese Yen. So Renminbi is used to distinguish Chinese currency, Yuan Renminbi (元人民币), from the currencies of other countries. In practice, prices in China are often expressed in Yuan, because it's obvious which currency is being referred to. In spoken Chinese, the word kuai (块) is more common.
You are missing the point. The entire concept that the USA is allowed to inflate their own debt (and in turn spend trillions in their own country on future debt obligations) only because the future obligations "will" be met because of the petrodollar standing is a complete scam. This is essentially putting the USA at the top of a pyramid scheme , no matter how much the downline suffers, as long as there is even the slightest amount of profit trickling in it will always go to the head of the pyramid aka USA. This monopoly on infinity debt because magical future debt will be paid for so "just trust us bro" needs to come to an end and if this is the first step do that then so be it. Will it work perfectly ? Probably not. Will it initiate the much needed step for all countries to stop giving a single currency ie. the USD, so much global standing ? Definitely. It is this first scary step (because the USA will 100% initiate coup or something similar in countries pushing for this as it becomes reality). The USA have no right to have a global magic money printer system when everyone else needs to beg on their knees just to stay afloat. Enough is enough. If this first step works out, the USA will have to wait up one morning and realize they are now going to suffer as the rest of the world suffered since the 70s at a minimum. Moving from the USD makes more sense now than back then because until recently, the USA still have a big portion of global manufacturing etc still internally however today the rest of the world don't need the USA for 99% of products that is produced and consumed in the world so love it or hate it but China today based on its productivity is more similar to the USA productivity pre 2000 and in fact even bigger. The USA GDP growth is all a product of increase spending year over year which will soon have to come to an end. Internally aside from spending to inflate GDP the USA does not have much of a global GDP impact, its all smoke and mirrors and its all falling apart right now. Dont be surprised more and more destablization will be pushed via coerced USA influence in other countries because the last thing the USA wants to lose is spending power in the military , in fact the military might be the biggest production export by the USA compared to anything else the USA export.
The US $ lost it reserves statues last year .. for a currency to be a *world reserve currency* it must has *unrestricted capital account* i.e allowing foreigners to buy and sell USD $ unrestricted .. this changed last year when the US government weaponies the USD.
Very clear explanation of a complex and timely topic, thank you. I also like how you don’t waste words, every word had purpose. So many content providers use fillers. Thank you for being concise.
Wow I remember first seeing Patrick's blog a year or two back and it was well under 200k subscribers. Now he's at 500k. Well deserved. So objective and clear headed and that killer wit!
A lot of people don't know that they've been talking about this BRICS thing for at least 4 decades. The rhetoric has been the exact same for that long and we see how that has turned out.
"The United States is the only large economy that is willing to generate deficits to soak up the surpluses generated by other large economies around the world" This statement explains so much about our world's economy. Thank you for offering us a clear headed view of macro economics ! It is a much appreciated change from the majority of other channels and specialists making claims that make us grow more worried instead of making us understand the bigger picture. I also wonder how the state of macro-economic could evolve in the coming decades as more countries reach a level of surplus that could push the US debt to heights never seen before. Domestic hyper-inflation is what comes to my mind , but I'm missing a piece of the puzzle here.
EU has had a very rough ride with German-led common currency, despite shared laws, culture, and continent. A BRICS common currency would be a lot more difficult, even with strong leadership of China.
@@themsmloveswar3985 That is ask too much man. Chinese and Russian people has no choice to make, and the other countries most people doesnt have enough education to choose wiselly their leaders. I mean Lula was literally out of jail for corruption before being elected as a president, so it goes without saying.
The problem posed is this. If say trade is undertaken on terms with 30 to 90 days credit, who want to trade in a currency that in 90 days may be worth 15% less than it was when the transaction was executed. To an extent any currency is subject to such a risk in principle, but unless you’ve recently had a frontal lobotomy, you’re going to find that risk more palatable with the Greenback than some Third World currency.
For every reason you have not to like the dollar you will have five more to hate the alternatives😅When I hear my fellow Africans talking about dedollarization I usually ask them why they think it's a good idea, they go on to state the demerits of the dollar but after a short discussion they realise they would experience even worse challenges while using currencies like the Yuan or Commodities like gold
As an American, I WISH there was a lot more interest in strengthening the alternatives if only to allow greenbacks to come back home. Globally we have no backups, and the only way you can make the "good" money here is learning somekind of tech job, and grinding yourself into misery for the few years you can actually keep it. Either that or grinding for little in a region dying for USD. And the worse thing is, the over dependence on USD means we can't re adjust the currency without world wide ramifications. Often to the determent of our interests and allies aboard. We need more "carrier" money between markets, but the tighter the USD is at home thanks to exports that never come back, the worse the secondhand shock. Going forward, any stimulus pack will become a inflation shockwave and any prolonged deflation an international recession. And if that doesn't break globalization, the US opting to slow imports/ start disengaging aboard will, for nobody wants an economy like US.
I am part of those Africans for the dedollarization - the system is what holds Africa underdeveloped because the terms are always set by those who benefit the most. If we are already at the bottom why don't we just change now - what do we have to lose?
@@MsRamington the dollar is simply a means of exchange, countries like Singapore, China, Malaysia, Saudi, European countries before the Euro have been using the dollar to trade so why are they rich? A country like Equador uses the US dollar, why are they still poor? Whether you use cowrie shells, goats, gold or gems to trade doesnt matter, as long as you are corrupt, lack economic priorities, misappropriate funds, suppress the private sector, fail to invest in infrastructure you will be poor
@@davianoinglesias5030 Agreed, but I think you left out overweening bureaucracies. And those obstacles you mentioned are not at all easy to overcome. It’s easier to identify them broadly as you have done. But the work must be done, even if it’s done imperfectly, even if there are setbacks. There is always a lot of resistance from entrenched interests that benefit from the corruption, misappropriation, and mis prioritization. And these interests are always eager to deflect blame onto the U.S. and the dollar. Still, there are developing nations that are doing the hard work and liberalizing their economies while addressing the issues. Progress can seem slow but progress is being made. The truth is, most of the anti-dollar sentiment is geopolitical not financial. Certain countries are feeling discouraged and constrained from attacking their neighbors militarily for fear of sanctions, and those that do anyway are suffering from the sanctions and providing an object lesson. The benefit to the U.S. might not be financial, but having the reserve currency is a sort of immunity for doing all kinds of heinous shit. The sanctions tool cannot be successfully applied to the U.S. As an American, I think this is unfortunate. Policymakers would have to think twice and then a third and forth time before embarking on a reckless course of action (as the U.S. does from time to time). The rest of the world will have to find some other way of keeping U.S. foreign policy honest. I don’t think financial pressures will do it, not even getting cut off from oil.
What they mean by dedollarization is that the trade between these countries would bypass the dollar as much as possible and exchange things directly more or less. They are not trying to completely replace dollars. For example, India buys oil from Russia and Russia would buy medicines from India and they would cancel out with Rupee-Ruble trade (they would keep track of slight temporary imbalances). Any excess surplus will be converted to dollar for long term storage.
@@alexandroferreirafreitas9420 That's not what I said and that is also not true. For example, India does a lot fo trade with Bangladesh in local currency trade. Also, the US should not be able to unilaterally sanction countries.
Then there is no point. If you watch the entire video he explains why what ends up happening in that scenario is Russia would have to export more raw materials to India at low prices and exchange for medicines at higher prices than they would if they settled the trade in USD. That's the entire problem.
Take a look at russias situation with the indian rupee. India does not allow russia to export the rupees. They have to use those rupees to buy goods that they then take bak. Modern world does not work on barters.
I love your channel so much. Just started watching in the last month or so. Ty for making everything educational and simultaneously hilarious. Channels like this are the reason people can cut the cord on cable news. Most of their "money shows" are hosted by people I wouldn't trust to get me out of an empty field while 100ft. high neon signs flashing "Exit" show them the way out.
Impossible. There is no way BRICS could agree on monetary policy That is not to say that the dollar is some god send, but at least they play with their currency in plain sight, unlike China for example
@Dekyne Sure if their only policy objective is to cut the dollar out there are lots of ways to do it. But they probably also have other economic goals beyond just that.
The reason the china trade goes through the dollar is that few people in business want to hold Brazilian Reals or the Yuan. Cutting out the dollar will to lead to brazil becoming even more of an economy that exports raw materials to China at low prices in exchange for Chinese finished goods at much higher prices. These sorts of ideas just double down on all the historic economic problems of brazil.
@@dekyne3227 None uses gold standard. I wonder why. Morons want us to tie the world economy to a mineral that the total amount of has far less value than the global economy. You can't pretend your self in to making the value of any currency less arbitrary. The value of gold is completely arbitrary.
The FT mentioned that although a changing of reserve currency is likely to be decades down the line, many developing countries now have it in their minds that they would like to diversify their foreign currency holdings away from the dollar. This is something that wasn’t seen as an option before but now it’s a possibility. Let’s see how this change in attitude shapes the near future.
I totally agree with you. Yes it might be difficult but public opinion on developing countries is losing trust in America. Anything might possible this time
Not only it was possible, that a number of countries have done it for a huge number of reason namely diversification. But hey, lets pretend this is something new 🤣😂
@Rita Gameiro That’s what I thought. It’s the reason why the USD went from ~what 80% of reserves to 60% over the course of a couple of decades. Clearly diversification has been happening for quite a while.
You are also forgetting that 80% dropped to below 50% in the mid 1980s, hovered around 50% to 52% throughout most of 1980s and now it’s back above 60%. You need to do your homework before commenting 🤣🤣🤣🤣🤣🤣🤣
@@kennethli8 and you are ignoring the fact that it happened because of the crazy inflation. This time is for geopolitical reasons with inflation being secondary driver.
BRICS currency is unlikely to be anything but a basket notional currency and nothing else...if that. The economies are in different stages/parts of the economic cycle. Interest rates could not align. There is not enough interdependent trade for this to work.
I don’t think it would work simply because Brazil, South Africa, and Russia are like super corrupt as fuck nations who will probably try to swindle each other and which values and cultures are totally different from one another, and India and China hate each other lol. No way a common currency would work between them given those conditions
@@lolcatjunior Countertrade as pure non financial trade requires no specific currency to "value" the bartered products. So it does not support the concept of a BRICS currency. Notional USD valuations would suffice. While countertrade can be useful in breaking sanctions and other restraints, it really does not expand beyond basic products. Diversity is key to growing any economy. Frankly put, countertrade is barter and that approach to trade is highly inefficient.
@@stephenconway2468 Its one of the few ways an underdeleoped economies can grow and trade even if they have a poor currency or lack proper finance. China, India and Russia still do countertrade in order to trade with less delevoped countries. When the Soviet Union collapsed lots of foreign countries including the eastern bloc slowly started circling the drain. This was because the Soviet Union was the second biggest economy in the world and the biggest participent in Countertrade. America could have delevoped the world faster and earn alot more allies if it engaged in more countertrade like China is with its belt and road initiative. Instead of forcing every country to neo liberalize their markets. The closest the US does with countertrade is when it trades in oil. The key to growing an economy is to create a competive industry and feed it subsidies so that it can grow the rest of the economy. There are dozens of countries that try to "diversify" and fail everytime. A BRICS currency makes no sense tho, they are better off using their own money.
