Thanks Meyrick. I agree with your arguments. Is it also possible that foreign governments choose to hold less excess reserves in the future ? The logic behind building excess reserves has, after all, dwindled, as currency strength rather than currency weakness is the most attractive policy course for several governments, particularly emerging governments. Furthermore, with trade routes under reconfiguration, the energy transition putting the supply of some finite materials in question, and a widespread generalised inflation, there is also a natural logic to securing and holding more physical supplies of critical materials locally, than there is in holding idle fiat currency. None of this is to argue the relative reserve status of the dollar, but rather to question whether Greenspan’s savings glut is finally receding, and by definition, that would deplete the pool of excess reserves, wherever they are held. This would have ( all else equal) repercussions for bond yields, and in their wake, asset prices more generally.
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Thanks Meyrick. I agree with your arguments. Is it also possible that foreign governments choose to hold less excess reserves in the future ? The logic behind building excess reserves has, after all, dwindled, as currency strength rather than currency weakness is the most attractive policy course for several governments, particularly emerging governments. Furthermore, with trade routes under reconfiguration, the energy transition putting the supply of some finite materials in question, and a widespread generalised inflation, there is also a natural logic to securing and holding more physical supplies of critical materials locally, than there is in holding idle fiat currency. None of this is to argue the relative reserve status of the dollar, but rather to question whether Greenspan’s savings glut is finally receding, and by definition, that would deplete the pool of excess reserves, wherever they are held. This would have ( all else equal) repercussions for bond yields, and in their wake, asset prices more generally.
Kind Regards
Mark