#2981 ·
Oil day trading accounts for a mere 0.15% of global FX turnover. We're talking about a world where the USD handles 88% of transactions, the EUR sits at 33%, the JPY at 17%, the GBP at 13%, and so on. In that light, oil is essentially a rounding error when it comes to the dollar's position. Russia pulling away from the USD matters to the US about as much as a toddler picking on someone tiny at the UN. If you look at the math—daily production at roughly 10 million barrels times $60 per barrel equals $600 million a day. Now, compare that to a daily FX turnover of $6.6 trillion and tell me how much a move by Russia actually impacts the US.
Also, I’m not sure if you’re aware that Russia liquidated $160 billion in US Treasuries (which is less than 2% of the secondary market volume). It caused enough of a headache for the US that we’re still feeling the ripples today.
The USD draws its power and prestige as the world's number one currency from American output and everything else flowing out of the American economy.
Another crucial piece of the puzzle regarding the USD is this: OPEC nations, Russia, the Eurozone, and China all share a fundamental issue. They run policies aimed at maintaining trade surpluses, while the US runs on a deficit. This means if they want to keep those surpluses, they have no choice but to finance the American deficit.
When you bring up astronomical American debt, you really ought to be more precise. If you're referring to internal debt, I don't see the crisis. Credits create deposits (savings)—that’s just how the plumbing works. The real question is whether that debt is being invested productively. In the case of the US, it clearly is. No other nation of this developmental stage or sheer scale even comes close to our macroeconomic parameters. We are looking at the most productive economy on the planet.
Now, if we are discussing external debt, then yes, there can be problems because those players rely on our financing. But as long as creditors insist on running surplus policies, they are forced to fund the American deficit. Their surplus is the American deficit. A sudden stop in debtor capital inflow is always a risk, but ultimately, the mechanism for correction is a depreciation of the USD—essentially wiping out the surpluses held by China, Germany, and everyone else.
Furthermore, I don't see the Eurozone, China, Russia, OPEC members, or Japan doing anything to appreciate their own currencies against the USD to start reducing their manufacturing surpluses. On the contrary, they are fighting tooth and nail to keep their industries and exports running at full throttle to accumulate those surpluses. As long as that continues, the US doesn't need to sweat its status; its output leaves them all in the dust.
Also, I’m not sure if you’re aware that Russia liquidated $160 billion in US Treasuries (which is less than 2% of the secondary market volume). It caused enough of a headache for the US that we’re still feeling the ripples today.
The USD draws its power and prestige as the world's number one currency from American output and everything else flowing out of the American economy.
Another crucial piece of the puzzle regarding the USD is this: OPEC nations, Russia, the Eurozone, and China all share a fundamental issue. They run policies aimed at maintaining trade surpluses, while the US runs on a deficit. This means if they want to keep those surpluses, they have no choice but to finance the American deficit.
When you bring up astronomical American debt, you really ought to be more precise. If you're referring to internal debt, I don't see the crisis. Credits create deposits (savings)—that’s just how the plumbing works. The real question is whether that debt is being invested productively. In the case of the US, it clearly is. No other nation of this developmental stage or sheer scale even comes close to our macroeconomic parameters. We are looking at the most productive economy on the planet.
Now, if we are discussing external debt, then yes, there can be problems because those players rely on our financing. But as long as creditors insist on running surplus policies, they are forced to fund the American deficit. Their surplus is the American deficit. A sudden stop in debtor capital inflow is always a risk, but ultimately, the mechanism for correction is a depreciation of the USD—essentially wiping out the surpluses held by China, Germany, and everyone else.
Furthermore, I don't see the Eurozone, China, Russia, OPEC members, or Japan doing anything to appreciate their own currencies against the USD to start reducing their manufacturing surpluses. On the contrary, they are fighting tooth and nail to keep their industries and exports running at full throttle to accumulate those surpluses. As long as that continues, the US doesn't need to sweat its status; its output leaves them all in the dust.