I remember my high school AP Government teacher teaching us about BRICs countries in 1998 or so. The term was around prior to the paper for sure (only South Africa wasn't part of that block and I suspect will always be the most junior member as their country is on the brink of falling apart). They were all considered the emerging markets sort of outside the first world. It's kind of strange to me now why some other fairly large countries like Vietnam, Malaysia, Indonesia, Turkey, and Argentina don't quite make the cut, but I suppose they do not have quite the diversified economies of the others.
True, its a bit of an arbitrary selection of countries in retrospect. I think part of the expectations about those countries wasnt really the real performance of them, but historically a huge hype about growing economies. Some worked out, China became a big deal, but India also has the potentiual to become a huge economical center in the future. But many people, espeically back in the 70s, actually thought that those countries wouldnt just become as big economies as China today, but actually take over the world economy, putting America (and the west) into a second place. Thats also where Cyberpunk literature drew a lot of inspiration from, its like a dramatization of fears about insanely efficient and powerful mega-corporations taking over the world economy. Especially with hype of growing asian economies like Japan or South Korea, but also South American countries like Brazil. And its no wonder it created entertainment literature, considering most of the expectations about the growing economies, BRICS and others, came from economic narratives that didnt really reflect the real world. While BRICS came pretty late, I feel like it was kind of an aftershock of that mentality. Maybe even a reaction after the growth slowed down and expectations became more realistic, trying to get back some glory those countries dreamed off. Of course these days you are absolutely right, its just strange that theres focus on those particular countries, when theres a lot of reasonably strong, emerging modern economies. But its just not as exciting has narratives about the world getting taking over by a dozen economic superpowers.
While it seems to be gaining traction, one thing remains paramount. First world countries have developed economies linked to working democrasies. China and Russia are the antithesis of democracy and that is a known fact. South Africa has a democracy but it seems to be in name only as the country is effectively removing itself from the world stage. Compared with the US no country in BRICS has the stability to deliver an international base of currency. Sheer numbers do not equate to political stability. These will be the main drivers keeping BRICS from becoming a force to be reckoned with.
@@Ceejayilc I think its a bit too optimistic to continue assuming that only democracies build strong economies. Or classically, that democracy is created with economic growth. China is too much of an antitheses to that. That said, you got a point that China/Russia is strongly reliant on trade with democratic countries, directly and indirectly. But that doesnt mean it cant change. Assuming they dont self-destruct with stupid (and callous) Ukraine/Taiwan adventures.
India has no parity of trade with BRICS irrespective of the origins. We have parity with US and EU. it makes much more sense for us to have a common trade currency with countries we have parity of trade with.
No chance, China loves devaluation of their currency because they want to export as much as they can. While the others in the group will not want it because they aren't China and will make a lot of imported products (outside BRICS) more expensive.
Pat, as always, well done presentation with the critical points discussed which few actually know or understand. I appreciate your work product (fan and subscriber).
This video was very insightful. I never realised that the current trading system depends so much on the US continuing to take debt. If they stopped doing that, we would probably see much higher inflation on the globe?
Yep pretty much. Global GDP growth has been at the expense of the US (more specifically its exporting sectors). In order to accommodate this global savings glut, the US has to either increase systemic unemployment or its debt (hint: we did both). Michael Pettis is the guy who writes up a lot of stuff on precisely this topic of you're interested in learning more.
One ought to read more of Karl Marx. Not saying follow him, just understand. Explanation how USA needs to borrow more so the world can operate is like " if you want to lose weight you must eat more ice cream and chocolate "🤦♂️🤦♂️🤦♂️
China is in a tough spot because they don't want to let their currency float to maintain their status as an exporter of goods. The discrepancy between the yuan's utility vs the dollar/yuan exchange rate will be addressed by global economics. China's political influence is significant, but not extensive enough that they can dictate an artificial exchange rate to the rest of the world. Something will give.
The title of the other UA-cam channel will be "Dollar will disappear in 15 days!" Bombastic title as always. Patrick's video is the cure for the insane world of UA-cam.
I enjoy these lectures and even though I know little of economics, I feel I’m learning from them. I like your style of presentation, deeply informed yet understandable, with occasional humorous notes thrown in.
I know NOTHING about economics or currencies but I do know that NONE of the BRICS nations share a common ideology, or common cause. They all have their own ideologies and interests which conflict with one another. Is it possible for them to build a stable currency?
I don't think it's about replacement of dollar by any other currency. Its more about reduction of dollar usage ( lets say 10 to 15 %) in international trade,as reserve currency and its effect on America's ability print it out of thin air without much consequences.
It's already lost more than 30% of it's position as global reserve currency, and is still falling each year as it has been for more than a decade. Now that the US can't peg the USD to oil anymore that trend is about to go off a cliff.
@@D64nz And trade it for what? Nothing else, including the BRiCS currencies already in use are in any position to replace it today or the next 10 years. Its too hard to get their currencies as a foreginer, and the international market for them has a pittance of what the world would need to function as it is now. Maybe more "my money or yours" deals would take pressure off the USD, but it would be fight for a while to get any BIRCS money to get widespread adoptation.
@@nomobobby Yes, and also who would want to adopt a currency regulated by a communist dictator? I guess only those who are sanctioned into oblivion as Iran or Russia.
it will age better than the last time someone said dollar is gonna be displaced. i think there are lot of young people who haven't read the history or know why dollar is a reserve currency in the first place and a lot of people who just blindly hate america.
@@shreyvaghela3963 Bad assessment. From an authoritarian monetary system controlled by the west like the present one to a more democratic multipolar system, it is inevitable that there will be a decline of the dollar. The only question is when and how. As always the USA will do everything in its power to stop such a predicament, like invading other countries in the east and engaging in regime changes.
Wow, Pro- Professor, you dissected the issue so well. I am from a French speaking country, colonized Senegal. I am very fortunate to be able to clearly understand your explanations. VERY CLEAR ENGLISH. That brings me a joyful degree of knowledge. Thank you with all my brain cells. You make me fell smarter. DOLLAR POWER BALANCE. D.P.B /// Throwing a BRIC to the the Dollar Wall.
Australia, China's 6th largest trade partner, have traded between each other in Australian dollar and yuan/renmenbi for just over a decade. ( April 13) Australia exports more to China than it imports.
Might be the case for some of their trade not all their trade. Australia is very pro American and against China. It is one of the few Anglo countries along with America
That currency conversion trade between the Australian dollar and Yuan only goes up to $41 Billion per agreement term. Each agreement signed has been 3 years with the most recent being years. Beyond $41 Billion they still use USD while trading
Thank you Pat, that was educational. It actually helped me to better understand the challenge being a world currency country or getting to one. I am still wondering why Euro has not reached more acceptance as a strong contender for a world currency. They do have a lot of underlying characteristics you mentioned to be a world currency.
With everything said and done, military power plays a very significant factor as well. The petrodollar exists primarily because of this, would the Saudis would never trade their oil in dollar denomination if it wasn't backed up with US weapons deals. A lot of sea trade routes are secured by the presence of US Navy (how much you want to believe this is up to you).
Because the Euro there's no "euro assets" that central banks can buy. You can buy German bonds and German Debt backed by German assets. But you cannot buy "euro" debt or bonds backed by euro assets. Although they all use the same currency, each "EUR" country's assets are assessed differently and come with different risks. The only reason to keep Euro's is for foreign exchange transactions. Once the EU stops mascaraing as a trade bloc and it's constituent states properly integrate their economies the Euro will be a contender for reserve currency. But right now it's useless as a reserve.
As soon as I saw the title of the video I knew you were gonna mention Michael petis. Then I had to wait until nearly the end of the video lol. Still a great video as always both informative and entertaining
Mr. d'Estaing was also not too happy with the US as they essentially ended France and Britain's ability to control the Suez Canal in 1956 due to financial manipulations.
There is something interesting to note that when Russia invaded Ukraine did the currency reserve used after sanctions was Chinese yuan... Indirectly meaning the China is settling debts for the invasion... Win or lose Russia now is in debt to China.
All trade with China is now done in RMB, devaluing the Ruble, and welcoming in inflation as Russians pay more for Chinese goods, which are the only goods they can get. All denoted by the recent crash of the Ruble.
@@timmyg44 Russia crashed and rebounded. China is buying billions of Russia gas and oil long term contracts . They have a symbiotic relationship now thanks to us sanctions. Weaponizing the dollar made this Eurasian monstrosity.
@@timmyg44 Why trading in RMB is "devaluing Ruble"? Russia has seen multiple devaluation of Ruble, in all of which Russia was internationally trading in USD. And many other countries, who experience inflation, like Lithuania, or currency devaluation, like Turkey, or Argentina do foreign trade in dollars. What's their problem then?
@@strangelylookingperson Russia is now doing business with China purely in RMB, which devalues the Ruble making Chinese goods more expensive, and thus inflation. It's down 20% in the last month as I remember?? And yes, trading in just $US devalues your currency, which is great if you are an exports driven economy. This is of course why everything is so cheap in America.
It seems the wreckingball dollar hurts America more than it helps. It's been a major force of deindustrialization, or has it? That would be a good topic to see Patrick's take on it. Would be nice to hear from someone not selling gold bars. New Video from Patrick is always a bright spot in my day.
In an inflationary economy the US is basically devaluing all the dollars in foreign hands, at no real cost to itself. That’s a massive benefit, I’d have thought.
