USD share as global reserve currency drops to lowest since 1994

Political leadership, the Fed, and trust

• Several commenters tie reserve erosion to perceived chaos and tariffs from the current US administration, plus “weaponized” use of the financial system.
• Others argue the Fed has tried to offset presidential policies, but its credibility is being eroded by politicization of appointments.
• Trust is framed as central: countries, investors, and allies don’t “invest in chaos,” and some firms are reportedly shelving US expansion plans.

How reserve status erodes

• Multiple comments clarify that central banks don’t need to “dump” Treasuries; simply not rolling maturing bonds is equivalent to gradual selling.
• Higher US deficits mean more debt must be sold; if external demand weakens, yields rise and debt service becomes more expensive, potentially feeding back into more borrowing.
• Debate over whether this is a slow “whimper” (multipolar reserves, higher rates, stagflation risk) or could trigger crisis dynamics akin to a bank run; skeptics note that openly dumping Treasuries is self-destructive.

Alternatives: multipolarity, BRICS, and the euro

• Common view: no single successor exists; most likely outcome is baskets of currencies and a more multipolar reserve system.
• The euro is seen by some as the only serious rival but hampered by incomplete fiscal integration and security dependence on the US.
• BRICS payment systems are described by critics as mostly symbolic so far; proponents see them as early infrastructure for a future alternative.
• The yuan and rupee are viewed as constrained by capital controls and institutional trust issues.

Gold, crypto, and backing debates

• Long, contentious sub-thread on gold- or commodity-backed multinational currencies versus fiat:
  • Gold supporters emphasize scarcity and discipline; opponents stress rigid supply, vulnerability to miners, and historical instability under gold standards.
  • Some argue any hard backing just reassigns power to “mine and vault operators.”
  • Crypto is mostly dismissed as impractical for reserves, though a few suggest a central-bank digital dollar as a defensive move.

Sanctions, “petrodollar,” and diversification

• Many link diversification away from USD reserves to the freezing of Russian assets and broader US sanctions policy.
• Some say this has pushed countries, especially autocracies, to add gold and explore non-dollar payment rails (e.g., yuan oil deals, CIPS, BRICS).
• Others downplay “end of the petrodollar” narratives, arguing oil trade is a smaller share of global trade and “petrodollar” was always mainly geopolitical.

Implications for the US and world

• Being reserve currency is described as a mixed blessing: it enables “exorbitant privilege” and export of inflation but also forces the US to supply safe assets and tolerate large deficits.
• Several argue reduced reserve share could be healthy long term—forcing US fiscal discipline and limiting its ability to fund wars—though others fear inflation, loss of living standards, and reduced geopolitical leverage.
• Broad consensus: the dollar still dominates by trade and reserves, but inertia is being gradually replaced by hedging and parallel systems, with the endgame and timing seen as highly uncertain.