US everything has become unappetizing for everyone outside the US.

Exorbitant privilege is a gift that lasts only as long as the trust does.

https://en.wikipedia.org/wiki/Exorbitant_privilege

https://news.ycombinator.com/item?id=47635834 covers this succinctly:

America was in practice running an empire that collected tribute from the rest of planet earth in exchange for entries in a database denominated in a currency they controlled and that was accepted everywhere. Really the only way it could go wrong is putting it under the control of someone who doesn't understand the kayfabe...

from

Gold overtakes U.S. Treasuries as the largest foreign reserve asset - https://news.ycombinator.com/item?id=47635056 - April 2026 (250 comments)

This argument fundamentally does not make sense. Look at a chart of U.S. GDP per capita growth: https://substackcdn.com/image/fetch/$s_!zSCw!,f_auto,q_auto:...

The U.S. was growing at the same rate or faster as the UK from 1830 to 1930, when the UK had an empire and the U.S. didn’t. Then, in the second half of the 20th century when the U.S. had an empire and the UK didn’t, the growth rates were more or less the same in both places in the long run trend (ignoring the UK’s step change hit from WWII).

The £ was backed by UK's (perceived) military might just as $ is by the States'.

The the war on Iran (and many years of war on terror) showed we have anything but

There are other backers to that as well. The main ones being oil trades being settled largely in USD and the need to acquire USD to pay for US goods/services. It's not all military might there's a lot of economic might in there too.

This is nonsense. The rest of the world holds 9.7 Trillion in Treasuries and this amount increased by $500 billion over the last year.

So the opposite of this article is true. You can get all the data from the Z.1 release.

Please don't take these types of flame bait articles seriously or try to spin up an entire world view based on them as you will end up not only directionally wrong, but believe in the exact opposite of reality.

FYI, that $500B increase in treasury holdings is not the whole picture, there are also the agencies (housing mortage backed securities guaranteed by the govt) and foreign holdings of those also increased by $70 billion over the last year, and are about 1.5 Trillion.

Institutional investors are very slow to adapt, so I wouldn't take their continued investment as a positive signal. The sentiment shift is real, and a lot of goodwill has been spent.

It's basically divide and conquer on a national scale tearing down the democratic world police and the democratic systems it supported.

The point is that the entire article is wrong, factually.

In terms of institutional investors and sentiment, I think you are fundamentally not understanding why the rest of the world holds US debt, it is to support running trade surpluses. That is a core economic need of much of the world, and as long as there is that need, you will see foreign government accumulation of dollar denominated assets.

For some reason people either refuse to understand simple balance of payment accounting constraints or they are deeply offended by them, and want to live in a world in which moral outrage determines things like global capital flows.

But we do not live in that world. The reason why the rest of the world accumulated a trillion of dollar denominated assets last year, split roughly 50/50 between private and public, is solely because China needed to run a trillion dollar trade surplus. And next year it will also need to run an even bigger surplus. That forces everything else.

Sure, the engines may have died, but not only is the plane still airborne, it's even accelerating!

You are using the wrong metric. The supply of t-bills is increasing rapidly because of the massive deficit. That is sufficient to explain the increased number of holdings.

The correct metric is price. If there is decreased demand, it will show up in the yield. And it does.

It's not just about treasure bonds. The mood is shifting in Europe that, maybe, putting all the eggs in the USA basket is perhaps not that great of an idea.

It's the vindication of Gaullism half a century after De Gaulle's death, the concept of strategic autonomy is getting traction in the rest of Europe. It's not that we can't be friends, but that we shouldn't let our future be gambled in the hands of Wisconsin voters every two years.

There must always be a hegemon. Will it be Europe? No, too weak and divided..will it be China? No, too authoritarian..

The US remains the best option among a mixed field of weak, corrupt, divided and authoritarian alternatives.

We’re seeing a return to multilateral regional hegemony. Russia, China, India, a new Persia, Israel and Turkey duking it out in Asia. The edges of those conflicts trying to bring war back to Europe. And America getting potentially balanced by China and Europe in the Americas, with the Pacific theatre figuring out its own balancing game plan.

The wild card being this will be the first time the world has entered this sort of unstable state since the invention of nuclear weapons. I expect to see a total failure of non-proliferation and the first nuclear civil war in my lifetime, if not the first nuclear war of territorial conquest. (I do not expect to see the first nuclear extermination.)

America getting potentially balanced by China and Europe in the Americas

I can't figure out a way to parse this sentence that makes sense. Are you saying that "Europe" will "balance" the USA in the Americas? As in, European influence will counteract US influence in the Americas?

You're not totally wrong but you do underestimate the power of an organized Europe with freedom of movement and commerce. I'm not saying you're getting this wrong but many people reading these comments take seriously that nominal US per capita GDP is an unequivocal signal that we've got it right. A lot of that signal goes away on the basis of a PPP comparison, and then even more goes away when you compare things like healthcare costs. And on top of all of that Europe can point to superior quality of life outcomes. If that GDP number doesn't translate into quality of life, what good is all of that money?

I was dismissive when I saw the title, but they have real statistics: foreign holdings are at 2012 levels while total treasuries outstanding are 3x larger.

Holdings have increased by $500 billion over the last year. Why cherry pick 2012? Because that was in the aftermath of QE from the great recession and foreign holdings of treasuries were enormous as they rotated out of US private debt and sought the safety of treasuries. Today it is risk on, relatively speaking.

These go up and down based on cash management needs and portfolio allocation choices between public and private debt, and so you can pick one year when cash management needs were high or appetite for riskier were low. And then count on people being dupes, LOL.