While it may increase the cost of american goods, which in turn makes the production of commodities more expensive, it has the added benefit of forcing the economy towards a higher added value and technological production, and it also allows for an absurd amount of money printing without a significant increase in inflation as you have other countries to absorb your excedent amount of cash. I'd say theres plenty a reason why politicians are worried about this
Not true. The deindustrialisation that has occurred is because China is mercantilist, which imposes a trade deficit with every country that trades with them. It was, as Joseph Soll calls it, the "secular exuberant optimism" of Western capital who believed that China would naturally adopt financial capitalism after moving away from Maoism, and open it's economy to the free market. So confident were they, that they dismantled their own manufacturing capacity and shipped the vast majority of it to China. Not only would they enjoy a disciplined, educated, and then cheap workforce, but they would also foster the economic growth of China, and it's people would want to buy foreign goods and commodities. But they were naive. Whether through the legacy of history, or the need for the CCP to retain direct control, as they had been used to since they took control, the CCP baulked at fully opening their economy to the international markets. Instead, they pursued a mercantilist trading strategy that did not form a virtuous balance of China importing as much as they export. They only import as a last resort. This meant that there were no outflows coming from China into the the largely Western nations to replace the jobs culled to develop China's capacity. Instead their corporations spent those profits manufacturing consent for reducing their tax burdens, buying political capital, and speculating on the stock markets. If they had not virtually stopped paying onshore taxes, then governments could have stepped in and used that money to create new industries and support their workers. But, through their now deep pockets, they paid to avoid any responsibility towards their former workers whom they have impoverished since the latest stage of globalisation began in the 1980's. And slowly but surely, they were left to face stagnant real wage growth, precarity, declining living standards, and indebtedness, whilst their political class, the financial sector, and the corporations all got richer. Now perhaps, China wants to be as powerful, as to never again feel powerless as they did when their economy was the plaything of the Western powers. And the other developed nations, including China's former colonisers, are stuck with a resurgent China they helped to create. The joke is that it's not working out that well on either side. Leaving people to rot in the vine and the greed of the 1%, has created political instability in Western economies. Out of that weakness, sprang Trump, and a negative Conservatism drunk on nostalgia for the Good Old Days, which they are desperate to recreate, not only because for them at least it was better, but also to revenge themselves on the Liberal elites they blame for their misery. Too much bad things have happened to them for them not to be angry at being hung out to dry, then through mouths of the compliant politicians, be lgnored, blamed, and scapegosted for their distress. But when things starred getting fractious amongst the elites, the corporations simply bought more politicians and started culture wars to deny, defect and deceive their electorates, away from looking too hard at what had really happened. The elites greed created the problem, but didn't create in them the morality to accept responsibility. So here we are, with leaders who haven't a clue how to get out of this mess. And China is in the same boat, because reality there is a curated process. Their oligarchs just work through the party framework, in order to get the privileges, and the money. and they too, are afraid of their own people. Whilst they try and polish the poop the Chinese economy has become. Old ways die hard, and no-one wants to put their head above the parapet and tell the truth, or they might end up in prison. So, people keep their heads down, and the poop keeps piling up. And all the elites want to do is to exert more control over their populations, because the global financial system is is broken. Greed broke it in 2008, and it was never repaired. And our elites will try to do everything but the right things, in order to protect their position. So it's raw capitalism for the 99%, and socialism for the asset-wealthy. So, perhaps one day, we should take matters like the global reserve currency out of any country's control. And tax the corporations fairly, and not emburden future generations with debt to protect the assets of the few. One day, but not now.
A common BRICS currency is unlikely to work if it were a new currency - as opposed to simply substituting RMB for the US dollar. A successful common currency will need reasonably concurrent fiscal and monetary policies in order to work - and there is none of that between Brazil, Russia, India, PR China, and South Africa. These countries might as well just use SDRs.
Trading doesn’t have to be in a reserve currency. Two countries can trade in each other’s currencies if both have something to offer the other one wants. You don’t need a BRICS reserve currency for trading settlements and it is a misconception to focus on it and use its hypothetical success or failure to draw conclusions about the need for USD to settle international trade.
I think that “the Line”’s dimensions should’ve been 420 miles in length, and 69 miles in width. Then it would’ve been a successful project. As it is now - it doesn’t stand a chance…
I found Patrick's statement that the U.S. runs deficits DELIBERATELY to soak up the surplus' of other countries fascinating. If anyone can expand on this in any way I'd greatly appreciate it.
Countries whose hard currency reserves fall below 3 months of imports are considered to be at risk of default or local currency collapse and become financial pariahs. As world trades grows so does the amount equivalent to 3 months of importations. The rest of the world accumulate these reserves by running trade surpluses with the world's trade and reserve currency's issuer, the US. The $ status as the reserve currency and the US deficits are the two sides of the same coin. Trump's attempts at slashing the US trade deficit by taxing imports and labeling some partners as currency manipulators had economists rolling their eyes. Conversely, if the US trade partners did not want to hold $ and sold their $ to buy other currencies, the value of the $ would drop, the US products would become cheaper on the world markets and the US trade deficit would disappear.
I am not so sure this is out of altruism. Seems to me that it’s more a case of taking advantage of the situation. The vast flood of imports from the surplus countries allow voters in America to enjoy a higher standard of living than they otherwise would. So far, enough of them have benefited to outweigh the disadvantage to what are now called the rust belt states. However, the elites in America now realise that they need to bring some jobs and investment back.
America is he biggest importer of goods in the world. other countries may manipulate their currency to make exports favorable. america doesn't say anything to them mostly countries in east Asia and germany. that's how america soaks savings
Boyle has a calm, academic style which is a positive contrast to many pundits. Much of his recitation of historical facts is solid. He is less good, however, on a deeper understanding of important topics of global trade (I can’t recall if he mentions the word “trade” at all) and sovereign debt issuance in USD and its impact on borrowers. His analytics are based on Triffin’s Paradox (1964) which is in turn founded on the mechanics of Bretton Woods. None of this is in any way new, let alone creative. Of course, when one defines certain things as goals (eg “BRICS reserve currency”), then conventional economic thinking can kick in and deem certain mechanisms and outcomes inevitable in the way that, say, gravity is. However, many of us are skeptical that economics is a science per se. In any event, there are limitations to purely linear thinking, particularly in complex biological systems which, after all, is what human societal networks are.
The U.S. dollar reserve currency status was born out of chaos and war. During the end of WW2, the world required a stable currency and mutually agreed economic framework to abide by and trade with. The U.S.A. was the only standing great power - literally left unscathed from WW2 carnage and fully intact while Europe, Asia and Africa was in shambles. The U.S.A. did not sit idly by - as it recognized its new important and valuable role and quickly took to it to make sure its position was understood by all parties around the world through military and geopolitical interventions and projections of power. This reserve currency status ushered in untold wealth to the Americans. Pretty much everyone in the world must work with the American controlled financial system if they wanted to facilitate any form of trade or economic activities. And those who went against it were quickly taken out in the form of Western (American led) democratic reforms, which is euphemism for regime change. This kept all those who opposed USD reserve currency status - first and foremost - in subjugation and terror. The story is quite self explanatory and no human rights, justice or freedom was ever a part of the plot.
At the end of the day, the acceptance and use of a currency will always be based on transparency in determining its value, and resiliency to remain valuable. Brics is made up of two major autocratic nations both of which are prone to currency manipulation and outright misinformation on their economies. If you're a wealthy person in the world and you need to park some of your wealth, which currency will you have more confidence in? The BRICS currency or the dollar\Euro?
Whichever gives me better returns and is LESS TAXED. Ask yourself, why do companies still shift much of their capital and park it in China. If Cali is taxing me @ 70% with all the sales, luxury, etc etc, and it would apply to all my capital at the moment of my departure to a better state like Texas or Florida, why would I NOT park my money overseas and keep it there? Whether Luxembourg, Singapore, Bahamas, or if I'm anxious about the capital's security, China :)
@@Pedi98 sorry but your comment is not related to the topic. Domestic taxation policy vs foreign holdings are not related to the discussion of this video or my comment. I would recommend you seek the advice of a professional if you are investing in foreign currency.
Wealthy people prefer China, where they still manufacture things. Outside of the US, investors look for work getting done more than big flashy offices of tech companies that don't do anything. Sorry, yank
BRICS would only use the currency for export/import of goods not the actual population. It would be to substitute the dollar as the trade currency. So it would work unlike the euro
@@auraguard0212 no it is idiotic to think anybody should trust China who is a great power. After the dollar all trade needs to be conducted on mutual terms preferably gold if not on a case by case basis on what currency benefits the most
I doubt that a ¨BRICS¨ currency would work unless they only use it to trade among those 5 countries themselves. The global dependency on the USD though is an interesting discussion, especially for emerging markets.
Fascinating video. I understand parts of this and in general, follow your reasoning. But I feel like it doesn't "click" because I'm missing some more fundamental understanding of the forces at play. Could you please do a video explaining some of the underlying principles? Surpluses, deficits, currency exchange rates...
Hypothetically let's say some countries are trading in their own currencies, the first issue will be maintaining such vast reserves of various currencies. Unless the two countries are major trade holders between each other, it is very risky for the two countries to depend on each other's currency as holding reserves of a currency whose value might be volatile will risk the economic conditions in the country which is holding that said currency. In simple words, if I am trading with you today in Yuan and suddenly the Chinese Housing Bubble bursts which would lead to a domino effect to cripple their economy and hence the Yuan's strength in the global market compared to other currencies including the dollar. So if I am Russia holding Yuan as reserves, my economy will also face the same issues as the Chinese market. Hence, holding multiple currencies of different countries whose economic volatility is bad will risk both the country's economy and also the entire world economy too.
@@preachergaming6970 Yes.. I know the reasons people want contracts in U.S. dollars. I was trying to be funny. Certainly I want to be paid in dollars and not Lira, for example.
Their currencies are viewed as less stable than the dollar. For example: How would you like to loan money to Greece and they will pay you back at a later date in Lira? 😅😅😅😅😅
I love how Patrick's pronunciation of Yuan shifted from the beginning to the end of the video. It is actually quite hard to pronounce, and I wonder saying RMB might be easier.
Overall, Brazil seems happy with the greenback. This talk is little more than Lula desperately trying to sell himself as a world leader. What a nerve... (Greetings from Sao Paulo.)
I think it really depends. If they were to replace the national currencies of each member this could be problematic when it comes to political risk but if the new currency is a way to accept foreign transactions and reserves it may work out.
With respect Pat, what are you talking about when you say China has a dual currency system? The renminbi 人民币 is the currency of China. The Yuan 元 is the unit of measure of this currency. They're the same currency, the very same Yuan that is bought and sold internationally is also used domestically without conversion, there's just a capital control. That's like saying 'pounds' and 'quid' are different currencies. It's just that foreigners are under no obligation to respect Chinese price controls and so international prices are free floating while domestic prices aren't, but you wouldn't call a currency pegged to the USD two different currencies even though its the exact same thing.
"CNY means Renminbi traded within the mainland China, while CNH refers to Renminbi traded outside the mainland China, such as CNH markets in Hong Kong, Singapore and London." Apr 11, 2023... 💴💵💶💷💸💳💰🇨🇳
Absolutely Brilliant and perfectly reasoned out analysis! I agree that expecting the new proposed BRICS Currency-- if indeed it materialises at all -- is purely aspirational and outside the realm of reality! Keep up your excellent work!
I wouldn’t call it newly proposed. It was part of the “promise” from the beginning. It is perhaps gaining momentum. Or perhaps the momentum is illusory.
The US holds a monopoly over the global currency. In 2022, they abused that monopoly to punish Russia. What happens when a monopoly abuses its position? It creates competition. It creates a need to change and re-examine. But please keep doing as all people do and go on with the assumption that life and the world remains static.
Is it possible that there is a large enough demand for Chinese goods that even if they didn't open up their stock markets to foreigners they could still become a world reserve currency? I don't know if this is a possibility, but if anyone else knows please reply to this!
The belt and road initiative is China's version of feudal imperialism. Once the countries default on their debts from the infrastructure China has built in these foreign countries they will take over these ports and roads and slowly toll and tax them into bankruptcy. It's neo-imperialism & feudal-indenture slavery all in one package. China's version of build back better. They don't need to sell a product, they need to sell a safe silk road with the promise of stability and ease of access for business.
