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0 sats \ 2 replies \ @Solomonsatoshi 22 Mar \ parent \ on: Bessent’s Debt Dilemma (Financial Times Unhedged, Armstrong/Reiter) econ
How does that work?
People buy stablecoins and the issuers of the stablecoins must acquire USD to back them?
This would only work as long as the USD is seen as holding value better than other currencies and useful for trade payments.
If more and more trade is denominated in Yuan, as it is being, and the Yuan holds its value relative to the USD which it does, then the utility of the USD still fades away over time...because the USA Inc is operating an unsustainable trading deficit.
My understanding is that yes, the issuers must by Dollar Bonds... in order to back them. In other words there's more demand for US debt?
And there are a lot of people that rather have Dollar stablecoins then their local fiat
On the whole Yuan-trade denomination...
"The number of bilateral transactions using the Chinese currency grew by a third in July to 53% from 40% in the same month in 2021. In 2010, 80% of outbound Chinese trade was conducted in dollars, the FT reported, but that figure has halved since Western sanctions on Russia went into effect. Over the same period, outbound trade in yuan has grown from almost zero to more than half of all transactions.
"Trading in yuan is convenient for both Russia and China," Maia Nikoladze, associate director at the Atlantic Council think tank's GeoEconomics Center, told DW. "Russia does not have too many other currency alternatives, while China benefits from exerting more economic influence over Moscow, and also makes progress towards internationalizing the yuan."
Globally, however, the yuan is used for less than 7% of all foreign-exchange transactions, versus 88% for the dollar, according to the Dollar Dominance Monitor by the Washington-based Atlantic Council. The tracker found that 54% of export invoicing is still done in dollars, versus 4% for the yuan."
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I would question the accuracy of the stats provided by US controlled and aligned organisations.
I would also suggest that much of the Yuan denominated trade is simply not reported to western institutions.
For more than a decade Iran has sold oil to China via a shadow market operated by Chinese 'teapot' refineries and shadow banking payments to avoid US/SWIFT sanctions.
Increasing trade with Africa, Asia and other regions is denominated in Yuan but the data does not go to US/western institutions.
That said USD is certainly still dominant, but also, gradually, and increasingly, waning in its dominance.
China sees gradually shifting trade payments away from USD controlled channels and protocols as important as developing its military and trade infrastructure (Belt and Road) . They are all logical and concurrent requirements of developing its emerging status as the worlds dominant economy and power.
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