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this post was submitted on 01 May 2024
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chapotraphouse
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I don't think US budget deficits is the big issue, it is high sure and wasted on unproductive shit with all the military spending but you should be looking at current account deficit instead, which is the world's highest.
Having control over the reserve currency mainly gives you the privilege to import much more than you would able to otherwise since other countries are "willing" to take your reserve currency for goods.
Not all countries can a surplus or a deficit at once. It's why Germans complaining about lazy Greeks during debt crisis was ridiculous. The Greeks were only buying German goods because Germans were willing to sell it to them. And because Germany was strangling domestic workers who wouldn't be able to buy the goods they made themselves.
China right now has a trade surplus. So, I don't really know how much advantage it would give them to have their own currency be "wanted" outside other than bypassing sanctions and soft power. Eg. Recently India wanted to buy crude from Russia but of course, sanctions. They could have an Rupee-Ruble arrangement but that would result in one side (Russia) accumulating too many Rupees which it doesn't need.
So, Russia asked India to provide Yuan instead. Since Russia can then use Yuan to buy from China. But of course, India wouldn't want that.
That's the difference between having the Yuan be a trading currency or a reserve currency. From what I understand, creating bilateral agreements allows China and it's trading partners to de-risk from the american political system. But allowing the Yuan to become a reserve currency, which is then speculated upon overseas, would give China currency hegemony. Yes, the Chinese could then use that metaphorical gold mine to invest productively. But all the incentives the US had to export their industries overseas would still be there. If the USD hegemony can be understood as a resource curse, then an Yuan hegemony can be as disruptive to the chinese political system as it was to the post war american political system.