The argument is a country’s currency can only become a reserve used by the rest of the world if it exports enough of that currency, by purchasing imports. That’s what’s happened to the US$, since we run trade deficits. Exports of commodities or products don’t encourage the home currency to be used as a reserve. If China becomes a net importer, the situation could change, as we’d all be saving Yuan as they flow all over the world, instead of Dollars.
The reason the renminbi cant be the reserve currency is Chinas huge trade surplus. They would have to start purchasing imports and run a huge deficit like the US in order for it to work, which will never happen. That is the opposite of how you should look at it.
@@ibiedun156 Dollar is like 60% of international reserves and Euro is like 20%. I don't know if it's 'right behind' considering they lost London in Brexit and bobbleheaded Swiss bankers being shocked when they found out banking for notorious international financial criminals is actually a stupid buisness model. But it's the closest any currency has come to being an alternative.
Institutions degrade way before any clear substitute arises. There was no clear subsitute to the king of France when he got arrested then beheaded, there was no substitute to the British Empire when Indians stood-up against it etc.
@@Keeptheirheadzringin Money is not an institution. There is a constant evaluation, every single day. When you have to literally put your money on the table, you pick the best option at the time.
@@christianlibertarian5488 Money is very much an instution, no economist will tell you otherwise outside of crazy monetarists that say that there is no such thing as money in the long run (no need to be here talking about the dollar then).
@A B How can you expect AI to shift the balance of power toward service-oriented economies ? It is destroying the entire notion of intellectual property, the pillar allowing for any monetization of knowledge !
pound was a reserve currency before the dollar. how did dollar become a reserve currency? people changed the financial system after mutual agreement in the west. people can change the dollar system as well.
@@TheDynamicmarket i wouldnt say so, most people prefer it to the alternative, no one is forcing countries to trade in dollars. Fact is as long as there isnt an alternative the dollar will stay king. And i dont see any potential alternatives tbh.
@@captainalex157 what is the alternative we do not know but turkiye, china, india are internationalizing their currencies. if the indonesian politicians are telling to the people not to use visa mastercard and if they banned their use in government, it doesn't look good. upi is getting internationalized, rupay and russian mir payments and wechat have exploded in usage.
China-Brazil trade balance favours Brazil heavily: China just got Brazil to balance that trade since they won't be able to use their yuan somewhere else.
Agree there are challenges, but how many wars have India and China fought in last 50 years as compared to US & EU in serial war after war. US economy is war based so US has to keep creating troubles. US/EU plan to do regime change and take over Russian energy reserves backfired big time.
I'm not even American (I'm Nigerian) and even I know the US dollar isn't going away anytime soon. For starters, no other country can match the USA's economic, cultural and military might. Second, most of the other competitors, like China, artificially control their currency rather than let it flow on the market like the USA. Third,to become a global currency requires massive investment and spending that America did over many decades and that China, Indian or Russia will never do. Finally, most countries, even BRICS members, depend on and trust the US dollar more so than their own currencies and their crippling socioeconomic issues are another hinderence. It's not going away.
I’m not American and I see the exact opposite. Usa weaponizing the dollar by stealing / holding Russian foreign reserves incentivizes other countries ( corrupt countries if you will) from keep inflation foreign reserves in dollars . Instead of spewing generalizations let me tell you what happened in recent meetings : Brazil- china own currency. Iran - china own currency. Russia - china own currency . ASEAN recent meeting plan is to dump dollar , yen , pound , Mastercard , visa . Saudi - china , trade in yuan. This all just happens in last 3/4 months . It’s accelerating …..
@@supertuscans9512 only just recently yes. But the past 75 years, let’s be honest mate, they’d get invaded like iraq and Libya when they tried selling oil for gold/euros. Where do you think the term petrodollar came from.
Who is more manipulative of their currency while being least transparent? Brazil or China? The U.S. Federal Reserve does stuff like raise and lower interest rates and it controls the money supply. But they’re transparent and they announce moves ahead of time.
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Excellent summary video Patrick!
American dollar is socialism. Globalized cost when it suffers while you're allowed to print for your 400m with its value maintained. Its utter nonsense that it's not good for the US, it's THE reason why the US economy is the way it is.
Patrick how can the BRIC’s nations specifically India and China arrive at a reserve currency when the enmity and distrust that exists between the 2 border countries is undeniable and has not abated one bit in recent years. Furthermore can India and China agree on a reserve currency when they cannot come to an accord on where the border is between the two countries, a conflict which have costed dozens of lives in the last 5 years?
What is your prediction of the gold price once BRICS creates a gold backed currency?
What is your prediction of the gold price once BRICS creates a gold backed currency?
Remember 2008, when people suddenly jumped swiss franc, yen and gold? I've worked with swiss and japanese businesses at the time. They were in tears - a dilemma of either going red with cutting prices or loosing market share they put so much time, effort and money to get.
No
Can you imagine if over night, all banking institutions had to change their electronic financial systems and physical payment systems/protocols (nevermind legal requirements) to adopt a different currency paradigm? That very year, we would probably have -50% global GDP. Banks just wouldn't be able to cope with such a shift. If "de-dollarization" does happen, it will take many decades of a slow transition, or else you would see a world wide great depression.
CHF went negative interest rates back in the 1970s as a means of dissuading buyers. They have had to do that again and again.
@@aw2031zap No. And it has been happening in case you're still sleeping
@@cowarddonnie-ji5yz
It hasn't.
All the BS about "dedollarization" is a bunch of cope.
Euro and USD makes up about 90% of all trade.
The only one interested in abandoning the USD as the global reserve currency is China and Russia.
Russia since they started an economic war with the west and the west holds Russia bye the balls.
China since China wants to rule the world.
China wants to be like USA, but a genocidal and extremely racist version of USA.
The issue for Russia is that Russia is a joke of a country.
It is a corrupt shit hole of a failed empire, with a lower GDP than Italy.
The issue with China is that none wants to trade using China's garbage currency.
China has to really push its influences to get people to even mention it as a possibility.
China has one of the most manipulated currencies in the world.
You may not like that USA controls your ass.
But you can't escape that the Euro and the USD are the only candidates for being global reserve currencies to begin with.
The Yuan is not even on the same planet.
The reason why China is talking so much about this BS right now is because they want to divert focus from their dying economy.
The CCP are a bunch of morons.
All they know is propaganda.
They can't deal with the truth.
That is why we got the corona and why the economy of China is finally collapsing.
Great discussion! You succinctly addressed a great many of nuanced issues. Chinese economic policy precludes them from playing the role of an international reserve currency because of the stance on capital flow controls. Without free convertibility of currency they can not serve this role, nor do they really wish to. Their discussions and meetings with the BRICS on this topic is much more for domestic political consumption.
I also find it a pretty funny prospect trying to work with China, let alone Russia, on a stable currency alternative. Doubly so if the current events are the reason to check out alternatives.
Russia brought everything on itself, its been reguarly threatening the west with nukes since 2008, and the chinese regime is just utterly braindead in their obsession over "recapturing" Taiwan (despite the CCP never controlled the Taiwan islands).
It's done intentionally, China doesn't want to de-dollarize yet because that would increase the value of the Yuan and make Chinese exports more expensive (and therefore less competitive). There will come a day when China prioritizes the strength of the Yuan over exports, and there and then will you finally see the capital controls let loose.
The convertibility already started. Many countries prefer China's currency stability then the wild swings of a pure market based currency conversion rate.
@@stephenwest2 China already does. Otherwise China's Yuan would be way undervalued from where it stands today. Trump the knucklehead tried to claim China was deliberately cheapening its currency on purpose, when China had in fact been strengthening its currency.
I will believe in this so called "brics" currency when some of those countries become more free and democratic a while others get rid of so much corruption b/c l think one would have to be on a heavy dosage of crack in order to place any faith in them.
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Sounds like we need a blockchain as a liquidity layer between foreign currencies to solve this problem. Something like XRP acting as a bridge between foreign currencies.
@MSD Group That's why xrp is the neutral middle layer.
hey Patrick, take care of your vocal cords! get some medicine or something. We care for you!
Last night, just after I watched this video, I learned that CVM, Brazil's SEC, made it clear to Petrobras that under their intern'l market obligations they cannot deal in any other currency than USD.
And I'm sure the SEC itself would endorse that position in order to keep PBR ADR trading in the US.
@@rogerbritus9378 ,.agreed and I believe that was indeed the message. For the record, I understand CVM was talking to the government not PBR and possibly at the latter's request so as to kill the nonsense in the craddle.
The Brazilian dictator can easily overturn the CVM rules.
@@wilsonfreitas8418 o atual ou o anterior? São dois autocratas em potencial..
gado detected @@wilsonfreitas8418
My understanding was the Yuan is a unit of RMB (RMB translates to "the people's money"), and that CNY is the local currency designation while CNH (China Hong Kong) is the designation for international trade. Unless something has changed, it's the CNH and CNY that can diverge in value as CNH is "offshore RMB" while CNY is "onshore RMB" and Yuan is just the unit -- like a dollar.
Exactly this!
It reminds me how Douyin and TikTok are from the same country but serve entirely different markets.
@@ianx2458 Thank you!
My understanding too. For a moment I thought I was hearing “won” the Korean currency, then I thought… nah Patrick wouldn’t get something wrong. Must be the accent. 😂
Yuan is eurodollar
In Chinese, Yuan (元) is a general word used to describe a currency unit. Mei Yuan (美元) means American dollars. Ou Yuan (欧元) means Euros. Ri Yuan (日元) means Japanese Yen. So Renminbi is used to distinguish Chinese currency, Yuan Renminbi (元人民币), from the currencies of other countries.
In practice, prices in China are often expressed in Yuan, because it's obvious which currency is being referred to. In spoken Chinese, the word kuai (块) is more common.
"The Line" IS a blockchain.
As in, a chain of blocks. Alright, I'll see myself out.
No. No. You have a point.
House block, office block, civil service block, house-house-housing block, commerical block.
That tracks, confirmed legit!
Love to hear Plain Bagel and Patrick discuss this overhyped dedollarization trend in the media
They are really good at pouring cold water on issues
You are missing the point. The entire concept that the USA is allowed to inflate their own debt (and in turn spend trillions in their own country on future debt obligations) only because the future obligations "will" be met because of the petrodollar standing is a complete scam. This is essentially putting the USA at the top of a pyramid scheme , no matter how much the downline suffers, as long as there is even the slightest amount of profit trickling in it will always go to the head of the pyramid aka USA. This monopoly on infinity debt because magical future debt will be paid for so "just trust us bro" needs to come to an end and if this is the first step do that then so be it. Will it work perfectly ? Probably not. Will it initiate the much needed step for all countries to stop giving a single currency ie. the USD, so much global standing ? Definitely. It is this first scary step (because the USA will 100% initiate coup or something similar in countries pushing for this as it becomes reality).