The trouble is the US never paid down the debt for those years, they just rolled it over and incurred new debt. If foreign holdings decrease further, it doesn't matter if it is simply for cash management reasons -- the US will be rolling over historic debt at historic interest rates.

I think RoW is trying to send a message to certain US constituents.

Edit: so much hate for something so benign.

RoW = Rest of World?

If so, those constituencies are immune to facts and common sense.

Please don't make us decode your acronym https://www.acronymfinder.com/ROW.html

I've been hesitant to talk about this too much, because it's such a bad joke, but personally I'm waging a War On Acronyms (WOA). They really don't save much time or effort, but make communication much more opaque. They can be a way of in-group signaling, which just makes it harder for newcomers / outsiders to come up to speed. And so many collisions.

RoW is not opaque. It’s widely used especially in academia. Acronyms exists for a good reason. If you like everything spelled out please stop using apostrophes while you’re at it.

Yes, that's called Quantitative Easing after the Global Financial Crisis. The peak in the graph was 2008 after which the US issues a shit ton of debt which was bought by the Fed. China used to be the biggest holder of US Treasuries but now it's the Federal Reserve and Japan.

But the idea that you look at that graph as say it's "unappetizing" is dumb. Most foreign governments besides China have INCREASED their UST holdings. The only reason why the % is dropping is because of the massive amount bought by the Fed which messed up the %.

Yeah ... and exactly how many of our treasury auctions have failed? Zero. Overbid by foreign parties, all of them.

Every graph of foreign ownership is up and to the left over the last 10 years

https://tradingeconomics.com/united-states/foreign-treasury-...

https://tradingeconomics.com/united-states/foreign-treasury-...

https://tradingeconomics.com/united-states/foreign-treasury-...

Only China has gone down:

https://tradingeconomics.com/united-states/foreign-treasury-...

I stand corrected about Japan it looks like they've been flat over the last 10+ YEARS

https://tradingeconomics.com/united-states/foreign-treasury-...

Basically the article linked above is dumb, and they either are stupid and don't understand what they're talking about or trying to cast a false narrative

China also has not gone down, they are merely shifting their ownership structures. China accumulated over a trillion in dollar denominated assets last year, but rumors are the big players have been Chinese regional banks. It's a byzantine mess of hidden ownership structures over there.

If true, this would change the narrative. But I wouldn’t base anything on rumors. China is also rapidly building its supply of bullion and is attempting to shift trade away from the USD, so it would make sense for it to be drawing down on USD reserves. (Not that it will ever eliminate those reserves completely.)

It doesn't matter whether it is Chinese regional banks, or SAFE, or any other instrument. Brad Setzer tries to do a heroic job decoding this stuff at his CFR blog (https://www.cfr.org/blogs/follow-the-money) but at the end of the day, all that matters is total foreign holdings of dollar denominated assets - that measures their exposure to the dollar.

Everything else is portfolio allocation choices between treasuries or agencies or BAA corporates or AAA corporates, there are so many different instruments to invest in, you can shift your holdings back and forth however you like, all while keeping your dollar exposure exactly the same. And you can set up a fund in the Caymans and hold your assets there. And China does all of that. So really it is all fungible once you are in the "foreign ownership" bucket.

US policy:

1. print money

2. suppress wages by shipping in cheap labor

3. reassure the population you arent doing the above

Step 3 is profit. As in, "we are robbing you blind but that's not my hand in your pocket".

The issue (real issue?) is that it’s unclear whether these governments reduced their holdings or switched them to these opaque structures (tether can be considered one). The idea is, it would be hard for the US to untangle true ownership. I wonder if UBO was getting undone blue or red because it’s a real threat for such a system but the US needs this “second” lifeline.

Looking at the graphs in the article, I don't think the overall picture supports the headline...

Yeah. The headline is utterly divorced from the reality of the charts?

How so? Foreign official holdings are flat since 2012.

The headline specifically refers to central bank and government holdings.

The only real dumping has happened from Japan, which is fighting to defend the yen, and China, which is obviously repositioning though to a way lesser degree than a nation dumping an adversary’s bonds would.

The story is just another way of saying we’re issuing more debt. Central banks aren’t reducing exposure. They just didn’t increase them with our own finances, which makes sense, our finances don’t increase their reserve requirements.

Thanks, Trump.

I think the more interesting story is the long-term decline in the quality of virtually all sovereign debt. Many things are anchored to the assumption that high-quality sovereign debt is widely available.

Dedollarizing the world economy has more net losers than the US (though that's the obvious one).

It's not without its benefits -- over the last couple decade, the US has found ways to weaponize access to USD, so if you're not a fan of having a country other than your own able to effectively regulate or sanction you and your business, there's some niceties here.

Being able to trade and invest in a stable, highly liquid, easily converted, low risk currency was a net win for most of the world for about half a century. There isn't an obvious replacement, so we'll just see more friction.

It's kind of a prelude to a Thucydides Trap.

The problem with replacing the world reserve currency with something else is that nobody can agree on what that something else should be. Expect to see a lot of jockeying for power as people realize the U.S. isn't the world hegemon anymore. Jockeying, on a state level, usually means war.

Only China has the GDP to replace USA. So while the answer isn't written in stone, it looks like it'll be China, or since China favors UN governance, maybe we'll move to an old discarded idea (because it didn't serve American interests) like an international currency system that Keynes favored.

https://en.wikipedia.org/wiki/Bancor

Recall that America is currently attacking Iran without provocation and is aiding a genocide.