Effects: Over-reliance on the US dollar

[Alpha Marine]

Do nations really need to have a financial reserve in a particular currency of a nation? What are the implications of having reserves in multiple currencies? The dollar has been very stable because the US and its allies have always controlled the world economy. Currently, more nations like China and others have built their economy and they also want to control some segments of the world's economy.

I believe there are countries that have more than one currency as their federal reserve. Yuan, Pounds, Euros, Dollars are all federal reserve currencies. The dollar is only the most popular in this regard. Diversification isn't the issue here. The issue is if one of these currencies depreciates, it affects the country that is using it as a reserve.
What I find dreadful in all these is, a particular country can suffer from the negligence or bad government, bad monetary and fiscal policies of another country. Like how countries suffered because of the increased inflation rates in the U.S.

The point is diversification. Should any single currency fail, your portfolio will not entirely lose its value. USD is not stable anymore. Setting aside inflation -- more countries are becoming cautious about the U.S. governments ability to levy sanctions and forfeit assets against a particular country for their own internal political battles. Should you have USD and your country becomes barred from doing business with companies that the U.S. government has jurisdiction over, your currency loses a fair bit of value. The alternative isn't Yuan, it would be a decentralized asset. Some countries are turning to gold but IMO bitcoin would solve a lot of the issues that currency reserves have.

Looking from the perspective of counties that turn to gold and not Bitcoin, you can't blame them. You don't expect a country to keep its reserve in relatively new technology. Gold has been around forever and it is trusted. It can be also volatile like Bitcoin, but it's usually for the short term. Gold is still the best currency.

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[YUriy1991]

Looking from the perspective of counties that turn to gold and not Bitcoin, you can't blame them. You don't expect a country to keep its reserve in relatively new technology. Gold has been around forever and it is trusted. It can be also volatile like Bitcoin, but it's usually for the short term. Gold is still the best currency.

The choice between Gold and Bitcoin as a reserve asset really depends on the tastes and risks of each country, both in terms of investment strategy and perception. In quotes, if they will. Bitcoin also offers potential future benefits where it is uniquely valued as a store of value asset and has other perspectives to consider, BTC also offers cross-border transactions that are faster, cheaper than traditional methods.

I think, this is another way of looking at creating long-term wealth, if they only knew about it.

[Sayeds56]

[.....] Some countries may be concerned about the growing influence of China and its potential use of economic leverage to achieve political goals.

It's strange that you mentioned this on China but didn't put it as one of the main weapons of the US when pressuring other countries to follow their demands. They have been leveraging this for years after the WW2 using economic sanctions and it seems this is also the reason why other nations are shifting or applying to become part of BRICS.

I think the extensive use of sanctions as a tool of foreign policy against developing nations to influence their decisions has been counterproductive in the long term. The rise of emerging economies like BRICKS can be seen as a direct consequence of this flawed foreign policy approach. Every phenomenon has its own time, declining value of dollar and nations intent to reduce their reliance on US dollar as international currency for import/export of goods and services, unmistakably signals that there is challenging time for dollar in the future.

[Gyfts]

The point is diversification. Should any single currency fail, your portfolio will not entirely lose its value. USD is not stable anymore. Setting aside inflation -- more countries are becoming cautious about the U.S. governments ability to levy sanctions and forfeit assets against a particular country for their own internal political battles. Should you have USD and your country becomes barred from doing business with companies that the U.S. government has jurisdiction over, your currency loses a fair bit of value. The alternative isn't Yuan, it would be a decentralized asset. Some countries are turning to gold but IMO bitcoin would solve a lot of the issues that currency reserves have.

Looking from the perspective of counties that turn to gold and not Bitcoin, you can't blame them. You don't expect a country to keep its reserve in relatively new technology. Gold has been around forever and it is trusted. It can be also volatile like Bitcoin, but it's usually for the short term. Gold is still the best currency.

The application of cryptography for currency uses might be "new" relatively speaking, fine. But I'm not articulating a country keep its reserve entirely in crypto. They're welcome to diversify with different assets and securities including fiat currencies. A prudent decision would be to have the plurality of the reserves be held in Bitcoin. This solves the volatility issue.

[Unbunplease]

I think the extensive use of sanctions as a tool of foreign policy against developing nations to influence their decisions has been counterproductive in the long term. The rise of emerging economies like BRICKS can be seen as a direct consequence of this flawed foreign policy approach. Every phenomenon has its own time, declining value of dollar and nations intent to reduce their reliance on US dollar as international currency for import/export of goods and services, unmistakably signals that there is challenging time for dollar in the future.

In my opinion, sanctions can have a certain impact on underdeveloped countries. If the level of development of the country is sufficient, the sanctions will simply lead to the restructuring of the economy to find a way out. In doing so, much will depend on the success of the import substitution policy. Politicians need to look for other ways to solve problems rather than impose sanctions.

[Sayeds56]

In my opinion, sanctions can have a certain impact on underdeveloped countries. If the level of development of the country is sufficient, the sanctions will simply lead to the restructuring of the economy to find a way out. In doing so, much will depend on the success of the import substitution policy. Politicians need to look for other ways to solve problems rather than impose sanctions.

You made a valid point regarding potential  positive side of the sanctions for developing countries. Sanction can serve as motivating factor for these nations to strive towards self-reliance and produce/manufacture all what they have been imparting since years. However, as you said success of such plans of self-reliance completely depends on wisdom and strategic vision of political leadership. Several Asian countries, such as China, India, Malaysia and Bangladesh have demonstrated examples of wise and visionary leadership. These countries have effectively utilized their resource and implemented long term strategies to achieve self-reliance.

[Ozero]

I think the extensive use of sanctions as a tool of foreign policy against developing nations to influence their decisions has been counterproductive in the long term. The rise of emerging economies like BRICKS can be seen as a direct consequence of this flawed foreign policy approach. Every phenomenon has its own time, declining value of dollar and nations intent to reduce their reliance on US dollar as international currency for import/export of goods and services, unmistakably signals that there is challenging time for dollar in the future.

In my opinion, sanctions can have a certain impact on underdeveloped countries. If the level of development of the country is sufficient, the sanctions will simply lead to the restructuring of the economy to find a way out. In doing so, much will depend on the success of the import substitution policy. Politicians need to look for other ways to solve problems rather than impose sanctions.

International sanctions can and should have a proper impact not only on underdeveloped, but also on economically strong states. The modern development of science and technology has reached such a level that no state can produce absolutely all the goods that it needs. Therefore, almost everyone, who to a greater, who to a lesser extent, depends on the existing division of labor and products.

In addition, not always other ways to solve emerging problems can do without the application of long-term sanctions. An example of this is Russia's current military aggression against Ukraine.