The USA have no right to have a global magic money printer system when everyone else needs to beg on their knees just to stay afloat. Enough is enough. If this first step works out, the USA will have to wait up one morning and realize they are now going to suffer as the rest of the world suffered since the 70s at a minimum. Moving from the USD makes more sense now than back then because until recently, the USA still have a big portion of global manufacturing etc still internally however today the rest of the world don't need the USA for 99% of products that is produced and consumed in the world so love it or hate it but China today based on its productivity is more similar to the USA productivity pre 2000 and in fact even bigger. The USA GDP growth is all a product of increase spending year over year which will soon have to come to an end. Internally aside from spending to inflate GDP the USA does not have much of a global GDP impact, its all smoke and mirrors and its all falling apart right now. Dont be surprised more and more destablization will be pushed via coerced USA influence in other countries because the last thing the USA wants to lose is spending power in the military , in fact the military might be the biggest production export by the USA compared to anything else the USA export.
I was just going to type the same thing.
The US $ lost it reserves statues last year .. for a currency to be a *world reserve currency* it must has *unrestricted capital account* i.e allowing foreigners to buy and sell USD $ unrestricted .. this changed last year when the US government weaponies the USD.
@@yeetyeet7070 why you want them to trade betwen each other in there enemy currency!!
Very clear explanation of a complex and timely topic, thank you.
I also like how you don’t waste words, every word had purpose. So many content providers use fillers. Thank you for being concise.
Wow I remember first seeing Patrick's blog
a year or two back and it was well under 200k subscribers. Now he's at 500k. Well deserved. So objective and clear headed and that killer wit!
A lot of people don't know that they've been talking about this BRICS thing for at least 4 decades. The rhetoric has been the exact same for that long and we see how that has turned out.
"The United States is the only large economy that is willing to generate deficits to soak up the surpluses generated by other large economies around the world"
This statement explains so much about our world's economy.
Thank you for offering us a clear headed view of macro economics !
It is a much appreciated change from the majority of other channels and specialists making claims that make us grow more worried instead of making us understand the bigger picture.
I also wonder how the state of macro-economic could evolve in the coming decades as more countries reach a level of surplus that could push the US debt to heights never seen before. Domestic hyper-inflation is what comes to my mind , but I'm missing a piece of the puzzle here.
EU has had a very rough ride with German-led common currency, despite shared laws, culture, and continent. A BRICS common currency would be a lot more difficult, even with strong leadership of China.
The BRICS would need to avoid putting morons in charge ( like UVDL, Lagarde, Borrel, Michel, etc...).
That is a straightforward process.
@@themsmloveswar3985 That is ask too much man. Chinese and Russian people has no choice to make, and the other countries most people doesnt have enough education to choose wiselly their leaders. I mean Lula was literally out of jail for corruption before being elected as a president, so it goes without saying.
@@themsmloveswar3985 Also completely impossible with nations like China and Russia taking charge
The problem posed is this. If say trade is undertaken on terms with 30 to 90 days credit, who want to trade in a currency that in 90 days may be worth 15% less than it was when the transaction was executed.
To an extent any currency is subject to such a risk in principle, but unless you’ve recently had a frontal lobotomy, you’re going to find that risk more palatable with the Greenback than some Third World currency.
@@themsmloveswar3985 “Straightforward process”
I see you don’t follow South African or Brazilian politics? 😂
Mr Boyle is the best at explaining complicated things in a way people can understand, Thanks Man
Professor Boyle.
For every reason you have not to like the dollar you will have five more to hate the alternatives😅When I hear my fellow Africans talking about dedollarization I usually ask them why they think it's a good idea, they go on to state the demerits of the dollar but after a short discussion they realise they would experience even worse challenges while using currencies like the Yuan or Commodities like gold
As an American, I WISH there was a lot more interest in strengthening the alternatives if only to allow greenbacks to come back home. Globally we have no backups, and the only way you can make the "good" money here is learning somekind of tech job, and grinding yourself into misery for the few years you can actually keep it. Either that or grinding for little in a region dying for USD. And the worse thing is, the over dependence on USD means we can't re adjust the currency without world wide ramifications. Often to the determent of our interests and allies aboard.
We need more "carrier" money between markets, but the tighter the USD is at home thanks to exports that never come back, the worse the secondhand shock. Going forward, any stimulus pack will become a inflation shockwave and any prolonged deflation an international recession. And if that doesn't break globalization, the US opting to slow imports/ start disengaging aboard will, for nobody wants an economy like US.
I am part of those Africans for the dedollarization - the system is what holds Africa underdeveloped because the terms are always set by those who benefit the most. If we are already at the bottom why don't we just change now - what do we have to lose?
@@MsRamington the dollar is simply a means of exchange, countries like Singapore, China, Malaysia, Saudi, European countries before the Euro have been using the dollar to trade so why are they rich? A country like Equador uses the US dollar, why are they still poor? Whether you use cowrie shells, goats, gold or gems to trade doesnt matter, as long as you are corrupt, lack economic priorities, misappropriate funds, suppress the private sector, fail to invest in infrastructure you will be poor
@@davianoinglesias5030 Agreed, but I think you left out overweening bureaucracies. And those obstacles you mentioned are not at all easy to overcome. It’s easier to identify them broadly as you have done. But the work must be done, even if it’s done imperfectly, even if there are setbacks. There is always a lot of resistance from entrenched interests that benefit from the corruption, misappropriation, and mis prioritization. And these interests are always eager to deflect blame onto the U.S. and the dollar. Still, there are developing nations that are doing the hard work and liberalizing their economies while addressing the issues. Progress can seem slow but progress is being made.
The truth is, most of the anti-dollar sentiment is geopolitical not financial. Certain countries are feeling discouraged and constrained from attacking their neighbors militarily for fear of sanctions, and those that do anyway are suffering from the sanctions and providing an object lesson. The benefit to the U.S. might not be financial, but having the reserve currency is a sort of immunity for doing all kinds of heinous shit. The sanctions tool cannot be successfully applied to the U.S. As an American, I think this is unfortunate. Policymakers would have to think twice and then a third and forth time before embarking on a reckless course of action (as the U.S. does from time to time).
The rest of the world will have to find some other way of keeping U.S. foreign policy honest. I don’t think financial pressures will do it, not even getting cut off from oil.
AFRICA DOESN'T WANT TO BE US SLAVES
What they mean by dedollarization is that the trade between these countries would bypass the dollar as much as possible and exchange things directly more or less. They are not trying to completely replace dollars. For example, India buys oil from Russia and Russia would buy medicines from India and they would cancel out with Rupee-Ruble trade (they would keep track of slight temporary imbalances). Any excess surplus will be converted to dollar for long term storage.
You nailed it my friend. This whole dedollarization business is all about evading sanctions rather than replacing the dollar.
@@alexandroferreirafreitas9420 That's not what I said and that is also not true. For example, India does a lot fo trade with Bangladesh in local currency trade. Also, the US should not be able to unilaterally sanction countries.
Then there is no point. If you watch the entire video he explains why what ends up happening in that scenario is Russia would have to export more raw materials to India at low prices and exchange for medicines at higher prices than they would if they settled the trade in USD. That's the entire problem.
Take a look at russias situation with the indian rupee. India does not allow russia to export the rupees. They have to use those rupees to buy goods that they then take bak.
Modern world does not work on barters.
I love your channel so much. Just started watching in the last month or so. Ty for making everything educational and simultaneously hilarious.
Channels like this are the reason people can cut the cord on cable news. Most of their "money shows" are hosted by people I wouldn't trust to get me out of an empty field while 100ft. high neon signs flashing "Exit" show them the way out.
Exactly, those people who couldn't organize a Booze Up in a brewery. And I have no doubt Boyle could get that enterprise underway.
BRICS are fine, but I'm not sure about the strength of the mortar between them.
One thing is sure, there is only poison between the west and the global south
Impossible. There is no way BRICS could agree on monetary policy
That is not to say that the dollar is some god send, but at least they play with their currency in plain sight, unlike China for example
Yeah everyone else is uncivilized and treacherous except Americans and Western Europe /s
They don't have to do a monetary policy just trade in their own currency or go to a gold standard both ways can cut the dollar out
@Dekyne Sure if their only policy objective is to cut the dollar out there are lots of ways to do it. But they probably also have other economic goals beyond just that.
The reason the china trade goes through the dollar is that few people in business want to hold Brazilian Reals or the Yuan.
Cutting out the dollar will to lead to brazil becoming even more of an economy that exports raw materials to China at low prices in exchange for Chinese finished goods at much higher prices. These sorts of ideas just double down on all the historic economic problems of brazil.
@@dekyne3227
None uses gold standard.
I wonder why.
Morons want us to tie the world economy to a mineral that the total amount of has far less value than the global economy.
You can't pretend your self in to making the value of any currency less arbitrary.
The value of gold is completely arbitrary.
The FT mentioned that although a changing of reserve currency is likely to be decades down the line, many developing countries now have it in their minds that they would like to diversify their foreign currency holdings away from the dollar. This is something that wasn’t seen as an option before but now it’s a possibility. Let’s see how this change in attitude shapes the near future.
I totally agree with you. Yes it might be difficult but public opinion on developing countries is losing trust in America. Anything might possible this time
Not only it was possible, that a number of countries have done it for a huge number of reason namely diversification.
But hey, lets pretend this is something new 🤣😂
@Rita Gameiro
That’s what I thought. It’s the reason why the USD went from ~what 80% of reserves to 60% over the course of a couple of decades. Clearly diversification has been happening for quite a while.
You are also forgetting that 80% dropped to below 50% in the mid 1980s, hovered around 50% to 52% throughout most of 1980s and now it’s back above 60%. You need to do your homework before commenting 🤣🤣🤣🤣🤣🤣🤣
@@kennethli8 and you are ignoring the fact that it happened because of the crazy inflation. This time is for geopolitical reasons with inflation being secondary driver.
Really enjoy this presentation Patrick. Your clear voice in a sea of muddle. Thanks!!
Interesting geopolitical overview of common currency headwinds. I'm going to dig further into some of these areas.
Look up stuff written by Michael Pettis, all his work basically gave me the aha moment for these types of issues.
I appreciate the mandatory trashing of the "Line City" idea.
BRICS currency is unlikely to be anything but a basket notional currency and nothing else...if that. The economies are in different stages/parts of the economic cycle. Interest rates could not align. There is not enough interdependent trade for this to work.
I don’t think it would work simply because Brazil, South Africa, and Russia are like super corrupt as fuck nations who will probably try to swindle each other and which values and cultures are totally different from one another, and India and China hate each other lol. No way a common currency would work between them given those conditions
True.
Look up counterstrade. Non financial trade.
@@lolcatjunior Countertrade as pure non financial trade requires no specific currency to "value" the bartered products. So it does not support the concept of a BRICS currency. Notional USD valuations would suffice. While countertrade can be useful in breaking sanctions and other restraints, it really does not expand beyond basic products. Diversity is key to growing any economy.
