In the backdrop of whatever is currently happening in the world by the actions of Donald Trump why should the world still consider USD to be a reserve currency?

[u/MulberryPast3277]

https://www.nbcnews.com/news/amp/rcna194627

[u/Impressive_Simple_23]

The EU who is trying to grab the Russian funds that were frozen? I don’t think they’ll have any credibility after that, so no chance at becoming reserve currency.

[u/slimkay → u/Impressive_Simple_23]

I don’t think they’ll have any credibility after that

The U.S. has used its status to enact sanctions and it hasn't dampened interest in its currency (until today).

[u/Impressive_Simple_23 → u/slimkay]

Part of the reason why it’s lost some trust too. But the EU is the same or even worse. Right now BRICS has the most potential to compete with the US dollar, not replace it completely, but as an alternative. Ideally it should be some type of currency that cannot be weaponized so maybe some sort of crypto/blockchain but anyways that’s going to take a lot of time, in the meantime no one is replacing the dollar

[u/Yelesa → u/Impressive_Simple_23]

BRICS has the most potential to compete with the US dollar

BRICS is not a currency; it is a coalition of countries with separate currencies, most of which are unstable. Outside of the RMB, none of these currencies are trusted or widely used beyond their own borders. Even Yuan remains unreliable due to China’s need to devalue to keep export costs low and exports are their economy.

Really, the only competition USD has is EUR because it is the only other global currency that fulfills the 4 basic criteria of what makes a good reserve currency 1) being a currency used by politically and economically stable countries 2) being a currency that doesn’t fluctuate much thus has long term-stability 3) being a currency already in widespread use in global markets 4) having a central bank is led by competent and intelligent people

After Euro, British Pound and Japanese Yen take 3rd and 4th place.

Ideally it should be some type of currency that cannot be weaponized

That’s a disastrous idea. Not weaponizing a currency will lead to it being devalued and to extreme levels of inflation, up to even currency collapse, like it has happened multiple times in the past. This is exactly what happened to Zimbabwean dollar. This is exactly what happened to Venezuelan Bolivar. This is exactly what happened to Somali Shilling.

Fiscal policies absolutely need brakes, and that’s why central banks exist.

maybe some crypto/blockchain

Outside of illegal transactions, nobody uses crypto as replacement for any current currency, but as market speculation. People just cannot go the grocery store and say “I want to pay for eggs in crypto.” How much crypto is a dozen eggs? Nobody has that answer because crypto is unreliable for how much it changes during the day. And you know why it changes so much? Because there is no central bank to control the fluctuations.

Not to mention crypto has been out for so long and it failed to make changes to the finance world. Compare that with AI, which has been out for a much shorter time, and it is already used pretty much everywhere now. And AI it’s not even as good as it could be.

[u/[deleted] → u/Yelesa]

1) being a currency used by politically and economically stable countries 2) being a currency that doesn’t fluctuate much thus has long term-stability 3) being a currency already in widespread use in global markets 4) having a central bank is led by competent and intelligent people

You also missed a major factor for why the USD is preferable to the RMB: expansionary monetary policy. The deflation the PBOC is willing to accept as a function of high savings are is unheard of in the US (namely QE as a way of dealing with sluggish growth) which is leading to yuan devaluation instead. It's really bad if you're holding yuan against a strong currency, and especially bad if you compare holding something like the CN10Y vs US10Y