6 ms·

But wouldn't it make sense to believe those debts are in gold or other sort of exchange coin? I heard many Asian countries as selling US and buying Yen and Wua

by motbus3 21d ago

But wouldn't it make sense to believe those debts are in gold or other sort of exchange coin? I heard many Asian countries as selling US and buying Yen and Wuan as countermeasures for the possible devaluation of the USD and to guarantee trade. I understood that the threat of doing so slowed down things but it seems inevitable at this point that it accelerates. I am not sure on what I am talking about. This is what I understood from the news. I would like to be corrected if I'm wrong though

xarwex 20d ago
Regardless of what the debt is in you have to get that resource somehow, so if your debt is in euro, you'd have to print dollars to buy euro if all your economy provides is dollars. I don't know what US' debts are in, but dollar being the lingua franca of finance, it is probably their home currency. But if you have a debt in a currency that you don't own, then your acquisition of said currency with your home currency is kind of limited, because the market will react with fx rate so dollar yields less and less euro per unit the more dollars you print. In that case, the country would probably just not pay which annihilates trade relationships ergo economy. I don't know if I understand your first sentence correctly though, maybe that's not an answer you were searching for lmk :) As for selling dollar for other currencies, I am sure it makes sense to dump some of it because it seems to be a bit more volatile, holding another country's currency is exposing you more to their economy after all. I am not sure what that has to do with guaranteeing trade, maybe someone smarter can answer that, my understanding is that you hold a currency buffer so that if you need to trade in some currency you already have some of it so it flows nicely, but I can be completely wrong.

6 ms·

But wouldn't it make sense to believe those debts are in gold or other sort of exchange coin? I heard many Asian countries as selling US and buying Yen and Wua

by motbus3 21d ago

xarwex 20d ago
Regardless of what the debt is in you have to get that resource somehow, so if your debt is in euro, you'd have to print dollars to buy euro if all your economy provides is dollars. I don't know what US' debts are in, but dollar being the lingua franca of finance, it is probably their home currency. But if you have a debt in a currency that you don't own, then your acquisition of said currency with your home currency is kind of limited, because the market will react with fx rate so dollar yields less and less euro per unit the more dollars you print. In that case, the country would probably just not pay which annihilates trade relationships ergo economy. I don't know if I understand your first sentence correctly though, maybe that's not an answer you were searching for lmk :) As for selling dollar for other currencies, I am sure it makes sense to dump some of it because it seems to be a bit more volatile, holding another country's currency is exposing you more to their economy after all. I am not sure what that has to do with guaranteeing trade, maybe someone smarter can answer that, my understanding is that you hold a currency buffer so that if you need to trade in some currency you already have some of it so it flows nicely, but I can be completely wrong.