Frankly put, countertrade is barter and that approach to trade is highly inefficient.
@@stephenconway2468 Its one of the few ways an underdeleoped economies can grow and trade even if they have a poor currency or lack proper finance. China, India and Russia still do countertrade in order to trade with less delevoped countries. When the Soviet Union collapsed lots of foreign countries including the eastern bloc slowly started circling the drain. This was because the Soviet Union was the second biggest economy in the world and the biggest participent in Countertrade. America could have delevoped the world faster and earn alot more allies if it engaged in more countertrade like China is with its belt and road initiative. Instead of forcing every country to neo liberalize their markets. The closest the US does with countertrade is when it trades in oil.
The key to growing an economy is to create a competive industry and feed it subsidies so that it can grow the rest of the economy. There are dozens of countries that try to "diversify" and fail everytime.
A BRICS currency makes no sense tho, they are better off using their own money.
Honestly I love his objective economic analysis of issues , Boyle is good at what he does....
I remember my high school AP Government teacher teaching us about BRICs countries in 1998 or so. The term was around prior to the paper for sure (only South Africa wasn't part of that block and I suspect will always be the most junior member as their country is on the brink of falling apart). They were all considered the emerging markets sort of outside the first world. It's kind of strange to me now why some other fairly large countries like Vietnam, Malaysia, Indonesia, Turkey, and Argentina don't quite make the cut, but I suppose they do not have quite the diversified economies of the others.
True, its a bit of an arbitrary selection of countries in retrospect. I think part of the expectations about those countries wasnt really the real performance of them, but historically a huge hype about growing economies. Some worked out, China became a big deal, but India also has the potentiual to become a huge economical center in the future.
But many people, espeically back in the 70s, actually thought that those countries wouldnt just become as big economies as China today, but actually take over the world economy, putting America (and the west) into a second place. Thats also where Cyberpunk literature drew a lot of inspiration from, its like a dramatization of fears about insanely efficient and powerful mega-corporations taking over the world economy. Especially with hype of growing asian economies like Japan or South Korea, but also South American countries like Brazil.
And its no wonder it created entertainment literature, considering most of the expectations about the growing economies, BRICS and others, came from economic narratives that didnt really reflect the real world.
While BRICS came pretty late, I feel like it was kind of an aftershock of that mentality. Maybe even a reaction after the growth slowed down and expectations became more realistic, trying to get back some glory those countries dreamed off.
Of course these days you are absolutely right, its just strange that theres focus on those particular countries, when theres a lot of reasonably strong, emerging modern economies. But its just not as exciting has narratives about the world getting taking over by a dozen economic superpowers.
While it seems to be gaining traction, one thing remains paramount. First world countries have developed economies linked to working democrasies. China and Russia are the antithesis of democracy and that is a known fact. South Africa has a democracy but it seems to be in name only as the country is effectively removing itself from the world stage. Compared with the US no country in BRICS has the stability to deliver an international base of currency. Sheer numbers do not equate to political stability. These will be the main drivers keeping BRICS from becoming a force to be reckoned with.
@@Ceejayilc I think its a bit too optimistic to continue assuming that only democracies build strong economies. Or classically, that democracy is created with economic growth. China is too much of an antitheses to that.
That said, you got a point that China/Russia is strongly reliant on trade with democratic countries, directly and indirectly. But that doesnt mean it cant change.
Assuming they dont self-destruct with stupid (and callous) Ukraine/Taiwan adventures.
India has no parity of trade with BRICS irrespective of the origins. We have parity with US and EU. it makes much more sense for us to have a common trade currency with countries we have parity of trade with.
@@DevKulkarni Also helps that Americans/Europeans arent shooting at Indians.
No chance, China loves devaluation of their currency because they want to export as much as they can. While the others in the group will not want it because they aren't China and will make a lot of imported products (outside BRICS) more expensive.
yes the brazil dude should already understand that they don't trade with each other in their currencies because they don't trust each other.
China devalues because the U.S manipulates its currency LEGALLY!!!!!!!!!!!!!!!!!!!!!!!
Patrick is the vaccine we all need for financial FUD and Conspiracy theories.
My impotence is cured. Thanks to this vaccine.
Don't forget to come back next week for your booster shot 😁
@@gladlawson61
That was a blue pill? Not a vaccine.
What? Reddit and the Daily HODL are from financial FUD and conspiracy theories
If he is like the vaccine, well most of us are going to die, only time will tell.
Pat, as always, well done presentation with the critical points discussed which few actually know or understand. I appreciate your work product (fan and subscriber).
This video was very insightful. I never realised that the current trading system depends so much on the US continuing to take debt. If they stopped doing that, we would probably see much higher inflation on the globe?
Oh yeah, short term hyperinflation. Happened to the Spanish currency when they were at their height.
Yep pretty much. Global GDP growth has been at the expense of the US (more specifically its exporting sectors). In order to accommodate this global savings glut, the US has to either increase systemic unemployment or its debt (hint: we did both).
Michael Pettis is the guy who writes up a lot of stuff on precisely this topic of you're interested in learning more.
One ought to read more of Karl Marx.
Not saying follow him, just understand.
Explanation how USA needs to borrow more so the world can operate is like " if you want to lose weight you must eat more ice cream and chocolate "🤦♂️🤦♂️🤦♂️
This was incredibly insightful. The large scale relationships are not discussed with this level of nuance.
China is in a tough spot because they don't want to let their currency float to maintain their status as an exporter of goods. The discrepancy between the yuan's utility vs the dollar/yuan exchange rate will be addressed by global economics. China's political influence is significant, but not extensive enough that they can dictate an artificial exchange rate to the rest of the world. Something will give.
The title of the other UA-cam channel will be "Dollar will disappear in 15 days!"
Bombastic title as always.
Patrick's video is the cure for the insane world of UA-cam.
Spoiler: no.
I enjoy these lectures and even though I know little of economics, I feel I’m learning from them. I like your style of presentation, deeply informed yet understandable, with occasional humorous notes thrown in.
I know NOTHING about economics or currencies but I do know that NONE of the BRICS nations share a common ideology, or common cause. They all have their own ideologies and interests which conflict with one another. Is it possible for them to build a stable currency?
I don't think it's about replacement of dollar by any other currency. Its more about reduction of dollar usage ( lets say 10 to 15 %) in international trade,as reserve currency and its effect on America's ability print it out of thin air without much consequences.
It's already lost more than 30% of it's position as global reserve currency, and is still falling each year as it has been for more than a decade.
Now that the US can't peg the USD to oil anymore that trend is about to go off a cliff.
@@D64nz And trade it for what? Nothing else, including the BRiCS currencies already in use are in any position to replace it today or the next 10 years. Its too hard to get their currencies as a foreginer, and the international market for them has a pittance of what the world would need to function as it is now. Maybe more "my money or yours" deals would take pressure off the USD, but it would be fight for a while to get any BIRCS money to get widespread adoptation.
@@D64nz USD isn't pegged to oil...
@@nomobobby Yes, and also who would want to adopt a currency regulated by a communist dictator? I guess only those who are sanctioned into oblivion as Iran or Russia.
I can't wait to see how this will age
it will age better than the last time someone said dollar is gonna be displaced. i think there are lot of young people who haven't read the history or know why dollar is a reserve currency in the first place and a lot of people who just blindly hate america.
@@shreyvaghela3963 Bad assessment. From an authoritarian monetary system controlled by the west like the present one to a more democratic multipolar system, it is inevitable that there will be a decline of the dollar. The only question is when and how. As always the USA will do everything in its power to stop such a predicament, like invading other countries in the east and engaging in regime changes.
@@shreyvaghela3963"people who blindly hate america". We all know why America is hated, don't underestimate the world
like most of his videos, badly.
Made me aware of many implications of reserve currencies that I hadn't considered.
Very stimulating, thank you!
This is the best analysis I have ever seen on this subject.
Wow, Pro- Professor, you dissected the issue so well. I am from a French speaking country, colonized Senegal. I am very fortunate to be able to clearly understand your explanations. VERY CLEAR ENGLISH. That brings me a joyful degree of knowledge. Thank you with all my brain cells. You make me fell smarter. DOLLAR POWER BALANCE. D.P.B /// Throwing a BRIC to the the Dollar Wall.
A BRICS common currency? No. A multi currency world? Yes.
Yeah people will be clamouring for those Zimbabwe dollars😂
ummm .... it's been a multi-currency world for several hundred years
@@rhuephus yeah, I too am at a loss with what's trying to be said.
You are aware that countries already can trade in whatever currency they like, right?
You're right, its been a multi-currency world already since 2002, when the eurozone was formed.
I am so glad you explained this. Well done and thank you!
Australia, China's 6th largest trade partner, have traded between each other in Australian dollar and yuan/renmenbi for just over a decade. ( April 13)
Australia exports more to China than it imports.
Might be the case for some of their trade not all their trade. Australia is very pro American and against China. It is one of the few Anglo countries along with America
That currency conversion trade between the Australian dollar and Yuan only goes up to $41 Billion per agreement term. Each agreement signed has been 3 years with the most recent being years. Beyond $41 Billion they still use USD while trading
Great episode.
As BRICS expand, it'll be more difficult for the organization to act in unison.
Id been waiting for a Patrick Boyle video on this for so long, I did a bunch of reading myself, now I'm doubly informed
Excellent, just excellent. Respect Patrick.
Patrick Boyle and The Plain Bagel AKA The Financial Duo
Thank you Pat, that was educational. It actually helped me to better understand the challenge being a world currency country or getting to one.
I am still wondering why Euro has not reached more acceptance as a strong contender for a world currency. They do have a lot of underlying characteristics you mentioned to be a world currency.
The answer is what does Europe produce? Dollar may no longer be backed by gold but you need dollars to buy services from Google.
With everything said and done, military power plays a very significant factor as well. The petrodollar exists primarily because of this, would the Saudis would never trade their oil in dollar denomination if it wasn't backed up with US weapons deals. A lot of sea trade routes are secured by the presence of US Navy (how much you want to believe this is up to you).
Because the Euro there's no "euro assets" that central banks can buy. You can buy German bonds and German Debt backed by German assets. But you cannot buy "euro" debt or bonds backed by euro assets. Although they all use the same currency, each "EUR" country's assets are assessed differently and come with different risks.
The only reason to keep Euro's is for foreign exchange transactions.
Once the EU stops mascaraing as a trade bloc and it's constituent states properly integrate their economies the Euro will be a contender for reserve currency. But right now it's useless as a reserve.
@@louiscypher4186 Isnt Greece an example of the major loophole in the euro? Just asking
@@jarvisaddison8560 What do you mean by loophole?
I'd describe it as a liability in currency terms.
As soon as I saw the title of the video I knew you were gonna mention Michael petis. Then I had to wait until nearly the end of the video lol. Still a great video as always both informative and entertaining
Mr. d'Estaing was also not too happy with the US as they essentially ended France and Britain's ability to control the Suez Canal in 1956 due to financial manipulations.
