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E46: Lyn Alden on How Money Works
"Upstream" with Erik Torenberg
Diminishing US dollar-based assets in foreign reserves
The dominance of dollar-based assets in foreign reserves is gradually diminishing, with the peak observed around the year 2000. Factors such as the rise of the euro initially disrupting market share, followed by Asian countries like China gaining market share while Europe loses some ground. This trend is influenced by technology, geopolitical incentives, and imbalances leading to a gradual acceleration of non-dollar payment systems and the desire for alternative assets less linked to the US. Although this shift may disrupt the US initially, in the long run, it could help rebalance the global financial system. However, reshoring, a long-term goal, is challenging to achieve under the current system due to the significant global demand for dollars driven by trade deficits, which hinder reshoring efforts. One factor that has reduced the trade deficit to a certain extent is increased oil production, reducing reliance on imports.
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