Comment by wahern

He's not wrong in his conclusion, just not accurate in why. If countries start moving away from depending on the trade imbalance with the US, the demand for USD will dry up. And they are trying to move away from it because of politics, specifically because of US bullying. But more importantly, the US is increasing trade barriers in a naive attempt to reduce that trade imbalance, which is the biggest reason everybody holds so many dollars--they're paid in dollars when exporting to the US, but don't buy enough US imports (individually or collectively) to spend & exchange all those dollars, which is why they park them in treasuries and other US investments. And it won't be long before oil begins receding from the picture (at least relative to total global trade, if not absolute dollars), displaced by renewables. Though oil is odd in that while creating demand for USD to settle transactions even for non-US oil, it's also a significant US export and has the effect of repatriating dollars.

The importance of USD globally was always on borrowed time. Global GDP has exploded in the 21st century, and the size of the US economy relative to the global economy is shrinking, albeit slowly. The US share of global GDP was like 35% in 1985. By 2030 it's projected to be as low as 12%. It doesn't necessarily follow that this would change the dynamic of strong dollar demand supporting US investments and debt, but it makes it much easier for this dynamic to change as countries become increasingly less reliant in relative terms on exporting to the US. In fact, it's kinda idiotic to rock this boat unless/until we're prepared for some serious fiscal belt tightening. As global GDP increases relative to the US, in theory the rest of the world could support profligate US debt in perpetuity.