There is something interesting to note that when Russia invaded Ukraine did the currency reserve used after sanctions was Chinese yuan... Indirectly meaning the China is settling debts for the invasion... Win or lose Russia now is in debt to China.
All trade with China is now done in RMB, devaluing the Ruble, and welcoming in inflation as Russians pay more for Chinese goods, which are the only goods they can get. All denoted by the recent crash of the Ruble.
@@timmyg44 Russia crashed and rebounded. China is buying billions of Russia gas and oil long term contracts . They have a symbiotic relationship now thanks to us sanctions. Weaponizing the dollar made this Eurasian monstrosity.
@@timmyg44 Why trading in RMB is "devaluing Ruble"?
Russia has seen multiple devaluation of Ruble, in all of which Russia was internationally trading in USD. And many other countries, who experience inflation, like Lithuania, or currency devaluation, like Turkey, or Argentina do foreign trade in dollars. What's their problem then?
@@strangelylookingperson Russia is now doing business with China purely in RMB, which devalues the Ruble making Chinese goods more expensive, and thus inflation. It's down 20% in the last month as I remember?? And yes, trading in just $US devalues your currency, which is great if you are an exports driven economy. This is of course why everything is so cheap in America.
which is not correct they used uae dirham
It seems the wreckingball dollar hurts America more than it helps. It's been a major force of deindustrialization, or has it? That would be a good topic to see Patrick's take on it. Would be nice to hear from someone not selling gold bars. New Video from Patrick is always a bright spot in my day.
In an inflationary economy the US is basically devaluing all the dollars in foreign hands, at no real cost to itself. That’s a massive benefit, I’d have thought.
Globalization of the dollar has allowed the us immense power over everyone. It’s americas greatest weapons de industrialization is worth it
@@sirrathersplendid4825 no, it isn't. Dedollarization is net benefit for America, sadly it won't happen.
While it may increase the cost of american goods, which in turn makes the production of commodities more expensive, it has the added benefit of forcing the economy towards a higher added value and technological production, and it also allows for an absurd amount of money printing without a significant increase in inflation as you have other countries to absorb your excedent amount of cash.
I'd say theres plenty a reason why politicians are worried about this
Not true. The deindustrialisation that has occurred is because China is mercantilist, which imposes a trade deficit with every country that trades with them. It was, as Joseph Soll calls it, the "secular exuberant optimism" of Western capital who believed that China would naturally adopt financial capitalism after moving away from Maoism, and open it's economy to the free market. So confident were they, that they dismantled their own manufacturing capacity and shipped the vast majority of it to China. Not only would they enjoy a disciplined, educated, and then cheap workforce, but they would also foster the economic growth of China, and it's people would want to buy foreign goods and commodities. But they were naive. Whether through the legacy of history, or the need for the CCP to retain direct control, as they had been used to since they took control, the CCP baulked at fully opening their economy to the international markets. Instead, they pursued a mercantilist trading strategy that did not form a virtuous balance of China importing as much as they export. They only import as a last resort. This meant that there were no outflows coming from China into the the largely Western nations to replace the jobs culled to develop China's capacity. Instead their corporations spent those profits manufacturing consent for reducing their tax burdens, buying political capital, and speculating on the stock markets. If they had not virtually stopped paying onshore taxes, then governments could have stepped in and used that money to create new industries and support their workers. But, through their now deep pockets, they paid to avoid any responsibility towards their former workers whom they have impoverished since the latest stage of globalisation began in the 1980's. And slowly but surely, they were left to face stagnant real wage growth, precarity, declining living standards, and indebtedness, whilst their political class, the financial sector, and the corporations all got richer.
Now perhaps, China wants to be as powerful, as to never again feel powerless as they did when their economy was the plaything of the Western powers. And the other developed nations, including China's former colonisers, are stuck with a resurgent China they helped to create.
The joke is that it's not working out that well on either side. Leaving people to rot in the vine and the greed of the 1%, has created political instability in Western economies. Out of that weakness, sprang Trump, and a negative Conservatism drunk on nostalgia for the Good Old Days, which they are desperate to recreate, not only because for them at least it was better, but also to revenge themselves on the Liberal elites they blame for their misery. Too much bad things have happened to them for them not to be angry at being hung out to dry, then through mouths of the compliant politicians, be lgnored, blamed, and scapegosted for their distress. But when things starred getting fractious amongst the elites, the corporations simply bought more politicians and started culture wars to deny, defect and deceive their electorates, away from looking too hard at what had really happened. The elites greed created the problem, but didn't create in them the morality to accept responsibility. So here we are, with leaders who haven't a clue how to get out of this mess.
And China is in the same boat, because reality there is a curated process. Their oligarchs just work through the party framework, in order to get the privileges, and the money. and they too, are afraid of their own people. Whilst they try and polish the poop the Chinese economy has become. Old ways die hard, and no-one wants to put their head above the parapet and tell the truth, or they might end up in prison. So, people keep their heads down, and the poop keeps piling up.
And all the elites want to do is to exert more control over their populations, because the global financial system is is broken. Greed broke it in 2008, and it was never repaired. And our elites will try to do everything but the right things, in order to protect their position. So it's raw capitalism for the 99%, and socialism for the asset-wealthy.
So, perhaps one day, we should take matters like the global reserve currency out of any country's control. And tax the corporations fairly, and not emburden future generations with debt to protect the assets of the few. One day, but not now.
A common BRICS currency is unlikely to work if it were a new currency - as opposed to simply substituting RMB for the US dollar. A successful common currency will need reasonably concurrent fiscal and monetary policies in order to work - and there is none of that between Brazil, Russia, India, PR China, and South Africa. These countries might as well just use SDRs.
Trading doesn’t have to be in a reserve currency. Two countries can trade in each other’s currencies if both have something to offer the other one wants. You don’t need a BRICS reserve currency for trading settlements and it is a misconception to focus on it and use its hypothetical success or failure to draw conclusions about the need for USD to settle international trade.
wow, how insightful! i am an economist myself, but Patrick is out of this world. thank you, Patrick!
I think that “the Line”’s dimensions should’ve been 420 miles in length, and 69 miles in width. Then it would’ve been a successful project. As it is now - it doesn’t stand a chance…
They were not thinking of asking Elon Musk to invest in it.
I found Patrick's statement that the U.S. runs deficits DELIBERATELY to soak up the surplus' of other countries fascinating. If anyone can expand on this in any way I'd greatly appreciate it.
I'd be interested in hearing more about that
Countries whose hard currency reserves fall below 3 months of imports are considered to be at risk of default or local currency collapse and become financial pariahs. As world trades grows so does the amount equivalent to 3 months of importations. The rest of the world accumulate these reserves by running trade surpluses with the world's trade and reserve currency's issuer, the US. The $ status as the reserve currency and the US deficits are the two sides of the same coin. Trump's attempts at slashing the US trade deficit by taxing imports and labeling some partners as currency manipulators had economists rolling their eyes. Conversely, if the US trade partners did not want to hold $ and sold their $ to buy other currencies, the value of the $ would drop, the US products would become cheaper on the world markets and the US trade deficit would disappear.
I am not so sure this is out of altruism. Seems to me that it’s more a case of taking advantage of the situation. The vast flood of imports from the surplus countries allow voters in America to enjoy a higher standard of living than they otherwise would. So far, enough of them have benefited to outweigh the disadvantage to what are now called the rust belt states. However, the elites in America now realise that they need to bring some jobs and investment back.
America is he biggest importer of goods in the world. other countries may manipulate their currency to make exports favorable. america doesn't say anything to them mostly countries in east Asia and germany. that's how america soaks savings
its a lie americans tell themselves so they dont have to deal with reality
A majestic econmics lesson in 'disguise'. Thanks Patrick.
Boyle has a calm, academic style which is a positive contrast to many pundits. Much of his recitation of historical facts is solid.
He is less good, however, on a deeper understanding of important topics of global trade (I can’t recall if he mentions the word “trade” at all) and sovereign debt issuance in USD and its impact on borrowers.
His analytics are based on Triffin’s Paradox (1964) which is in turn founded on the mechanics of Bretton Woods. None of this is in any way new, let alone creative. Of course, when one defines certain things as goals (eg “BRICS reserve currency”), then conventional economic thinking can kick in and deem certain mechanisms and outcomes inevitable in the way that, say, gravity is. However, many of us are skeptical that economics is a science per se. In any event, there are limitations to purely linear thinking, particularly in complex biological systems which, after all, is what human societal networks are.
The U.S. dollar reserve currency status was born out of chaos and war.
During the end of WW2, the world required a stable currency and mutually agreed economic framework to abide by and trade with.
The U.S.A. was the only standing great power - literally left unscathed from WW2 carnage and fully intact while Europe, Asia and Africa was in shambles.
The U.S.A. did not sit idly by - as it recognized its new important and valuable role and quickly took to it to make sure its position was understood by all parties around the world through military and geopolitical interventions and projections of power.
This reserve currency status ushered in untold wealth to the Americans. Pretty much everyone in the world must work with the American controlled financial system if they wanted to facilitate any form of trade or economic activities.
And those who went against it were quickly taken out in the form of Western (American led) democratic reforms, which is euphemism for regime change.
This kept all those who opposed USD reserve currency status - first and foremost - in subjugation and terror.
The story is quite self explanatory and no human rights, justice or freedom was ever a part of the plot.
Human rights are a western social construct.
At the end of the day, the acceptance and use of a currency will always be based on transparency in determining its value, and resiliency to remain valuable. Brics is made up of two major autocratic nations both of which are prone to currency manipulation and outright misinformation on their economies. If you're a wealthy person in the world and you need to park some of your wealth, which currency will you have more confidence in? The BRICS currency or the dollar\Euro?
Several Chinese Billionaires would opine if they could, but the phone in their cell isn’t connected with wifi, lol.
Whichever gives me better returns and is LESS TAXED. Ask yourself, why do companies still shift much of their capital and park it in China. If Cali is taxing me @ 70% with all the sales, luxury, etc etc, and it would apply to all my capital at the moment of my departure to a better state like Texas or Florida, why would I NOT park my money overseas and keep it there? Whether Luxembourg, Singapore, Bahamas, or if I'm anxious about the capital's security, China :)
@@Pedi98 sorry but your comment is not related to the topic. Domestic taxation policy vs foreign holdings are not related to the discussion of this video or my comment. I would recommend you seek the advice of a professional if you are investing in foreign currency.
ALL THE BRICKS COUNTRY'S WILL SEE THERE MONEY LOSSING SOME OF THERE VALUE, IF THEY LEAVE THE DOLLAR!!.
Wealthy people prefer China, where they still manufacture things. Outside of the US, investors look for work getting done more than big flashy offices of tech companies that don't do anything. Sorry, yank
Short Answer: The Euro barely works today, so no.
BRICS would only use the currency for export/import of goods not the actual population. It would be to substitute the dollar as the trade currency. So it would work unlike the euro
@@sterkriger2572 So then what the hell is backing it?
