00:00What do you think about the dollar right now?
00:02Well, as you pointed out, its demise has been predicted many times.
00:09It's not going to be a point-in-time event.
00:11It's kind of like a puncture, and the air is going out the tire.
00:14But I think if you look at sterling's fading as a reserve currency,
00:18it was marked by many milestones.
00:20At the end of the First World War, you had coming off the gold standard,
00:24you had the Suez crisis.
00:25And I think this Iran situation with the U.S. is just another milestone
00:30in this sort of gradual decline in the dollar.
00:33And I think, really, the quipro crawl that has been in place for many years
00:38is in the U.S. ensures stability and security.
00:41In return, people recycle their dollars into dollar assets,
00:44and the U.S. gets cheap funding.
00:46I mean, your question is why, if you're not getting that stability
00:49and security anymore, it questions why you would continue
00:53with that sort of dollar calendar.
00:54The alternative, so what's the alternative?
00:55Well, the alternative is obviously this is why it's not like a dramatic
00:58overnight event, but nature always finds a way.
01:01I mean, we're finding, of course, with the de facto dissolution of NATO
01:05that really there's no way for European nations, for instance,
01:09that they're going to have to invest in defence.
01:11So there's going to be more assets to invest there.
01:14But already, like if you look at the dollar as a percentage of global reserves,
01:19I mean, it's 60% 15 years ago.
01:21It's now like 45%, 47%.
01:23So that's already in quite a rapid decline.
01:25And if you also look at the behaviour of reserve managers,
01:29now what they used to do, they used to opportunistically trade the dollars.
01:32So whenever the dollar was cheap, they'd buy some more.
01:34Whenever it was expensive, they'd trade down.
01:36Signally, they're not doing that anymore.
01:37So we've had this sell-off in the dollar over the last six months, a year,
01:41and they've not responded by buying dollars.
01:43So it's the dog that's not barking, is really important to point out.
01:47Our currency, your problem, is that going to work after this?
01:50Does the exordant privilege, if that number keeps going down,
01:53at what point do you get to the point where actually it does become the Americans' problem,
01:58that the deficit, the debt become problems?
02:01At the moment, America is able to glide its way through many of the current problems that it faces
02:07because people are buying U.S. assets.
02:10Is there a tipping point?
02:12Does it happen all at once?
02:14Is it gradual?
02:14Is it an avalanche?
02:17When you get to that point, what does it look like?
02:20Well, as you say, it's a tipping point.
02:22And like any tipping point, there's often no kind of forecast beforehand.
02:26There's no obvious sign.
02:27It's like sand on a dune, like which grain of sand causes the dune to collapse.
02:31So I can tell you in advance, but I think...
02:34What are the implications of that?
02:35Well, the implications, of course, are, you know,
02:38the dollar standard is the thing that's the linchpin of the financial system, right?
02:43So if we don't have an alternative in place, which we won't,
02:47it's going to be a fractured system, right?
02:49You're going to have a number of competing currencies, if you like, right?
02:53Or a number of competing alternatives.
02:55It won't be the case of that, like, we've had the sterling standard,
02:58then we've had the dollar standard.
03:00It's not clear what would replace that afterwards.
03:02Multipolar kind of...
03:03It's a multipolar kind of fractured kind of system.
03:05So I think that, you know, nobody's really pricing that in or expecting that.
03:08And obviously nobody really knows what that will look like.
03:12I could keep going.
03:14For a long time, we could talk about this for a long time.
03:16Simon, I've read Simon's pieces, honestly.
03:19Must reads on the Bloomberg Terminal,
03:21if you want to carry on the commentary around what is happening with the dollar
03:24and where it goes next.
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