@@colinhobbs7265 trust in China.
@@auraguard0212 no it is idiotic to think anybody should trust China who is a great power. After the dollar all trade needs to be conducted on mutual terms preferably gold if not on a case by case basis on what currency benefits the most
@@auraguard0212 especially in 2019
I doubt that a ¨BRICS¨ currency would work unless they only use it to trade among those 5 countries themselves.
The global dependency on the USD though is an interesting discussion, especially for emerging markets.
Yes they want to use brics currency to trade amongst brics countries only
Fascinating video. I understand parts of this and in general, follow your reasoning. But I feel like it doesn't "click" because I'm missing some more fundamental understanding of the forces at play. Could you please do a video explaining some of the underlying principles? Surpluses, deficits, currency exchange rates...
All the money around the world is very important
Outstanding presentation! Very objective and educational.
People don't realize that we already live in a multi-currency world. It's just that one happens to be soooo much better than the others.
What's stands out to me over all of these considerations is just how large the US economy really is.
This is one of the best videos I’ve ever seen on how a reserve currency works. Thanks 🙏
Your delivery is genius.
Why can't most countries use their own currencies in international trade and international borrowing? 😂😅😅😅😅
Hypothetically let's say some countries are trading in their own currencies, the first issue will be maintaining such vast reserves of various currencies. Unless the two countries are major trade holders between each other, it is very risky for the two countries to depend on each other's currency as holding reserves of a currency whose value might be volatile will risk the economic conditions in the country which is holding that said currency.
In simple words, if I am trading with you today in Yuan and suddenly the Chinese Housing Bubble bursts which would lead to a domino effect to cripple their economy and hence the Yuan's strength in the global market compared to other currencies including the dollar. So if I am Russia holding Yuan as reserves, my economy will also face the same issues as the Chinese market. Hence, holding multiple currencies of different countries whose economic volatility is bad will risk both the country's economy and also the entire world economy too.
@@preachergaming6970 Yes.. I know the reasons people want contracts in U.S. dollars. I was trying to be funny.
Certainly I want to be paid in dollars and not Lira, for example.
Economics explained has a really good explanation on just this on his Pakistan video.
Their currencies are viewed as less stable than the dollar. For example: How would you like to loan money to Greece and they will pay you back at a later date in Lira? 😅😅😅😅😅
My post was a joke...
Thank-you for your excellence and dedication in furthering the education of world economics.
Smartest guy on YT. Thank you.
I love how Patrick's pronunciation of Yuan shifted from the beginning to the end of the video. It is actually quite hard to pronounce, and I wonder saying RMB might be easier.
Would love a BRICS update
Literally nothing.
Overall, Brazil seems happy with the greenback. This talk is little more than Lula desperately trying to sell himself as a world leader. What a nerve... (Greetings from Sao Paulo.)
Eh, either that or Lula playing both sides to see what he could get away with. Pretty fascinating in a way.
Pooh Bear assembling his band of misfits to harvest his honey for him
😂😂😭
Your speel on the 'Line' city in Saudia Arabia 😂😂😂. Please post full video of it
I think it really depends. If they were to replace the national currencies of each member this could be problematic when it comes to political risk but if the new currency is a way to accept foreign transactions and reserves it may work out.
This video presentation is just brilliant 👏
With respect Pat, what are you talking about when you say China has a dual currency system? The renminbi 人民币 is the currency of China. The Yuan 元 is the unit of measure of this currency. They're the same currency, the very same Yuan that is bought and sold internationally is also used domestically without conversion, there's just a capital control. That's like saying 'pounds' and 'quid' are different currencies. It's just that foreigners are under no obligation to respect Chinese price controls and so international prices are free floating while domestic prices aren't, but you wouldn't call a currency pegged to the USD two different currencies even though its the exact same thing.
I really would like so see him answer this
"CNY means Renminbi traded within the mainland China, while CNH refers to Renminbi traded outside the mainland China, such as CNH markets in Hong Kong, Singapore and London." Apr 11, 2023...
💴💵💶💷💸💳💰🇨🇳
A collective of precarious governments? What could possibly go wrong?
Absolutely Brilliant and perfectly reasoned out analysis!
I agree that expecting the new proposed BRICS Currency-- if indeed it materialises at all -- is purely aspirational and outside the realm of reality!
Keep up your excellent work!
I wouldn’t call it newly proposed. It was part of the “promise” from the beginning. It is perhaps gaining momentum. Or perhaps the momentum is illusory.
The US holds a monopoly over the global currency. In 2022, they abused that monopoly to punish Russia. What happens when a monopoly abuses its position? It creates competition. It creates a need to change and re-examine. But please keep doing as all people do and go on with the assumption that life and the world remains static.
Thank you for this excellent program! Just subscribed today and will recommend this channel to friends and family!
Is it possible that there is a large enough demand for Chinese goods that even if they didn't open up their stock markets to foreigners they could still become a world reserve currency? I don't know if this is a possibility, but if anyone else knows please reply to this!
The belt and road initiative is China's version of feudal imperialism. Once the countries default on their debts from the infrastructure China has built in these foreign countries they will take over these ports and roads and slowly toll and tax them into bankruptcy. It's neo-imperialism & feudal-indenture slavery all in one package. China's version of build back better. They don't need to sell a product, they need to sell a safe silk road with the promise of stability and ease of access for business.
The argument is a country’s currency can only become a reserve used by the rest of the world if it exports enough of that currency, by purchasing imports. That’s what’s happened to the US$, since we run trade deficits. Exports of commodities or products don’t encourage the home currency to be used as a reserve. If China becomes a net importer, the situation could change, as we’d all be saving Yuan as they flow all over the world, instead of Dollars.
The reason the renminbi cant be the reserve currency is Chinas huge trade surplus. They would have to start purchasing imports and run a huge deficit like the US in order for it to work, which will never happen. That is the opposite of how you should look at it.
@@marcusdavey9747 That makes sense thank you!
@@connormullin4547 That makes sense thanks for the clarification!
A trading block made up of some of the most unstable currencies in the world? Wha could go wrong?
Ask Europe. They have a lot of experience in that
@@sterkriger2572 that’s not a good comparison, especially since since it’s right behind the dollar as the most valuable currency in the world.
@@VinceroAlpha euro right behind the dollar? In your head or in reality?
@@ibiedun156 Dollar is like 60% of international reserves and Euro is like 20%. I don't know if it's 'right behind' considering they lost London in Brexit and bobbleheaded Swiss bankers being shocked when they found out banking for notorious international financial criminals is actually a stupid buisness model. But it's the closest any currency has come to being an alternative.
Another great presentation. De-dollarization ain't gonna happen. There is just no substitute.
Institutions degrade way before any clear substitute arises. There was no clear subsitute to the king of France when he got arrested then beheaded, there was no substitute to the British Empire when Indians stood-up against it etc.
@@Keeptheirheadzringin Money is not an institution. There is a constant evaluation, every single day. When you have to literally put your money on the table, you pick the best option at the time.
@@christianlibertarian5488
Money is very much an instution, no economist will tell you otherwise outside of crazy monetarists that say that there is no such thing as money in the long run (no need to be here talking about the dollar then).
Empires generally last for quarter millenia.
Developing a possible alternative now reduces the chance that collapse will be collapse.
@A B How can you expect AI to shift the balance of power toward service-oriented economies ?
It is destroying the entire notion of intellectual property, the pillar allowing for any monetization of knowledge !
I love that you’re a champion of dry humor. There’s so few left. God, I wish I could work for you.
pound was a reserve currency before the dollar. how did dollar become a reserve currency? people changed the financial system after mutual agreement in the west. people can change the dollar system as well.
different times, two WW in the middle, and US as the centre of the financial world.
people didnt depend on the pound as they do on the dollar today
@@captainalex157 most people don't like dollar system. so, it will disappear sooner or later.
@@TheDynamicmarket i wouldnt say so, most people prefer it to the alternative, no one is forcing countries to trade in dollars. Fact is as long as there isnt an alternative the dollar will stay king. And i dont see any potential alternatives tbh.
@@captainalex157 what is the alternative we do not know but turkiye, china, india are internationalizing their currencies. if the indonesian politicians are telling to the people not to use visa mastercard and if they banned their use in government, it doesn't look good. upi is getting internationalized, rupay and russian mir payments and wechat have exploded in usage.
China-Brazil trade balance favours Brazil heavily: China just got Brazil to balance that trade since they won't be able to use their yuan somewhere else.
India and China is not very friendy with each other. Its problematic.
Agree there are challenges, but how many wars have India and China fought in last 50 years as compared to US & EU in serial war after war. US economy is war based so US has to keep creating troubles. US/EU plan to do regime change and take over Russian energy reserves backfired big time.
They are fighting over Himalayas which is funny and dumb . Will be resolved eventually
I admire the persistence with which you focus the camera on your jacket rather than your face.
This channel is a great discovery. Boyle is extremely knowledgeable.
I'm not even American (I'm Nigerian) and even I know the US dollar isn't going away anytime soon. For starters, no other country can match the USA's economic, cultural and military might. Second, most of the other competitors, like China, artificially control their currency rather than let it flow on the market like the USA. Third,to become a global currency requires massive investment and spending that America did over many decades and that China, Indian or Russia will never do. Finally, most countries, even BRICS members, depend on and trust the US dollar more so than their own currencies and their crippling socioeconomic issues are another hinderence. It's not going away.
I’m not American and I see the exact opposite. Usa weaponizing the dollar by stealing / holding Russian foreign reserves incentivizes other countries ( corrupt countries if you will) from keep inflation foreign reserves in dollars . Instead of spewing generalizations let me tell you what happened in recent meetings : Brazil- china own currency. Iran - china own currency. Russia - china own currency . ASEAN recent meeting plan is to dump dollar , yen , pound , Mastercard , visa . Saudi - china , trade in yuan. This all just happens in last 3/4 months . It’s accelerating …..
It seems to me that the desire for the BRICS currency is more ego driven by small economies who have outsized visions of their own value.
If you think like that you understand nothing about it. None of this economies are small
I disagree, the reason why they want a currency outside of usa control is due to both national security and reducing economic reliance
This statement made me laugh. Small economies? China is the second or probably top economy right now .
Sure! 'Mr superior race' their economies are so small yet they have surpassed the G7 ..
Patrick: US dollar wasn’t forced upon countries
Middle East: 👀👀
The ME can sell its oil in any currency it chooses.
@@supertuscans9512 only just recently yes. But the past 75 years, let’s be honest mate, they’d get invaded like iraq and Libya when they tried selling oil for gold/euros.
Where do you think the term petrodollar came from.
Who is more manipulative of their currency while being least transparent? Brazil or China?
The U.S. Federal Reserve does stuff like raise and lower interest rates and it controls the money supply. But they’re transparent and they announce moves ahead of time.
You know I'm starting to think this Patrick guy knows a bit about finances
Lol